Loudoun’s Tax Rate Fixation

This is a quiz – no peeking! 

First question: What is the tax rate in Loudoun County?

Second question: What tax rate did County Administrator Tim Hemstreet recommend in his proposed budget for the next fiscal year (FY 13)?

Third question: What is the tax rate in Leesburg?

Last question: What tax rate did Town Manager John Wells propose in his FY 13 budget for the Town of Leesburg?

I’d be willing to bet that some readers knew the answers to at least one of those questions, if not all four. And when you think about it, that’s pretty remarkable.

When I first came to Loudoun County, the fact that the local media – and by extension, local residents – were so focused on the tax rate struck me as highly unusual.

After the County Administrator’s annual budget presentation, a typical headline might read, “Administrator Proposes $1.12 Tax Rate.” When the budget was adopted, the headline might say, “Board Settles at $1.08.”

As a “come here” who had grown up in the Midwest and gotten his introduction to local government on the West Coast, Loudoun County’s seeming fixation on the tax rate at first seemed almost bizarre.

I attributed this fixation in part to the fact that the tax rate was commonly stated in an easily understandable dollars-and-cents format.

We can easily comprehend, for example, the idea of a dollar and 27 cents.  And if we know how much a penny on the tax rate affects our tax bill, then it’s not hard to do a quick mental calculation to figure out how much each penny would affect our bank account.

Quick lesson for the uninitiated: Real property tax bills in Loudoun County are a function of the assessed property value (divided by 100) and the tax rate. To calculate the tax bill on a $400,000 property, first divide by 100 (to get to $4,000), then multiply that number by the tax rate.

At the County Administrator’s proposed tax rate of $1.27, the tax bill on this property would come to $5,080. If the Board of Supervisors is able to reduce the rate by one penny, to $1.26, the bill drops to $5,040.

Thus, each penny on the tax rate affects the bank account of the owner of a $400,000 property by $40. For the owner of a $200,000 property, each penny represents $20 to the taxpayer. Pretty simple.

It would be harder to wrap our minds around the tax rate if it were expressed as, for example, our property assessment multiplied by .0127. A change in the fourth decimal place of that multiplier, from .0127 to .0126, seems almost insignificant. But the impact on our wallet is the same either way.

Presenting a budget is arguably the most important thing the County Administrator and Town Manager do each year, and the budget presentation itself is, for staff, perhaps the biggest event.

For more than two decades, I was part of the staff team that helped the County Administrator prepare for his annual budget presentation.

Most years, the proposed tax rate was a closely guarded secret. The Board members themselves didn’t know what it would be.

We knew that we would have to reveal the proposed tax rate at the end of the presentation. Our thinking was that once the County Administrator said what tax rate he was proposing, no one would listen to anything else he said.

Most of that suspense is gone now. In recent years, the Board began giving the County Administrator “fiscal guidance” that effectively caps the proposed tax rate.

This year, the directed staff to present a budget that would not require any increase in the average residential tax bill. This meant that the proposed tax rate would mostly be determined by real property assessment projections.

Nevertheless, Leesburg Today, which every year provides extensive and, in my view, excellent coverage of the budget process, kept up the local tradition again this year. The headline of its online story on this year’s county budget presentation is “Hemstreet Proposes $1.27 FY 13 Tax Rate.”

Likewise, its headline in the story about Leesburg’s budget presentation is “Leesburg Starts With $94M Budget, 19.5-Cent Tax Rate.”

And don’t be surprised if the tax rate makes the headlines in local media again this spring, when the Board of Supervisors adopts its budget.

Oh, yes – the answers to the above quiz, in order: $1.285, $1.27, 19.5 cents, and 19.5 cents. But some of you already knew that, right?