How much are taxes really going up?

The folks who spoke at last night’s public hearing talked about the council’s proposed 26 percent increase in the real estate tax. That number comes from comparing the current, pre-assessment rate, with the proposed, post-assessment rate. It appears again in Chamber of Commerce President Bob Hagan’s letter to the editor warning council members that this decision would disproportionately hurt business owners.

The actual percentage of tax increase that individual property owners will see varies greatly. In the numbers I looked at, I found that owners of Central Park townhomes would see a 16 percent tax decrease. The Silver Cos. would see an increase of as much as 88 percent in the tax bill for property in Celebrate Virginia. Homeowners in Great Oaks and the Preserve at Smith Run would see tax reductions in the 10 to 20 percent range. Some of the commercial properties on Caroline Street would pay 15 to 25 percent more in taxes.

But the point Hagan was trying to make, and much of the debate last night, was over how to spread the burden equitably between two broad classes of property owners-commercial and residential.

In an e-mail exchange with council members (responding to a question from Tomzak), Hagan explained why the 26 percent number is appropriate when talking about business properties. He wrote:

The increase for residential property is 6.8% thanks to the OFFSETTING DECREASE in assessment.

The increase on commercial property is 25.9% because there was NO offsetting decrease in assessments.

That means it is not ‘just an increase of $0.045’ but an increase of $0.145 to business property owners.

The math is the increase from the current rate of $0.56 to $0.705 ($0.145) divided by the current rate.

That is $0.145 divided $0.56 or 25.9% which was rounded in the letter to 26%

Commercial property assessments were essentially flat.  Hence the tax increase to anyone with a flat assessment amounts to 26%.

(Residential property owners whose assessments dropped by the average, would, of course, expect to see an increase of $0.045 over the equalized rate of $0.66 for a total of 6.8%.  The ‘equalized rate’ for businesses that have a flat assessment would be to keep the current $0.56. For business property owners therefore, the 26% or $0.145 is entirely a tax hike).

Again, I appreciate the question since it helps to demonstrate the inequity resulting from only looking at an “equalized” rate that applies to residential property whose value FELL, but having to apply the same rate to both residential AND commercial property.

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