Supervisors explore further property tax cuts
The Rappahannock County Board of Supervisors will explore deepening the proposed cuts in Rappahannock’s tax rates, reflecting a surge in tourist-related income, plus leftover funds from the federal government’s pandemic-relief programs.
After County Administrator Garrey Curry’s presentation at last week’s Board of Supervisors meeting of a proposed $32.9 million budget for the fiscal year beginning in July, the discussion quickly turned to the prospect of broader tax relief.
Curry had suggested an 18% drop in the rate of taxation for real estate and a 24% cut for the rate for personal property. Together, these two streams of tax revenue would generate $13.7 million in the next fiscal year, up from $13.4 million in the current fiscal year. But Hampton Supervisor Keir Whitson pointed to the county’s historically strong financial position, and called for an exploration of deeper cuts in the tax rates residents pay on their real estate and their personal property, which includes cars and farm vehicles.
The push for a drop in the tax rate is essentially about damage control, since without lower tax rates, residents face significantly higher tax bills from two shifts in the surrounding economy:
► First, last year’s general reassessment of real estate resulted in acrossthe-board increases in the valuations of houses and land, reflecting soaring real estate values. This means that property taxes would be calculated from a much higher base.
► Second, COVID-19-related snarls in global supply chains disrupted automakers’ production schedules and drove up the value of used cars. As a result, the aggregate value of personal property in Rappahannock surged to an estimated $101 million from $76 million just one year earlier.
The county is required to adopt a balanced budget, where expected revenues equal expected expenses. Curry’s approach has been conservative, avoiding over-optimistic revenue scenarios that could leave the county scrambling to make up for a shortfall in tax receipts. But Curry and the Supervisors expressed confidence in the robust revenues flowing from sales taxes and meals and lodging levies, which have been buoyed by the growth in tourism.
For the 12 months ending last February, sales taxes paid in the county grew to $976,408, up 29% from the comparable figure of $763,526 a year earlier. When meals and lodging taxes are added in, the county is expecting to bring in $2.2 million in the next fiscal year — a jump of $443,000 from the current fiscal year.
Adding to decision-makers’ financial confidence is the afterglow of federal government COVID-19 relief disbursements. The Coronavirus Aid Relief and Economic Security Act eased spending pressures faced by the schools and other departments. The more recently enacted American Rescue Plan Act leaves a pool of $1.4 million in the county’s accounts, with relatively few restrictions on how it is to be spent.
After the meeting, Whitson said the challenge boils down to a key question: “Can we find a way to further reduce the real and personal property tax rates while still protecting our cash balance and funding all of our local-government obligations?”
Inflation is part of the economic backdrop. Existing inflation pressures — at a 40-year high — will be exacerbated as higher energy costs and food prices kick in as a result of the Russian invasion of Ukraine and the resulting sanctions.
Curry’s plan would drop the real estate tax rate to 55 cents per $100 of real estate value, from the current 67 cents, and would cut the personal property rate to $3.25 per $100 of value, from the current $4.25. Each one penny cut in the real estate tax rate results in a reduction of $193,000 in revenue for the county.
The analysis of potential tax rate reductions will be tricky. Land-use tax deferral, which delivers significant property tax reductions for land dedicated to agriculture, forestry or horticulture, complicates any calculation of benefits arising from tax rate reductions. During the Supervisors’ meeting, Curry said that with the general reassessment and the proposed rate reductions, “there will be winners and losers.” Whitson said he wanted to understand “How many more taxpayers would become winners?” with further cuts in the tax rates.
“I have opened a conversation with the Commissioner of Revenue to look at the statistics surrounding this question,” Curry said in an email exchange after the Supervisors’ meeting. “It is very complex and does include the impacts of the land use taxation program.”
SUPERVISOR KEIR WHITSON: “Can we find a way to further reduce the real and personal property tax rates while still protecting our cash balance and funding all of our localgovernment obligations?”