Cities and counties in the Washington region are bracing for the effect of fewer property tax dollars, lost income that is forcing tax increases and service cutbacks in areas already hard hit by years of economic stress, a new report says.
Many municipalities have implemented or are considering a raise in property taxes. Others are cutting back local programs to keep their budgets afloat or freezing new hires and salaries. And if local governments don’t meet budget this year, it could get tighter the next.
Nationwide, city financial officers predict revenues generated by property, sales and income taxes will decline by more than 3 percent, according to a new report by the National League of Cities.
Local city and county financial managers say the property tax revenues, which constitute more than one-third of most municipalities’ income, will continue to lag behind in recovery in because property assessments are on a delayed cycle.
“Property tax revenue contributes significantly to the weakness in [budget] growth,” said David Umansky, a spokesman for the District’s CFO.
Many say it will take at least five more years to get back to the steady growth they enjoyed before the recession.
D.C. is facing the biggest revenue gap — a 13 percent drop — from lower property tax income this fiscal year. Mayor Adrian Fenty, facing a $175 million total budget shortfall, froze hiring and promotions this week and restricted discretionary spending.
Umansky said assessments applying to this year’s budget are from two years ago — the bottom of the housing downturn. He said revenue should stabilize in 2012, when assessments for 2010 go in effect.
The suburban municipalities are expecting less dramatic dips but a longer recovery.
“We are looking at a reduction in reassessments,” said Gaithersburg’s finance director, Harold Belton. “We’ve pretty much tried to get a handle on what’s going to get us … to 2015.”
Gaithersburg officials approved a 5-cent increase in the property tax rate for fiscal 2011 to 26 cents per $100 of assessed value. Belton said the budget also includes salary and hiring freezes.
Nearby Rockville didn’t raise taxes but cut some program funding and eliminated 15 positions. Montgomery County officials estimate total tax revenues will decrease by a historic 6.1 percent in 2011.
College Park has adjusted its projected real property taxes revenue down by 3.4 percent for 2011. Prince George’s County officials say upcoming assessments will “slow down growth in coming years.”
In Northern Virginia, jurisdictions report property values fell by an average 7 percent or more last year and are raising taxes to combat the decline.
Fairfax raised city property taxes to 95.5 cents. Alexandria levied a similar tax increase to nearly 98 cents, or about $10.41 more per month.
Arlington County’s property taxes increased by an average 4 percent per household this year, said Finance Director Mark Schwartz.
