Real Estate Taxes Explained

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Many residents and I received our Stafford County real estate assessments on February 14, 2022. Immediately following, many exasperated posts appeared on social media on how increases in values were unfair and debilitating. The posts contained many misconceptions and assumptions.

Stafford County does property assessments every two years for their about 50,000 parcels. From experience, assessments have been lower than the actual property value.

My assessment is 52% higher than 2020, of which the land is 115% higher, and the improvements are 15% higher. I’ll assume that these percentage increases are the same for all 50,000 parcels. So, my share of the real estate tax will not change.

Here is a simplified example:

The 2020/2021 tax rate is .97 per $100 assessed value.

Assume the total assessed value in 2020 for all county properties was $10,000,000, of which my one property was assessed for $100,000. My parcel would have contributed $970 in real estate taxes. The county would have collected $97,000. The county had a total operating budget of $97.000 and broke even.

Assume for 2022, the assessed values for all county properties increased to $16,000,000, of which my one property was assessed for $160,000. If the county operating budget is still $97,000, a tax rate of 61 cents per $100 will bring in $97,600.

Thus, real estate taxes will only be increased on a property if the Stafford County Board of Supervisors increases our total expense budget.

Real estate taxes are the largest source of revenue to operate county functions, including schools, police, fire and rescue, building construction permits and inspections, transportation projects, and parks and recreation. All of these functions are generally accepted amenities we desire in our community.

In the February 17, 2022, Free Lance-Star, an article indicated the County Administrator proposed a $700 million operating budget for the fiscal year starting July 1, 2022. That would be an 8.5% increase over the current operating budget. Since the current inflation rate is 7.9%, the 8.5% increase is reasonable. Doing the math: the current annual budget is $645 million, and at 97 cents per assessed $100, the total property value would have been  $66.5 billion.

Also, in the article, residential property assessments were 24% higher, and commercial property was 11% higher. I guess my 52% increase was the exception. An effective tax rate of 78 cents per $100 would bring in $645 million in revenue. So, the new total property value would be $82.6 billion, which is a 24% increase.

The County Administrator is proposing an 88.5 cents per assessed $100 rate that would bring in $731 million.

If your assessment increase is more than 24%, your property value is doing better than average. Like mine, your land assessment is causing a higher increase, meaning you are in a desired location. I’m expecting to pay $500 more per year for my desirable location.

If your assessment increase is less than 24%, your real estate taxes should not increase by more than 8.5%, which should be expected based on our current inflation rate.

I know this has been simplified to ignore the other sources of income, such as personal property taxes, sales taxes, and usage fees.

I’ve heard other complaints:

“I don’t have kids in county schools. Why am I paying for schools?” Some educators will tell you, “it is better to teach kids to fish rather than giving them fish.” Strangely, these same educators support politicians that want to give out fish. I prefer to teach kids to fish.

“Why don’t renters have to pay real estate taxes?” Renters do pay real estate taxes as part of their rent. It may go through the landlord. But they are paying taxes. Rents will increase to cover these higher assessments and taxes.

“I’m old, and on a fixed income, I’ll have to sell my house to pay taxes.” Turn over the assessment document that you received in the mail. The top portion indicates the programs available for tax relief to those over 65 with low income and net worth.

Why is there inflation? The number one factor that causes inflation is increased labor costs. We’ve been printing money for the past 14 years. Inflation has only occurred once minimum wages have increased. In July 2020, the minimum wage in Virginia was $7.25 per hour and then starting January 1, 2022, the minimum was increased to $11 per hour. Retailers, grocers, and restaurant owners pass these higher wages on to customers with higher product prices. It’s a tail that we will never catch.

Unlike national and state politics, you can get involved locally. Our expenses are what we want, and you can nicely voice your views at public hearings. The one on the budget and tax rate is April 5, 2022.

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