Loudoun County will no longer receive car tax relief at 70 percent from the state, creating a budget dilemma. The General Assembly decided in 2004 to cap the car tax reimbursement money at $950 million. Providing 70 percent relief, which was the practice, would entail a growing dollar amount each year. The decision takes effect in 2006.
"Legislation that went through [in the General Assembly] last year was done in a hurry," said chairman of the Board of Supervisors Scott York (I-At Large). York said liaisons from local jurisdictions warned the General Assembly the cap would cause problems.
In 1998, the commonwealth decided to institute a tax relief, with an intent of phasing out the car tax. Since 2001, the relief was frozen at a 70 percent rate, which means the car owners paid 30 percent of their car tax bill, and the state the other 70 percent. Now, the state will no longer pay back a percentage, rather it will divide the $950 million reimbursement between the localities. Loudoun County expects to receive $44 million to $50 million of the $950 million sum.
WHEN THE STATE reimbursement was based on a percentage, an increase in population meant an increase in reimbursement money from the county. Now that the reimbursement money is fixed, an increase in population means the county will not receive reimbursement equal to the monies received at the 70 percent-level.
However, localities are not allowed to raise the car tax rate to make up for the shortfall of money, because that would contradict phasing out of the car tax. Raising the rate would cause the locality to lose its share of reimbursement money.
County's Commissioner of Revenue, Robert Wertz, said it is too early to say what the percentage of relief will be. County's Treasurer, Roger Zurn, said the amount will definitely not be enough to cover a 70 percent relief in 2006. As the county's population continues to grow, he said, the percentage of relief provided by the state will continue to decrease.
THE BOARD OF Supervisors will have to figure ways to make up for the shortfall. It will either have to raise other taxes or cut funding to certain programs.
"We're going to see a very frustrating budget season," said York. He said tough decisions will have to be made in both directions.
Supervisor Stephen Snow (R-Dulles) said he did not see any indication anyone on the board wants to raise taxes. He said some of the programs that can wait for funding will probably have to do so. He called the predicament the "taxing sleight of hand."
"We have to look at spending with a critical eye," said Supervisor Eugene Delgaudio (R-Sterling). He said reducing spending on certain programs will put pressure on the legislators to bring more money back to Northern Virginia. If the citizens complain about their programs losing money, he said, they can be referred to the state legislators.
In a 8-0-1 vote, with Supervisor Sally Kurtz (D-Catoctin) absent, the board amended the county's tax code. As of next year, the property tax bills will show the percentage covered by the state and the percentage covered by the taxpayer.
THE STATE'S DECISIONS have clearly frustrated the supervisors. "I'm sickened that every move we make to reduce taxes gets slapped in our face from Richmond," said Supervisor Bruce Tulloch (R-Potomac).
The supervisors asked that more money be returned to the localities in Northern Virginia. "I expect our legislators to bring something back from Richmond," said Supervisor Lori Waters (R-Broad Run). She said localities in Northern Virginia "get gypped" each year, especially on education and transportation money. Supervisor Mick Staton (R-Sugarland Run) said, "Taxes went up, money in Northern Virginia went down. We have to do something to fix this problem."
On the other hand, Wertz asked members of the board how they think the people in some of Virginia's southern counties feel when affluent areas in Northern Virginia get tens of millions of dollars back from the state. Most localities do not receive the return Loudoun does, said Wertz.
While York expects a frustrating budget season, he said two factors should help the financial situation. The first factor is the rise in assessments, which should generate a significant increase in the revenue. The second factor is there will be no new schools opening in the county next year, he said.