Alexandria’s transient lodging, from Airbnb to hotels, famously took a hit back in 2020, but there’s some good news.

At a meeting of the City Council last night celebrating some of the work of Visit Alexandria, Mayor Justin Wilson noted that transient lodging has continued to climb and overall consumption tax revenue now exceeds pre-pandemic levels.

“Given where we were three years ago, that’s an amazing turnabout,” said Wilson.

A monthly financial report (item 14) showed that transient lodging taxes continued to climb dramatically from FY 2022 to FY 2023.

“We are now at 22.5% on transient lodging ahead of where we were last year,” Wilson said, “which is an incredible turnabout for the community and obviously I think speaks to the financial return the tourism industry provides to the taxpayers in the city, but I think it’s broader than that.”

Wilson said tourism is a part of Alexandria’s DNA in ways that are more than just financial

“Three years ago, as many of the businesses in this sector were shut down, so many of our residents realized what they were missing in the rich contributions the travel and tourism industry provides the people that live here,” Wilson said. “They’re a part of our community and a part of what makes this a wonderful place. We’re happy to have ya’ll back, not just for financial reasons.”

Vice Mayor Amy Jackson said Visit Alexandria has helped spotlight some of the best parts of Alexandria and has helped boost the recovery of transient lodging.

The pandemic shone a bright light on our strengths and weaknesses,” said Jackson. “We just kept going through this and we are the place to be. We are where you want to be, where you want to visit, to live, work play and raise a family.”

The value of Alexandria’s total residential tax base has outpaced its commercial tax base, according to the city’s Office of Real Estate Assessments.

Over last year, the city’s overall real estate assessments increased 3.82%, or $1.7 billion, to reach a total of $43.88 billion, according to a report that the City Council will receive at its legislative meeting tomorrow (Tuesday) at City Hall (301 King Street).

The city’s residential tax base increased by 5.32%, or $1.24 billion, for a total of $24.6 billion. The average value of a single-family home value increased by nearly 4.6% to $940,375, and the average value of a condo in the city is $407,616, an increase of roughly 3.5% over last year. The city’s multi-family rental apartment market base also increased almost 5.4% this year, for a total of $9.89 billion.

Mayor Justin Wilson touted the assessments in a series of tweets. Some residents challenged this, saying the city’s assessments don’t line up with decreases in single-family home sale prices tracked on real estate websites.

To give you some more color on this year: the volume of single-family sales went way down. The volume of condo sales did not decrease as much.

So condos as a share of overall residential sales increased. Condos have lower values, which dragged down the median.

— Justin Wilson (@justindotnet) February 9, 2023

For every zip code in Alexandria — except 22305 (Arlandria) and 22312 (Lincolnia) — there was either a negative year-over-year change in sale price or no change, according to the website Redfin, which tracks median sale prices.

Wilson said Redfin’s estimates are wrong and the city’s full assessment data will be posted this coming Tuesday (Feb. 14) to examine.

Alexandria’s commercial tax base also increased just under 2%, for a total of $355.5 million.

While most commercial properties saw moderate increases, the value of office buildings in the city fell 10%. Additionally, a number of properties were and are being converted to residential use. The city’s overall equalized commercial office property tax base fell 1.8%, or nearly $66.2 million, from $3.65 billion in 2022 to $3.6 billion this year.

According to a city report:

There were seven sales of office buildings in 2022. Of those sales, one traditional commercial office building indicated intentions of conversion to residential development, [while] another plans to upgrade the current office building

• 1801 Beauregard Street, with 135,087 square feet, reportedly intends to convert its space into 95-to-105 rental units
• 515 King Street, with 82,800 square feet, intends to add additional amenities and develop coworking spaces
• Empty office buildings at 801 N. Fairfax Street, 625 Slaters Lane and 635 Slaters Lane are being converted into condominiums
• 4900 Seminary Road is being converted into 212 multifamily rental units
• Conversions have been proposed for 901 N. Pitt Street, at Transpotomac Plaza and at 1101 King Street

The overall value of Alexandria’s 22 hotels increased by 2.6%, or $12.8 million, from $497.5 million in 2022 to $510.3 million this year.

Assessment notices will be sent to property owners this Wednesday (Feb. 15), and residents have until March 15 to request a review of their assessment with the Office of Real Estate Assessments, followed by a June 1 deadline to file an appeal with the Board of Equalization.

As for trends, last year there was a nearly 27% decrease in the volume of single family home sales, and a 13% decrease in condo sales compared with 2021, according to the city.

