The Mayor and Town Council are more than happy to boast about cutting next year’s real estate tax rate. But they somehow don’t mention that your actual real estate tax bill will continue to increase.
That’s human nature, I guess. But the fact is, they’re doing what Fairfax County is doing this year, to within rounding error. They are offsetting some of the ongoing high rate of increase in the real estate assessments by reducing the tax rate a bit.
And, in typical TOV fashion, when I went to find the key numbers — what’s the new tax rate going to be, and how much will tax bills rise — I couldn’t find either one of them. Not based on the materials published by the Town of Vienna. It took a while to sort out all the confusion.
So, for the record, with details to follow:
- The current tax rate is 0.2250 per $100 of assessed value.
- The intended future tax rate is 0.2225 per $100 of assessed value (but if you listen closely, that’s not actually the motion passed by the Town.)
- The difference is about a 1% reduction in the rate, roughly the same as Fairfax County.
- Tax assessments are rising 4.2% on average.
- The average tax bill on an existing Vienna home will rise just over 3 percent.
I defy you to find either the 0.2225 rate or the 3 percent increase in anything the Town published about this.
I realize that most people aren’t good with numbers. But I have to wonder if anybody on Town Council ever bothers to read the background material. It wasn’t that hard to tell that the numbers as presented didn’t make sense.
So, fair warning. I’m going to do the math, and I’m going to show my work.
Anecdote: A rising tide lifts all taxes.
The Town maintains an archive of old Town of Vienna newsletters all the way back to 1960. Those are fascinating in their own right, but my current interest is that they provide an easily-accessible public record of tax rates.
A writeup of 1960 tax rate is shown above, from the Town’s very first newsletter (.pdf). If you work through the math, the 1960 property tax rate was (1.35 x .32 =) $0.432 per $100 of actual assessed value. That can be compared directly to the current rate of $0.2250 per $100 of actual assessed value.
In short, in the Town of Vienna, the real estate tax rate has fallen by half since 1960.
Now it’s time for a bit of common sense. Pick one from the list below. Did that reduction occur because:
- Town government has gotten vastly more efficient over time.
- House prices are vastly higher now than they were back then.
If you guessed 2), you got that right. In general, when the increase in the value of real estate gets high enough, tax rates per $100 come down, resulting in net increase in total taxes that’s sufficient to pay for the increased cost of government. Basically, local governments spare homeowners from the full brunt of housing price increases when the rate of increase is high.
History repeats itself
Source: Federal Reserve Bank of St. Louis. The image is copyright Dow-Jones Indices LLC and is used here without permission.
Above is a graph of DC-area house prices for the past five years. While it visually exaggerates the recent uptick (note that the Y-axis starts at 210), it does faithfully reflect the data. Here, as elsewhere in the U.S., house prices are rising well above the rate of inflation.
Take the lesson from the prior section, look at the graph above, and you’ll understand why Fairfax County is proposing to reduce real estate tax rates by almost one percent this year. Note that I don’t say real estate taxes. The total tax collections will go up. But the rate per $100 will fall.
Here’s the Fairfax County notice, written in plain language. House values (assessments) rose 4.25%, and they’re planning to cut the residential real estate tax rate from $1.150 to $1.140 per $100.
But don’t cry any tears for the Fairfax County government. If you do the math, the average Fairfax County homeowner’s real estate tax bill will increase 3.3%. (That’s calculated as 1.0425*(1.140/1.150) – 1).
Town of Vienna, check the tape. Sounds like you passed two different tax rates.
This whole post started when I kept seeing Town Council candidates, and then the Mayor, talking about reducing the real estate tax rate. To which I said, seems reasonable, given the assessment increases. It’s not like their tax revenues will fall. In effect, we’ve chosen to follow Fairfax County’s lead.
But what’s the actual rate, and what’s the projected increase in the tax bills? Then I tried to get my hands on the numbers, and that’s where things went off the rails.
The first simple question is, what’s the new, lower tax rate?
Let me start with a simple fact. The real estate tax rate in Vienna is now $0.2250 per $100 of assessed value. It’s been that rate for something like seven years now. You can, at present, see that rate quoted on this Town of Vienna web page.
OK, that’s a fact.
Then I went to the materials published with the 4/26/2021 Town Council meeting, available on this Town of Vienna web page on Granicus. And I started looking at the numbers and doing a little plausibility check. And none of the numbers seemed right.
But at least I could see what the Town was planning for the new, lower rate. It says so, right on this page:
OK, that can’t be right. Worse, it took me all of about ten seconds to spot that. But apparently nobody who was actually voting on it did.
