For the first time in 124 years, the vernal equinox—one of two days in the year when the days and nights are equally long—arrived early this year, on March 19th instead of the usual 20th or 21st. That hasn’t happened since 1896. But that’s not the only anomaly this year. Spring is when local governments adopt their budgets for the next fiscal year, but the coronavirus pandemic has turned that annual ritual on its head.
On Monday, Gov. Ralph Northam ordered many businesses closed for the next 30 days, stating that the unprecedented economic and social disruption caused by the pandemic will likely last “months, not weeks.” Closures do not only affect these businesses, their employees and their families, but also leaves Virginia’s cities and counties in a very difficult predicament. All of the revenue assumptions in their proposed budgets, which were perfectly reasonable given the state of the economy just a few weeks ago, have suddenly became obsolete.
For example, residents of Spotsylvania County learned in February that their real estate assessments had increased because the average value of homes increased 9.8 percent compared with the same time last year. But just three weeks later, those assessments are already out of date. The fact is that nobody knows if the local real estate market will crash like it did during the Great Recession, or rebound after the coronavirus is contained.
Spotsylvania’s taxable real estate “fair market value” was $17 billion before the viral outbreak, up from $15.6 billion last year. But what the fair market value is now is anybody’s guess.
Will real estate in rural areas suddenly become much more valuable as frightened city dwellers search for places of refuge far from crowded city streets? If so, the median sales price for a home in Spotsylvania (which was $293,000 this year, a 23 percent increase over the last five years) could shoot up even further in the coming months or years.
But the spike in unemployment as businesses shut down and workers are laid off means that a lot of county homeowners are in dire financial straits. And if the economy enters a recession or depression, with massive unemployment and business bankruptcies, those property values could plummet.
The county’s recommended fiscal 2021 budget includes a 7 percent increase in property taxes, which account for about a third of all its revenue. Supervisors set the advertised real estate tax rate at 87.97 cents per $100 of assessed value, which is 3 cents over the current rate. But raising property taxes based on assessments that may or may not still be accurate could be catastrophic for many families.
Supervisors on the Fauquier County Board have already declared a “zero tax increase” this year, and all local jurisdictions in Virginia, including Spotsylvania County, should follow suit with a sort of taxation equinox in which this year’s property taxes are equal to last year’s. A tax freeze will also require a spending freeze until the national, state and local economies get back to normal, as hopefully they will at some point in the not too distant future.
Belt-tightening is never easy, and it will be particularly difficult for supervisors who reasonably anticipated more, not less revenue this coming year. But while the county and the country remain in uncharted territory, staying put—both physically and financially—is the only prudent thing to do.