See chart listing 2002 local real estate tax rates

January 16, 2003 -- Virginia's severe financial crisis means that local governments as well as the state face tough times ahead. But while state coffers overflowed during the boom of the 1990s, now it is the localities that are in better shape than state government, according to a new study by the University of Virginia's Weldon Cooper Center for Public Service.

"So far, local governments have weathered the current recession better than in the previous recession, when a poor housing market diminished real-property tax collections," said economist John L. Knapp. "However, in the near future, Virginia's local governments will face difficult times, as the state reduces aid and as local tax revenues reflect the slow growth of the economy."

Knapp also warned that "if the so-called housing bubble were to burst, this would cause a sharp drop in real-property tax revenue" for local governments and add to their problems.

The 270-page study, "Tax Rates 2002," contains detailed information on tax rates levied in all of Virginia's 95 counties and 39 cities and in most of the incorporated towns. The study is based on a comprehensive annual survey conducted by the Cooper Center.

As the state has cut local aid, city and county officials have protested that the unpopular job of raising taxes to maintain services may fall unfairly on them alone, with their main option being the real estate tax.

Virginia's law providing car tax rebates makes it politically difficult for local governments to increase tax rates on cars, Knapp said. The state reimburses car owners on the basis of 1997 local rates and no large jurisdictions have increased their rates since then, he noted. In contrast, 19 counties, most of them rural, have increased their rates.

In dealing with tighter fiscal times, local governments will have few revenue options other than the real estate tax, Knapp said. That is because most available tax sources are already being used at maximum permitted levels, he said. Although real estate is the single most important source for most cities and counties, the tax counts for only about 52 percent of local tax revenue statewide, he added.

The study shows that Virginia's median real estate tax rate of 73 cents per $100 of assessed value did not change between tax years 2001 and 2002.

Real estate tax rates rose in only six cities and in 27 counties. They stayed the same in the majority of cities (25) and counties (41). Rates were reduced in eight cities and 28 counties.
Many localities that increased rates have not reassessed real estate for several years, Knapp pointed out. On the other hand, many localities that reduced rates experienced large increases in assessments due to strong housing markets or new general reassessments after several years of no change.

The 2002 real estate tax rates ranged from a high of $1.42 per $100 of assessed value in Portsmouth to a low of 42 cents in Halifax County. The new study is the 21st annual edition of "Tax Rates." The book is for sale by the Cooper Center.

Ordering information is at:
http://www.ccps.virginia.edu/publications/02trflyer.pdf

For interviews or additional information, John Knapp may be reached at (434) 982-5604 and knapp@virginia.edu.