By now homeowners in the District will have received their annual property tax assessment from the Office of Tax and Revenue. The Chief Financial Officer (CFO) tells us that overall the value of residential properties has declined between 3 and 4%, and commercial properties have declined by just over 10%. The CFO has also recently released his February revenue estimate report which will show a decline for FY 2011 of about $71 million for property taxes – largely stemming from the decline in commercial property values.
To me, this is no great surprise. Given the state of the economy I fully expected commercial property to start showing a decline in value. An interesting observation from residential property is that the decline is largely on the east side of the city – where foreclosures have been highest – and that values in Ward 2 have remained fairly stable.
One policy which is hitting a number of taxpayers this year is the institution of what’s called the 40% “floor” on residential property taxes. This proposal was submitted by the Mayor as part of his FY 2010 budget last spring and was adopted by the Council. What is the 40% “floor?” It basically states that a taxpayer must pay property taxes on at least 40% of the assessed value on their home, and no lower. I spoke up against this proposal – in fact, I noted in the budget report of the Committee on Finance and Revenue that this proposal could have some negative consequences on tax bills – particularly for seniors. Now that the bills have come out, we are indeed seeing that. As part of our budget oversight hearings this spring, I will be asking the Office of Tax and Revenue for further data on this matter and its impact, and I’d appreciate you sharing your experiences and observations with me as well. We have heard from residents whose property tax bills have essentially doubled – which back when I passed the 10% cap was something I wished to avoid. So, your input is welcome.
All this being said, with the downturn in commercial property values – which is a situation that I think will continue for a few years – we need to be especially careful in our budgeting for FY 2011 and onward. Property speculation, both residential and commercial, led to the bubble which collapsed along with Wall Street in the fall of 2008. I do not think we will return any time soon to the days of quarterly revenue increases that we can use to continue to expand our government and pay the bills. In short, we have to create a post-bubble budget that lives within our means. The most important part of that exercise is restraining growth. Dr. Gandhi, our Chief Financial Officer, also let us know that to continue the current functions of the DC government from FY 2010 to FY 2011 there is a growth of over $400 million, even if we add no new programs or spending. So are there hard choices ahead? Yes there are, but I think between the Mayor, the Council, and the CFO we are ready to make those difficult decisions.
By now homeowners in the District will have received their annual property tax assessment from the Office of Tax and Revenue. The Chief Financial Officer (CFO) tells us that overall the value of residential properties has declined between 3 and 4%, and commercial properties have declined by just over 10%. The CFO has also recently released his February revenue estimate report which will show a decline for FY 2011 of about $71 million for property taxes – largely stemming from the decline in commercial property values.
