Agenda Alexandria Budget Discussion Turns Wary Eye to Future Tax Rate Balance

In the latest Agenda Alexandria conversation, local business and civic leaders came together to discuss the highs and lows of the recently proposed City Manager’s budget.

The budget included a proposed tax rate reduction, but City Council candidate Bill Rosssello challenged the overly sunny narrative about the reduction.

“I look at the budget the way it’s been presented and something that always seems to concern me is when we lead with a narrative around the tax rate,” Rossello said. “The tax rate is only one part of the equation for the actual taxes that people pay… While we’re looking at a proposed 2 cent tax rate decrease, when you do the math, for the average household it comes out to be almost a 6% tax increase in real dollars and that’s what really matters to residents: how much more or how much less am I going to pay?”

Rossello was joined on the panel by Rob Krupicka, former City Council member and Delegate and owner of Elizabeth’s Counter, and Janet Blair Fleetwood, Secretary of the Budget & Fiscal Affairs Advisory Committee and the Mayor’s representative on Budget and Fiscal Affairs Advisory Committee (BFAAC).

The group discussed the current imbalance between the residential and commercial tax bases, which has only gotten worse during the pandemic.

“Back in 2009, we used to get 30.5% of revenue from commercial, said Fleetwood. “It is now 21.3%. We have a good situation here, with Virginia Tech’s Innovation area coming in, Amazon, the Patent office, the National Science Foundation, and Landmark. We should start looking to grow businesses that will come in and bring good jobs and use commercial real estate.”

Fleetwood said there has been talk that post-pandemic, companies may not want to use commercial real estate as they did before, but Fleetwood said she has also heard from companies that they will still need physical footprints for team projects.

“I don’t think commercial footprint is going away,” Fleetwood said.

Krupicka noted that questions about the balance between residential revenue and commercial revenue may fundamentally change post-pandemic.

“The balance between residential revenues and commercial revenue… there are fundamental shifts happening right now that make that an old debate,” Krupicka said. “People are working from home now, and you’re going to see a lot of businesses that don’t go back to commercial office when COVID ends.”

Krupicka said one of the larger concerns is that small business have to compete against larger companies like Amazon and pay taxes those companies don’t.

“Small businesses are competing against Amazon and large internet companies,” Krupicka said. “There is big international competition that pays a lot less taxes than small mom and pop. Small mom and pop has to pay BPOL tax… small businesses like mine are writing checks to government, but doing it in the hole. If you broke even on COVID, you’re paying on gross receipts, not profits.”

Krupicka said Amazon pays retail taxes, which benefits the city, but in general pays less on taxes per transaction than small restaurants or retailers.

“We need to have conversation about if we want small businesses to be at a disadvantage tax wise,” Krupicka said.

On the other side, Rossello said the burden on residential taxpayers has grown considerably and is pushing people out of Alexandria.

“We’ve taxed out so many middle class folks, who can afford to pay decent mortgage or rent, but find it more affordable to leave,” Rossello said. “We’ve seen whole neighborhoods turn over from diverse middle class neighborhoods to gentrified neighborhoods where houses on very small lots are $1.5 million dollars.”