Prince William County Explains Projected Tax Changes to Handle Illegals

PRLog (Press Release) – Mar 11, 2008 – Here is the text of an email message to a constitute to clarify the upcoming PWC proposed tax changes and budget issues.  

Dear Resident of PWC-

Thank you for taking the time to email me with your concern regarding the FY 09 county budget and the proposed tax rate.  I appreciate you taking the time to contact me with your concerns.

At the outset, I want to dispel one piece of information that has been misreported in the press.  There are no proposals whatsoever to raise taxes by 20 or 30 percent.  This number was derived by looking at the proposed increase in the tax rate rather than by looking at what the increase in the average tax bill would be under that proposed rate.  

This can be somewhat confusing.  As you know, the tax rate is simply an amount that the county applies against the overall value of a particular parcel of property.  The overall tax bill is calculated by applying the adopted tax rate against every $100 of value of the particular parcel.

For example, if someone’s home is worth $400,000 and the tax rate is $1.00, the tax bill will be $4,000.  If the value of the $400,000 home drops to $200,000, but the tax rate remains the same ($1.00), the tax bill will drop to $2,000.  This would represent a “tax cut” in real dollars, even through the tax rate remains the same.  Similarly, the BOCS could adopt a $2.00 tax rate under this scenario, meaning that the homeowner’s tax bill would remain $4,000 (a flat tax bill in real dollars) even though the rate increased by 100 percent.  Finally, an even larger increase in the rate could be adopted under this scenario, and at that point we would start to see an actual tax increase in real dollars.

Putting the matter into actual historical context provides a good example of decreasing tax rates yet increasing tax bills.  I was not a member of the BOCS during these years, but from FY 04 to FY 07 the BOCS cut the tax rate every year, many times by several cents.  Yet the average tax bill for residential taxpayers increased in each of those years (by 11.8 % in FY 04, by 9.2% in FY 05, by 6.4% in FY 06, and by 7.3% in FY 07).  The reason for this was because during those years the increase in average property tax values outpaced the yearly reductions to the tax rate.

In contrast, looking at last year’s budget and tax rate provides a good example of increasing tax rates yet decreasing tax bills.  Specifically, in FY 08 the BOCS actually increased the tax rate from 75.8 cents to 78.7 cents.  Yet despite this 2.9 cent increase in the tax rate, the average tax bill in real dollars decreased by about 1.1%.  The reason for this was because last year the decrease in average property tax values outpaced the FY 08 increase to the tax rate.

As you are probably aware, property values have continued to decline since last year.  In fact, they have declined so precipitously that we would have to raise the tax rate by 19% (from 78.7 cents to about 93 cents) just to bring in the same amount of revenue as we brought in last year.  However, as I have explained above, such an increase in the rate would not equate to an increase in the average tax bill in real dollars.

I have not presented the foregoing information to be confusing.  Rather, I think it is important when discussing county fiscal policy to ensure that citizens understand the bottom line—namely, how much more or less they will have to pay under a given proposal, regardless of the actual tax rate.

In addition, I think a few other points bear mentioning.  First, because all property is different, the county must discuss tax policy as it applies to “the average tax bill.”  Thus, there are scenarios where individuals will see tax increases in real dollars when the average bill goes down, and there are also scenarios where individuals will see tax cuts in real dollars when the average bill goes up.

Second, the county is not permitted to bifurcate commercial and residential property tax rates under state law.  This leads to policy challenges because during times when residential is over-valued and commercial is under-valued, the former will on average have higher tax bills, while the latter will see a windfall.  In today’s market, the opposite is true.  Thus, while the increase in the property tax rate this year may have a minimal impact on average residential bills, it could have a much more pronounced impact on commercial property tax bills.

Finally, I think it bears mentioning that some politicians have added to the confusion of these matters over the past several years by boasting of “cutting tax rates.”  During this time, the press has reported on these matters in a similar fashion.  I think this is why they have focused on the 28 to 30 percent increase in the rate rather than the increase in actual bills.

In your email, you mentioned the possibility of a PWC sales tax to fund our illegal immigration measures.  Unfortunately the county does not have the legislative authority to impose such a tax on its own; however, we could ask the General Assembly to grant us such power.  To be honest, the chances of that happening are remote.  In any event, I do agree with you that it is important that we look for equitable ways to raise the appropriate revenues to fund the initiative.

With all of that said, the county executive’s draft budget does propose an increase to the average tax bill of 8%.  The majority of this proposed increase is scheduled to fund three main areas: 1) full funding of the police and fire and rescue staffing plans; 2) preliminary implementation of the recommended changes to fire and rescue staffing levels and procedures as proposed by the “Line of Duty Death Report,” which was drafted following the tragic death of firefighter Kyle Wilson; and, 3) our measures to attempt to address illegal immigration to the extent permissible under local authority.  It is also important to note that the Prince William County School Board has stated that in order to fully fund their budget, they would need us to increase the average residential tax bill by 10% (assuming they receive 57% of county revenue, which is consistent with the revenue sharing agreement between the BOCS and the School Board).

As you know, we are in the preliminary stages of our budget procedures.  For my part, I will be looking very closely at the proposal, as well as the base budget to identify savings wherever possible.  The key, in my estimation, is finding the appropriate balance between the need to provide quality county level services to our residents and the need to avoid unduly burdensome tax bills on our residents.  I will certainly keep your comments in mind as I consider the ways to achieve that balance.

Again, thank you for your email.  Should you have any further questions or concerns, I hope you will not hesitate to contact me.

Sincerely,

Michael C. May
Occoquan District Supervisor
2241-B Tackett's Mill Drive
Woodbridge, Virginia 22192
(703) 792-4643 (phone)
(703) 792-4833 (fax)