The median sale price of residential properties in the City of Alexandria declined for a second year (in 2022) from $588,750 to $544,875. The median rose from $517,250 to $608,000 from 2019 to 2020. The decline is still attributable to a greater number of condominium properties (typically sold for less than single-family properties) in the sales sample than in years prior to 2020.

More 2023 Alexandria Assessment Data:

*26.71% decrease in the volume of SF property sales

*12.56% decrease in condo sales

*median sale price of residential properties declined for 2nd straight year

*$2.44B in new growth last 5 years pic.twitter.com/bZAKmEAt3F

— Justin Wilson (@justindotnet) February 9, 2023

More 2023 Alexandria Assessment Data:

The commercial tax base increased by $355M.

$322M of the increase was from new development, of which $302M was residential multi-family development (rental housing). pic.twitter.com/ShjZo9uI3x

— Justin Wilson (@justindotnet) February 9, 2023

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.

“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.

Alexandria’s annual budget process wrapped up this week with a $839.2 million fiscal year 2023 budget approval and special tax relief for car owners.

Meanwhile, an uptick in opioid overdoses among children has Alexandria City Public Schools considering adding Narcan to schools and city officials issuing warnings about counterfeit Percocet.

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(Updated at 1:45 p.m.) The Alexandria City Council unanimously adopted City Manager Jim Parajon’s $839.2 million fiscal year 2023 budget on Wednesday night (May 4), and despite giving all city employees raises, Mayor Justin Wilson says inflation will likely mean more raises in future budgets.

“We’re staring into a significant inflationary environment that pinches our employees very hard, just like it pinches everyone hard,” Wilson said. “We’re going to have to continue to have this conversation every year about how we make sure we invest in the level of compensation and benefits required to not only attract but retain the best and the brightest in the city.”

The budget is an 8.9% increase from the FY 2022 budget, and includes a 7%  raise for firefighters, medics and fire marshals; a 6% raise for Police Department and Sheriff’s Office staff and a 4.5% raise for general city employees. That’s in addition to annual merit increases for city staff.

City residents can expect to pay an additional $445, or 6.5%, in real estate taxes, although Parajon’s budget maintains the current tax rate at $1.11 per $100 of assessed value. There are a number of other new fees, such as a $294 stormwater utility fee, which is a $14 increase over last year’s doubling of the fee from $140 to $280 to shore up flooding issues.

Council also approved Wilson’s proposal to increase annual residential and commercial refuse collection fees to $500 citywide (from $411 for commercial and $484.22 for residential collection). The $315,000 from the collected fees will fund a curbside food waste collection pilot.

This was the first budget for Parajon, who started work in January.

“This is a team effort and the fact we were able to put together what I think is a budget that truly is going to help a lot of people in the city,” Parajon said.

Councilman Kirk McPike said that he was proud to raise employee compensation, and that there is more work to do. McPike and his fellow new Council members Sarah Bagley and Alyia Gaskins were supportive of a 10% raise for AFD staff in February, as the department has struggled with recruitment, retention and compensation for years.

“I think that as a council we’re committed to doing more to help our firefighters and our police have the support that they need to give us the protection that the people of Alexandria deserve,” McPike said.

The budget also fully meet the requests of the Alexandria City Public Schools budget, which includes a 10.25% raise for teachers.

Council also unanimously approved the 10-year $2.73 billion Capital Improvement Program, which includes $497.8 million in investments for a new high school, renovations at 1705 N. Beauregard Street and two elementary school expansions.

The budget moves nearly $800,000 in Alexandria Police Department funding for School Resource Officers at Alexandria City Public Schools to a reserve account to fund six full time employees.

The budget includes:

• $1.85 million for police body worn cameras
• Expansion to Dash line 30
• $95,000 to hire a social equity officer
•  An additional Alexandria Co-Response team (ACORP), costing $277,000
• $200,000 in reserve funding to support Metro Stage construction
• Purchase of 4850 Mark Center Drive — the future home of the Department of Community and Human Services, the Alexandria Health Department and a West End service center

Alexandria City Council Adopts Fiscal Year 2023 Budget: https://t.co/ODqov4d4n7

— AlexandriaVAGov (@AlexandriaVAGov) May 4, 2022

It’s about to get a little more expensive to live in Alexandria. The City Council on Saturday (April 23) will set the real estate tax rate and likely increase the stormwater utility fee for residents by 5%.