To find out what’s right, I had to listen to the meeting, and at around 25:30 into it, you can hear the correction. The proposed new rate is 0.2225, which is indeed a reduction of 0.0025, or about 1 percent. In other words, same percentage reduction as Fairfax County, to within rounding error.
Now it gets odder still. If you watch the tape, Town Council has almost no discussion of this, and they cut directly to Councilmember Springsteen reading the draft motion more-or-less verbatim. Which then passes.
But here’s the difficulty. Town Staff wrote two different, mutually-contradictory proposed motions. Town Council appears to have passed both of them. The first motion was to keep the tax rate unchanged. Formally, in these documents, the “proposed rate” for the coming year is actually the same as last year, 0.225 per $100. The second, alternative motion was to reduce the rate. Town staff wrote two different motions, separated by a big OR in between. But what was actually read and passed was both motions. If you listen to the meeting, you’ll hear that the motion was something like this, below.
“I further move to approve the fiscal year 2021-22 proposed real estate tax rate, bank net capital rate, residential utility tax rate, and commercial utility tax rate as presented. I further move that
the Town Clerk be directed to advertise a Notice of Intent to Adopt at the May 17, 2021 Council meeting.”OR “I further move to approve the fiscal year 2021-22 proposed real estate tax rate at $0.225$0.2225per $100 of assessed value (a decrease of $0.0025), and bank net capital rate, residential utility tax rate, and commercial utility tax rate as presented. I further move that the Town Clerk be directed to advertise a Notice of Intent to Adopt at the May 17, 2021 Council meeting.”
With literally the OR spoken in-between. Both motions, with interruptions and corrections, were read. And then passed.
From context, you can be sure that they intend to drop the tax rate by about a percent in the coming year. But that’s not what they actually made a motion to do. Near as I can tell, they actually moved to keep it the same, and to drop it.
Town of Vienna, check your math.
So, how much are tax bills going to increase, at this new rate? Along with the new tax rate, that’s the second number I went looking for. Not only could I not find that, I couldn’t make sense of any of the other numbers in the background materials either.
The increase in the tax bill, for the average existing home, at the new lower rate, is easy enough to calculate.
- The old rate was 0.2250
- The new rate will probably be 0.2225
- Assessments rose 4.2 percent.
- For $X of property, the current bill is .2250 * X/100.
- The new bill is .2225 * 1.042 * X/100.
- The ratio is .2225*1.042/.2250 = 1.030, or a three percent increase in the tax bill.
Problem is, by law, you’re supposed to be able to find that, somewhere in what the Town publishes. And you can’t.
Virginia has a law requiring jurisdictions to publish information on the overall increase in tax bills, not just the tax rate. That would combine the effects of both the rate and the change in assessments. The language of the law is ridiculously convoluted, and the Town of Vienna got the math wrong in the past (Post #221). The last time, as I recall, Vienna ended up redoing part of the legal processes required to set the new tax rate.
Let me just walk through the common sense of that calculation, using the formal “proposed rate” of 0.2250, just as the Town did. That is, let me do the logic of that required calculation, assuming no change in the tax rate.
Let me restate that to be clear. The Town mentions two new tax rates in its documents. Formally, the “proposed rate” is 0.2250, no change from the current rate. And then, separately, there’s an option to lower the rate to 0.2225, which Town Council appears to be in favor of. The legally-required calculation was done in terms of the higher 0.2250 “proposed rate”.
If the assessments go up 4.2 percent, as stated in the background materials, and the tax rate does not change, then total tax revenues will rise 4.2 percent. That has to be true, and that has to appear somewhere in the published figures. So what you have to be able to see, with no ambiguity, in the legal write-up for the public hearing, is an estimated 4.2 percent increase in taxes.
So now let me dig up the same spreadsheet I provided publicly two years ago, plug in the numbers, and see what I get. Yeah, I get that if the Town leaves the tax rate unchanged, you’d see a 4.2 percent increase in the tax bills. That’s not what the Town shows.
The last time I bothered with this (final spreadsheet in workbook, below), I was able to replicate the notices from three other Virginia jurisdictions, to within rounding error. (Because I was taught to show my work and check my answer.) But I’m not going to bother with that on this two-years-later repeat. The formulas didn’t change. Download the spreadsheet below if you want to check my algebra.
To summarize: I wanted to see two simple facts about the new real estate tax rates. It took me an entire morning of digging, and ignoring incorrect numbers by the TOV, to find them. It really shouldn’t be that hard. The Town staff who produce these numbers, have a professional interest in ensuring that they are correct. But other than that, I must be the only person in Vienna who cares if these numbers are right. Town Council included. Why do I even bother?