WINCHESTER — City Council may be putting the brakes on a proposed 4-cent increase to Winchester's real estate tax rate.
"I can't get to this level of tax increase for my neighbors in this economic climate," Councilor Evan Clark said Tuesday night at council's work session. "A lot of our citizens are having to tighten their belts."
Last month, City Manager Dan Hoffman prepared two draft budgets for fiscal year 2022 — one based on the current real estate tax rate of 93 cents per each $100 of a property's assessed value, and the other based on an 89-cent tax rate. The 89-cent rate would be considered revenue neutral because, following recent citywide property reassessments that raised the collective value of Winchester's real estate by 5.8%, it would bring in the same amount of money as the city collected in the current fiscal year. Keeping the rate at 93 cents would actually equate to a 4-cent tax increase due to the higher property values.
Dropping the tax rate to 89 cents would basically maintain the city's current operational funding levels into FY22. Hoffman said that wouldn't provide enough money to enhance public safety, reinstate training programs, purchase new equipment and so on.
"I can tell you now, 89 cents doesn't get you Shihadeh," Hoffman told council, referring to this fall's planned completion and opening of Winchester Public Schools' new Emil and Grace Shihadeh Innovation Center at 536 Jefferson St., which will be a hub for Career and Technical Education (CTE).
That's because the money required for the center's opening would not be included in an FY22 budget based on an 89-cent tax rate. A 93-cent rate would add $700,000 to City Council's current $30,339,102 contribution to Winchester Public Schools, while an 89-cent rate would reduce the funding increase to $400,000.
Hoffman also reminded council that when the COVID-19 pandemic began last spring, city officials made significant, across-the-board budget cuts. That's why the $90,672,000 budget for fiscal year 2021 was $3,210,000 less than the fiscal year 2020 budget of $93,882,000.
COVID-19 was also responsible for reducing business growth in Winchester over the past year. As a result, Hoffman said, tax revenue collections have been fairly stagnant, and that won't change in the near future unless the city's real estate tax brings in more money than it did in the current fiscal year.
"With only organic growth, I don't see where we could do anything with this budget," Hoffman said.
Mayor and council President David Smith said he supports the 93-cent real estate tax rate.
"I think we'd be remiss to go lower," Smith said on Tuesday. "Once we start cutting things, we're going to see more disgruntled citizens, we're going to lose services."
Councilor Corey Sullivan disagreed. He said he could not support a 4-cent tax increase at a time when millions of federal COVID-19 relief dollars are expected to come in for the city and its school system. Sullivan suggested supplementing the budget with the federal assistance money rather than adding to the economic burden of city residents and businesses.
Council asked Hoffman to go back to the drawing board and prepare additional draft FY22 budgets based on real estate tax rates of 90, 91 and 92 cents. The proposals based on 89 and 93 cents already exist.
"I can tell you I'm not going to be at 93 cents," Clark said. "I just can't get to 93 cents and face my neighbors."
Council is expected to choose a real estate tax rate on April 27, which in turn will determine the proposed budget amount for FY22. A final vote on the new budget is scheduled for May 25.
Even if the rate drops to 89 cents, though, Councilor Richard Bell noted that many Winchester property owners will still pay more in taxes in FY22 due to the property reassessments. That's because the average property value increase of 5.8% was based on the reassessed values of all real estate — single-family homes, apartment buildings, retail stores, manufacturing facilities, vacant lots, etc. Residential properties in Winchester actually increased in value by an average of 10.4%.
For example, if a $250,000 single-family home increased in value by 10%, its new assessed worth would be $275,000. In FY21, the owner would have paid $2,325 in real estate taxes. In FY22, with the higher property value, the annual tax bill would be $2,557.50 based on a 93-cent rate or $2,447.50 based on an 89-cent rate. Bottom line, the owner will pay an extra $122.50 in taxes in FY22 if the rate falls to 89 cents, or an extra $232.50 if the rate stays at 93 cents.
Attending Tuesday night's City Council work session in Rouss City Hall were Mayor and council President David Smith, Vice President Kim Herbstritt, Vice Mayor John Hill and members Judy McKiernan, Evan Clark, Les Veach, Corey Sullivan, Richard Bell and Phillip Milstead.