This is not shaping up to be a typical budget season for Loudoun County supervisors.
Usually, at this time of year the dire summertime predictions of wide budget gaps and sharp tax rate increases are tempered by new projections of higher than expected revenue.
Leading into fiscal year 2017, the opposite appears to be true.
The Board of Supervisor’s finance committee was to be briefed Tuesday evening on new assessment figures developed by the Commission of the Revenue’s Office. Instead of reporting that property values increased more than expected, the department is finding that earlier estimates of county-wide real estate assessments were overstated by $2.3 billion, or 3.2 percent.
In September, the office was projecting that the overall value of existing real estate would grow by 2 percent in 2015 and another 1.7 percent in 2016. New estimates envision no increase in value during those two years—an 0.9 percent value decline in 2015 and a 1 percent increase during 2016. The value of new construction also is expected to fall short of projections of 7.7 percent growth over two years. Instead, increases of 5.5 percent are predicted.
The department is reporting declines in values of townhouses and condominiums, and only a marginal 0.4 percent increase in the value of single-family detached homes. The decline is being attributed to a flood of new listings that hit the housing market early in 2015 and anemic regional employment growth. Commercial property values saw an overall decline of $238 million.
The lower property values mean the supervisors’ goal of adopting a budget based on the equalized tax rate—the rate at which the average property owner would pay the same amount of taxes as the previous year—could require a tax rate increase. The current real estate tax rate is $1.135 per $100 of assessed value. The new expected equalized rate is a penny higher at $1.145.
Both of those tax rates would leave large funding gaps based on current expense projections. At the current tax rate, the county’s general fund would face an $82 million deficit, according to the county’s budget office. The gap would be $75 million at the equalized rate.
Also on Tuesday, the finance committee was to be briefed on a proposal to raise the Board of Supervisors’ self-imposed annual debt issuance limit for the first time in a decade.
Since 2006, the board has limited its annual borrowing to $200 million, as part of a package of fiscal policies that helped the county secure triple-A bond ratings.
As recently as July, the county’s financial management staff recommended that the cap remain unchanged. The analysis conducted at that time concluded that the government could increase annual borrowing to $250 million and remain in compliance with its fiscal policy limits.
Since then, however, the staff developed a proposal to link the debt issuance cap to increases in the Consumer Price Index over the previous five years. Using that methodology, the board would increase the limit to $225 million next year.
Following the finance committee meeting Tuesday night, both the revised revenue picture and the proposed debt cap change will be reviewed by the full board at its Dec. 16 meeting.
Contact Norman K. Styer at email@example.com.