Hemstreet Proposes $2.6B Budget; Warns Against Service Cuts

County Administrator Tim Hemstreet has handed supervisors the first draft of the $2.6 billion fiscal year 2019 budget, with a warning against digging too far into the county’s coffers for tax cuts.

Supervisors have once again been handed a tax cut by Loudoun’s booming real estate and personal property tax revenues. The equalized real estate tax rate—the rate at which the average taxpayer pays the same dollar figure in taxes, despite growing property values—is 3.5 cents below the current tax rate, $1.09 per $100 of assessed value.

Changing the real estate tax rate is the biggest tool supervisors use to adjust taxes and revenues year over year. If the board sets the rate in 2019 at $1.09, it will be the lowest tax rate since 2008. But despite fluctuations in the tax rate between a low of $0.89 in 2007 and a high of $1.30 in 2011, the only time county tax revenues have declined in the last 15 years was in fiscal year 2010.

Since 2011, the tax rate has been on a gradual slope downward, with revenues buoyed be growing real estate and property values. Most years, the budget is sustained by that growth in values, saving supervisors the need to raise taxes significantly as the cost of running the county government has steadily grown.

Real estate and personal property taxes account for 75 percent of county revenues. The proposed budget counts on $86.9 million in new revenues over the current fiscal year, partially offset by a $5.8 million increase in capital and debt costs.

At supervisors’ instruction, Hemstreet also prepared options for tax rates a penny above and below the equalized rate. But he said with the county adding around 11,000 new Loudouners every year, the county should not cut too deeply into that tax rate.

“I encourage the Board of Supervisors, as you consider going below the equalized rate, that you also consider carefully the impact on service levels as Loudoun continues to grow and is expected to continue providing high quality services to our expanding and diversifying population,” Hemstreet said.

He said as the county is built out, those growing tax revenues—brought about in part by the county’s continuing building boom—could level off, or even decline, leaving the county short on cash for things like schools, public safety, parks, and other things the county provides its residents.

“The economy will inevitably experience a downturn or even a recession,” Hemstreet said. “While it’s tempting to focus continually on the tax rate, equal focus should be placed on the types of services that the county provides, the quality of those services, and the level of those services, so that services are provided consistently over time.”

And he said within the next decade, there will likely come a time when the growth in real estate and personal property values will not cover the growing cost of running the county government.

At the equalized tax rate, Hemstreet’s proposed budget grows county services along with the county population, and focuses new spending on county employee compensation. It leaves a projected $10.8 million gap in the school system’s budget request, and an average tax bill of $5,071.

That proposed budget also includes the equivalent of 124 new full-time positions across the county’s departments, focused on human services. The county would also make significant investment in its workforce, which Hemstreet said is paid at about 86 percent of market rates. $8.2 would go into a 3 percent across-the-board raise to all positions starting July 1, and another $8 million would go toward a 3.5 percent merit increase in September.

If the tax rate is cut another penny, the Board of Supervisors will have to carve $8.2 million out of the county budget. $5.4 million of that would come from the schools; $2.8 would come from the county government.

Hemstreet has provided them options to do that. He said those cuts could affect the behavioral health program in the Fire and Rescue Department; foster care and workforce development in the Department of Family Services; prevention and intervention services in the Department of Mental Health, Substance Abuse and Developmental Services; and park maintenance. It would also result in a $16.3 million gap in the school system’s request.

The average tax bill would decrease $47 to $5,024. Hemstreet said he does not recommend making those cuts.

With the budget balanced at the equalized tax rate, every bit of the $8.2 million that would be generated by increasing the tax rate a penny would go to the schools, cutting that funding gap to $2.6 million. The average tax bill would grow $46 to $5,117.

Even at the equalized tax rate, homeowners on average will see a small cut. Commercial values have grown faster than residential assessments, meaning the equalized rate for the county overall is lower than it is for residential property alone. County budget staff project the average homeowner’s real estate tax bill would get a $22 cut.

The Board of Supervisors will now go to work tweaking that budget proposal. The board has scheduled three public hearings: Tuesday, Feb. 27, at 6 p.m. and Thursday, March 1 at 3 p.m. at the county government center in Leesburg; and Saturday, March 3, at 9 a.m. at the Loudoun County Public Schools administration building. Loudouners can sign up to speak at those in advance at 703-777-0204.

The board is scheduled to take a final vote April 3.


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