In real terms, that means residents could expect to pay between $445 and $477 per year more in real estate taxes, as City Manager Jim Parajon’s proposed budget maintains the current tax rate at $1.11 per $100 of assessed value.

The $1.11 rate, approved by Council for fiscal year 2022, was a 2 cent reduction from the real estate tax rate of $1.13 in FY 2021.

In February, City Council approved a real estate tax ceiling of $1.115, a .45% increase, which gives them wiggle room in the budget process. Council could raise the tax to that rate to fund a project or initiative, but the increase is not accounted for in Parajon’s budget.

The public hearing is at 9:30 a.m. at City Hall.

Additionally, Parajon is proposing an increase to the stormwater utility fee, which would mean residents would pay $294, a $14 increase. Last year, the fee was boosted 100%, from $140 to $280, as Alexandria continues to remediate serious flooding issues.

The budget will be adopted on May 4.

(Updated 8:30 p.m.) As part of an upcoming overview of the budget, Alexandria’s City Council will be considering an increase in the stormwater utility fee (item 16).

The fee is scheduled to increase from $280 to $294 for the stormwater utility fee bill due Nov. 15 this year.

The increase is scheduled for second reading and a public hearing at the meeting on Saturday, April 23, with the final passage of the ordinance scheduled for Wednesday, May 4.

The increase is more modest than last year’s increase, which doubled the stormwater utility fee from $140 to $280 by November. The aim of last year’s fee increase was to help accelerate the timetable for needed stormwater projects.

The City Council is also scheduled to consider budget add/delete proposals as well as the establishment of the real and personal property tax rates, also scheduled for final approval in May.

While such a major change is unlikely to occur this year, Alexandria’s City Council recently considered ideas proposed by the Budget and Fiscal Affairs Advisory Committee (BFAAC) that could dramatically shape budgets in the future.

Amy Friedlander, vice chair of BFAAC, presented budget-related recommendations to the City Council at a work session yesterday (Wednesday), including two that raised eyebrows on the Council.

“We encourage City Council to keep the residential tax rate at current levels and that we recommend the council considers establishing a goal for the differentiation between the residential and commercial tax bases,” Friedlander said, “as well as considering perhaps decoupling residential and commercial rates. I know that’s a big policy change, but it’s something to think about as you proceed through the year.”

The city’s real estate tax rate — recommended in the City Manager’s budget to remain at the current $1.11 per $100 of assessed value — is the same for both residential and commercial properties. However, as Alexandria residential real estate owners could attest, the tax rate remaining the same is still an increase for local property owners as assessed values continue to increase substantially.

“The burden on the residential tax base is increasing due to increased assessments,” Friedlander said. “If there were possibilities to alleviate that pressure, decoupling the two of them might be one of them.”

Reception on the City Council was mixed, with some concerns that breaking the tax rate into two parts could put undue pressure on commercial properties or negatively impact renters, who get grouped into the commercial tax base.

“Obviously giving us more flexible tools is great,” McPike said. “My concern would be: if we’re raising commercial tax rates, that includes a lot of rental properties. While renters don’t pay property taxes directly, those get rolled into the rents they pay, so I wonder if there might be some sort of regressive impacts to that approach. That would be a concern of mine, but I think in general flexibility could be something that outweighs that.”

Mayor Justin Wilson called the suggestion “tricky.”

“There are winners and losers on any of these things,” Wilson said. “If the state gave us more flexibility there would be more options available, but practically speaking our choice is: do we fund our match for NVTA using the commercial setaside or use it funding a real estate tax that everyone pays. Today we do it with everyone paying it, we could do it with commercial paying it only, but that obviously has implications. When we talked about this last time we were concerned about small businesses with triple net leases where this goes directly to their bottom line.”

The other proposal that stirred discussion on the City Council was going back to a five-year Capital Improvement Program (CIP) to avoid situations where eventual costs far outpace initial estimates in the CIP.

Friedlander said BFAAC recommended potentially reevaluating the total timeframe of the CIP to include projects ready for implementation only with other projects too far in the future to properly plan out — what comprises the majority of the later side of the CIP — put into a separate category. The city had five-year CIPs prior to 2009, Friedlander said, but switched to 10-year CIPs for the 2009 budget.

“That’s also a big thing,” Friedlander admitted. “Consider: is there a different way of planning, of labeling projects, of describing them that would better illustrate to the community. ‘This is something that’s going to happen right now and is going to be done shortly’ versus ‘this is something that’s going to be more long term.'”

Wilson said it’s a conversation that’s come up recently on the City Council in relation to projects requiring large investments with unclear costs.

