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Mayor: Alexandria seeing ‘anemic growth’ in tax revenues with budget shortfall ahead

Money on a table (staff photo via Vernon Miles)

Alexandria’s revenue tax is growing, but too sluggishly to keep pace with the expenditures — leading to a $17 million shortfall as the city heads into budget season.

That estimate, from Mayor Justin Wilson’s monthly newsletter, is slightly lower than the estimate from a City Council meeting in November, but still presents a substantial challenge for city leadership attempting hold off on a tax rate increase.

Wilson said Alexandria’s budget is built around real estate taxes, which are growing but with some worrying signs.

“In Virginia, the structure of municipal finance is heavily reliant on real estate taxes,” Wilson wrote. “Consequentially, in Alexandria the real estate market, both residential and commercial, dictates our budgetary fate. Last year, we saw the healthiest growth in our real estate tax base in over 15 years. Yet, in the past year, mortgage rates have more than doubled. It’s hard to imagine that such an increase will not eventually impact our real estate market.”

Real estate tax revenue is projected to increase by 1.2% — which Wilson called a “return to the anemic growth that characterized much of the last decade and a half.”

Wilson said residential taxpayers are already paying more due to appreciation in the residential tax base, and adding a tax rate increase on top of that would add an even greater burden to local residents.

“I believe we should again work to avoid a rate increase while protecting the core services our residents depend on,” Wilson wrote. “Last year was the 6th budget in a row without a tax rate increase and I am hopeful we can continue that pattern.”

And yet, the city will have to find a way to close the $16.1 million shortfall. That shortfall is mostly attributed to an increase in city operations, the annual transfer to Alexandria City Public Schools and city debt service.

The approved 2023 budget and proposed 2024 budget (via City of Alexandria)

“With these revenue estimates and expenditure estimates, this brings us to a projected revenue shortfall of $16.1 million,” Wilson wrote. “Given that our local budget must be balanced, that shortfall must be resolved with either spending reductions, tax increases or some combination of the two.”

City Manager Jim Parajon, who warned City Council last month that “the budget is going to be tight,” is scheduled to present a budget to Council on Feb. 28.

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