County Tax Rates Rise and Fall

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Revenues and expenditures in Albemarle County’s fiscal year 2023 budget.

At its May 4 meeting, the Albemarle Board of Supervisors approved two tax increases, one decrease, and one entirely new tax as they moved to adopt their fiscal year 2023 annual budget and five-year Capital Improvements Program. The approvals followed budget work sessions and public hearings in March and April on the proposed ordinance changes and budget provisions. In addition to the newly approved taxes and rates, the county previously approved and adopted a new cigarette tax of 40 cents per pack that went into effect on January 1 of this year.

The county’s real estate tax rate, which generates its largest source of income, remains at the same level that it’s been since 2019—$0.854 per $100 of assessed value of property and houses including mobile homes. Citizens will still pay more in property tax, however, as assessed values of real estate jumped 8.32% in 2022, the largest hike in the last 14 years. 

Though the supervisors could have moved to “equalize” the financial hit by lowering real estate tax rates to balance the surge in values, they chose not to do so. The tax rate on personal property, machinery and tools (which includes automobiles) decreased from $4.28 to $3.42 per $100 of assessed value this year, as the board attempted to compensate somewhat for the sharp increase in the value of new and used cars due to international supply chain issues.

The food & beverage tax rate will increase from 4% to 6% effective July 1, 2022, and will be imposed on food and beverages served in restaurants as well as prepared foods sold in grocery and convenience stores. Six percent is the maximum tax rate of this type allowed by Virginia law. The transient occupancy tax rate will increase from 5% to 8%, which applies to guest rooms in hotels, motels, and rentals such as Airbnb’s.

A Virginia law concerning the transient occupancy tax that went into effect in September of 2021 stipulates that the proceeds from any excess rate over two percent but not exceeding five percent shall be designated solely for tourism and travel initiatives run by local tourism industry organizations. Beyond that, a county that imposes a rate over five percent is not restricted in how it spends the excess—those revenues may be spent in the same manner as general revenues.

A new disposable plastic bag tax of five cents for each plastic bag will go into effect on January 1, 2023 and will apply to bags provided to shoppers in grocery stores, convenience stores, and pharmacies. Funds raised by this tax will support environmental cleanup, litter and pollution mitigation, or environmental education efforts, and will be used to provide reusable bags to recipients of SNAP or WIC benefits.

Albemarle County’s proposed tax rates for fiscal year 2023.

The plastic bag tax does not apply to bags solely used to wrap or package goods to prevent them from contamination, such as those containing meat, fish, poultry, produce, ice cream, dry cleaning, and prescription drugs. The tax applies whether the bags are provided to the customer free of charge or the store charges the customer for plastic bags. 

Large grocery store chains have led the way on nixing plastic bags for customers. Beginning in 2023, the Wegmans chain will entirely eliminate plastic bags in its stores nationwide, and will charge five cents per paper bag used—in an effort to move all customers toward reusable bags. The company will donate the collected funds to each store’s local food bank and United Way. Harris Teeter and Kroger announced in 2018 that they would eliminate single-use plastic bags by 2025, though the bags are currently still in use in the grocery store chains. 

Overall, Albemarle county’s 2023 budget is $586 million, a whopping 25% increase over its 2022 budget of $467 million. Revenue growth is fueled by a $30 million increase in real estate tax receipts due to sharply higher assessed values this year, an expected gain of $11 million from the combined increases in the food and beverage and transient occupancy tax rates, and $26 million in higher state and federal funding due to Covid relief and federal infrastructure legislation allocations. Increased expenditures include $13 million more in county staff salaries, $26 million more to schools on the basis of the county’s 60/40 formula to share local tax revenues, and planned capital expenditures for projects such as new and expanded public schools and county courthouse building renovations.

The county is also absorbing huge cash inflows due to federal and state school relief funds. In the week before the April 27 Board of Supervisors meeting where the 2023 budget was approved, revenues jumped by $21 million, driven by an $18 million increase in schools funding derived largely from additional American Rescue Plan transfers. The county allocates almost 60% of its expenditures budget to the combination of school operations, the schools capital budget, and school-related debt service. See the nearby graphic for the budget breakdown, and the Albemarle County Finance and Budget website for more details. 

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