Alexandria city manager says widening imbalance in tax base puts city in financial peril

Depending on how you cut it, the residential tax base comprises either 82% of the city’s revenue or 62% — but either way, Alexandria leaders said that’s a precarious balance for a local government’s budget.

It’s an issue that came up in both the city budget discussion and an update on the Potomac Yard Arena development at a City Council meeting last night.

The incongruity in those numbers comes from multi-family residential developments, which are required by state law to be classified as commercial developments. If multi-family residential were classified with the rest of residential developments, the residential tax base would comprise 82% of the city’s revenue.

The gulf between how much of the city’s revenue comes from residents vs commercial property has widened over the years and City Manager Jim Parajon said it puts the city’s financial security at risk.

“The imbalance between commercial and residential is a risk factor in this and future year’s budgets,” Parajon said. “A healthy Alexandria economy must include quality commercial growth to avoid greater tax burdens placed on residents or cuts to services.”

Director of Finance Kendel Taylor said earlier in the meeting that for 29 years city leaders have been talking about that gulf and watching it widen.

“When we talk about doing something from a catalytic perspective, changing our tax base to have more commercial tax base… with outsiders paying revenue for services to relieve pressure on people living in our homes and apartments, this is what we’re talking about: changing the trajectory of this chart,” Taylor said.

At the meeting last night, Parajon proposed a general fund operating budget of $911.3 million as well as a $2.33 billion 10-year capital improvement program for FY 2025-2034. The budget comes with no proposed changes in real estate tax, personal property tax or other tax rates. However, even the tax rate remaining the same will mean a roughly $30 per month tax increase for the average Alexandria residential household.

The budget fully funds the Superintendent’s Alexandria City Public Schools (ACPS) operating budget and 10-year CIP. It does not, however, include an additional $11 million requested by ACPS, which Parajon said would require cutting services and programs or raising the tax rate by two cents.

One smaller item of note was $250,000 to step up the city’s cybersecurity. The Alexandria Library was hit with a cyberattack last year and Parajon said the city’s faced multiple attempted hacks.

“This continues to be a threat to the city,” Parajon said. “This past year there were numerous examples of people trying to hack into our system. The ITS Director did a great job defending [the city] but they need more tools.”

According to a release from the City of Alexandria, there will be more budget hearings at:

On Thursday, February 29 at 7 p.m. at Charles E. Beatley, Jr. Central Library, City Manager Parajon will present the proposed FY 2025 Budget to the public.

To ask questions and provide feedback, please attend the following public meetings:

• Monday, March 11: FY 2025 Budget Public Hearing
• Saturday, March 16: Budget Public Hearing
• Saturday, April 13: Add/Delete Public Hearing
• Wednesday, April 24: Tax Rate Public Hearing