“We’ve had this conversation of late, particularly when it comes to schools,” Wilson said. “[These are] projects put on the CIP years out and as it gets closer the numbers are violently off and we have to have reconciliation or worse where we’re throwing projects two years out and then saying ‘quick, we have to do this.’ It doesn’t work as well as perhaps it should.”

Wilson also said the predictability of costs and planning can vary depending on the department. Road paving, for instance, is precise for around three years but vague beyond that, while school projects are usually put on the CIP far ahead of the actual costs.

“Part of why we went to a 10 year CIP is to use it as such,” Wilson said, “where we could say ‘you need a new elementary school, and we have it in year 9.’ It’s coming, but we still have to get there.'”

Councilmember Sarah Bagley said that either way, the city should do more to communicate the differences between financial plans and construction plans.

A tax rate add/delete hearing is scheduled for April 23 with final budget adoption is scheduled for May 4.

Alexandria will argue against a rate hike by Virginia American Water, even though the increase will go into effect on May 1.

The average water bill in Alexandria will go up about $94 per year, which the utility says covers infrastructure upgrades cross Virginia, including the replacement of a 3,800-foot-long water main in Alexandria that was installed in the 1950s.

Virginia American Water filed for the $14.3 million in rate increases with the State Corporation Commission (SCC) in November.

“The company is requesting this increase based on $137.6 million in infrastructure investments from May 2020 through April 2023,” Barry Suits, Virginia American Water president, said in a statement. “Through these investments we continue to upgrade our infrastructure and deliver high-quality water and wastewater service and fire protection to approximately 339,000 people in Alexandria, Dale City, Hopewell and the Northern Neck.”

Bill Eger, the city’s energy manager, said that the proposed rates in Alexandria are increasing faster than what the city wants or expects, and that before the SCC hearing the city will send out a press release detailing how residents and business owners can publicly comment.

“At that point in time the public can provide comments in order to state their case about why this rate case is important to them, including whether or not the costs that are being suggested are too much too little,” Eger told Council. “I suspect most would say it’s probably too much.”

Virginia American Water last increased rates in 2018, after proposing and implementing a $6.6 million increase in rates statewide. That rate was later reduced to just a $1.2 million increase after being litigated with the SCC, and residents and businesses were issued refunds.

Mayor Justin Wilson told Eger that he appreciates the effort to lower rates.

“We appreciate all of your work, understanding this and then fighting for our ratepayers,” Wilson told Eger. “It’s very important.”

This year’s budget could include a one-time measure meant to keep the vehicle tax from skyrocketing.

In his monthly newsletter. Mayor Justin Wilson outlined a unique set of circumstances that, if left unchecked, could see Alexandrians’ vehicle personal property tax skyrocket.

“Alexandria’s second-largest General Fund revenue is the vehicle personal property tax,” Wilson said. “As a local tax assessed on vehicle owners annually, based on an assessed value, there is perhaps no tax more hated in the Commonwealth of Virginia.”

Wilson said in Fiscal Year 2021, the city collected $36.5 million from vehicle owners to provide for a total of $60 million of total general fund revenue.

The tax on vehicle is generally fairly steady, but Wilson said changes in the vehicle market has caused that value to increase dramatically and, with it, the associated vehicle personal property tax.

According to Wilson:

Now, the City Council is grappling with a challenging aberration in this revenue source. Under normal circumstances, the valuations of vehicles do not increase. In 2018 and 2019, only about 1% of Alexandria’s registered vehicles increased in value.

Yet, the pandemic has caused chaos in the used car market place. Last year, many Alexandrians saw increases in the value of their cars. This year, this phenomenon was projected to continue, as the City Manager’s proposed budget assumed an 8.5% increase in revenues.

Wilson said the current estimates are that vehicle values would increase by an average of 26% for 87% of the vehicles in Alexandria.

“This is extraordinary,” Wilson said. “To protect taxpayers, the City Manager has brought to the Council a proposal for one-time relief for vehicle owners.”

The proposal from City Manager Jim Parajon would have the city assess only 77% of the Fair Market Value of vehicles to counter-balance the Covid related upswing in value. The proposal would provide no 2022 tax for vehicles assessed at $5,000 or less, and cars valued higher would still have a smaller amount of relief from the tax.

“This proposal provides all vehicle owners with tax relief, while reserving the greatest relief to vehicles with the lowest valuations,” Wilson said. “It is hopeful that the used car market will get back to normal next year. Council will determine their approach to this proposal later this month.”