What the Proposed Real Estate Rate Means for Your Taxes

Editor's Note: This is the second in a series of stories looking at the proposed budget. Coming up: The budget's emphasis on capital projects, what city departments sent in their budget requests, and how council and taxpayers react. to see what obligations, services and projects the city hopes to fund with the proposed budget.

Fairfax City Council is mulling over a potential real estate tax rate increase as part of the FY 2011-2012 budget review process. City staff calls for an increase from 95.5 cents to $1, given assumed assessment values and hits in sales tax revenues and county contracts.

So what does that all mean? 

The Budget in Taxpayer's Terms

This real estate tax rate would increase the average homeowner's bill by 8.2 percent compared to their last bill. A homeowner with an average real estate assessed value ($412,712) would pay an extra $26 every month or $312 every year.

Want to calculate your property tax rate under the new proposal? Click here to find your land and home's assessed value and multiply that by the tax rate per $100 of assessed value. For example:

Tax Rate = $1 per $100 of assessed value

Property Value = $200,000
$200,000 x .01 = $2,000

Property Value = $400,000
$400,000 x .01= $4,000

A More Detailed Explanation

Property owners in Fairfax City pay real estate taxes based on the value of their property, land and permanent improvements on that land/property. The City Assessor's Office assesses the properties once a year.

These taxes support city services and projects.

All property assessments are based on 100 percent of fair market value. Assessors look at similar properties, location, condition and other characteristics when estimating the value of a home. Assessed values do not necessarily add up to how much you initially paid for your house. Maybe you got a rotten deal, or maybe you've added an addition or two.

"This approach is considered the most reliable in determining value because it reflects the balance of supply and demand in the marketplace," according to the city's website. "It is based on the principle that a typical buyer will not purchase property at a price higher than the selling price of similar property."

Simple, right? Now's a good time to mention the equalization ratio.

The equalization ratio compares the city's assessment value of a property to the market value. In other words, an 80 percent equalization ratio would mean a property would be assessed at 80 percent of its market value.

Fairfax City's equalization rate is 100 percent, meaning the city's assessments are the same as market values.

So What Does This Mean For You in FY 2011-2012?

City staff have proposed a real estate tax increase of 4.5 cents, from the current 95.5 cents rate to $1 (per $100 assessed property value).

But it's not a matter of subtracting 95.5 cents from $1. It's time to use that assessment and equalization information.

Residential assessments are expected to increase by 3.2 percent, while commercial assessments are looking at a 1.2 percent decrease. The assessed value of all property (residential and commercial) within Fairfax City will increase by 2.2 percent.

Because the overall citywide assessment rose 2.2 percent, the combined residential and commercial equalization ratio falls to 94 cents. 

"The equalization rate is 94 cents, which means that at that rate what you actually pay out of pocket wouldn't go up or go up marginally," said Councilmember Dan Drummond.

The proposed real estate tax rate is 6 cents higher than the city's overall equalization rate.

Equalization for residential property drops even lower, to 92.5 cents, due to an increase in home values. Homeowners will have to chip in more, 7.5 cents, to meet the new tax rate.

This real estate tax rate would increase the average homeowner's bill by 8.2 percent compared to their last bill. A homeowner with an average real estate assessed value ($412,712) would pay an extra $26 every month or $312 every year.

Want to calculate your property tax rate under the new proposal? Click here to find your land and home's assessed value and multiply that by the tax rate per $100 of assessed value. For example:

Tax Rate = $1 per $100 of assessed value

Property Value = $200,000
$200,000 x .01 = $2,000

Property Value = $400,000
$400,000 x .01= $4,000

See a trend?

It's Not Final

This is only the beginning. Council members have until they adopt the budget. A lot can change in that time.

City Manager Bob Sisson hopes the city finds relief in school tuition and other county contracts, and sales tax estimates over the coming months. These factors could urge the council to change, even decrease, the real estate tax rate before adoption in April.

"Even with the proposed real estate tax rate, the city would still continue to be the lowest combined tax/fee burdened jurisdiction in Northern Virginia," Sisson wrote.

Fairfax County's current tax rate is at $1.09 per $100. But home values have risen enough that homeowners would see higher bills if that tax rate remains the same in the next fiscal year. County officials expect to lower that rate before budget approval.

City taxes are paid twice a year, on June 21 and December 5. For information on taxes, please call the City Treasurer at 703.385.7900

the increase in real estate taxes would go.