Finally, let’s discuss revenues.
Last year, the City Council adopted a six-cent increase in the real estate tax rate. This extra money was dedicated to schools (four-cents) and roads and line-of-duty pay (two-cents). Even with this increase, Virginia Beach still has the lowest real estate tax rate (and the lowest personal property tax rate on vehicles) among all seven large cities in Hampton Roads!
I am pleased to propose no change in either tax rate. However, the budget proposes modest increases in some smaller taxes and fees to help offset rising costs.
¨ The boat tax is established at $1.00 per $100 valuation to help fund dredging projects. This is appropriate and fair. Just as car and truck owners pay a personal property tax that helps us maintain roads, boat owners should help maintain our boating channels. They benefit directly from channel dredging. Federal funding is most unlikely to be forthcoming to keep our channels navigable. In conjunction with this change, the budget proposes lowering the tax rate for commercial boats, airplanes and recreational vehicles from the current $1.50 to $1.00 per $100 of value.
¨ A five-cent increase in the cigarette tax to benefit economic development projects. This will help Virginia Beach attract new businesses, jobs and diversify the economy.
¨ A $3 monthly increase in the waste management fee, bringing it to $13 a month. This increase, and another proposed for 2015, are necessary as we plan for the day when our city’s garbage disposal discount with SPSA disappears in 2015, and in order to cover the cost of our municipal solid waste collection (black can system). In FY 2014-15, the city’s cap on trash disposal will increase to $100 per ton, up from the current $65 per ton. Even with this increase, Virginia Beach will have the second-lowest waste fee of all seven cities in Hampton Roads.
¨ There are also previously approved increases in the storm water and sanitary sewer rates.
¨ Higher fees for some parks and recreation programs, some planning permits and some special event permits. This is consistent with our philosophy that users who benefit from certain services should help pay for them.
One more tax issue deserves your special attention.
As you know, Virginia Beach grants exemption from real estate taxes for qualified senior citizens. The current income limit is $47,100 a year for 100% exemption, and we are proposing lowering it to $42,100. The program currently costs $14 million a year. We recently reviewed the program and found that Virginia Beach’s income limit is much higher than that of any other city in Hampton Roads. Suffolk is the closest at $41,479. All other cities in Hampton Roads have much lower income limits of $21,000 to $28,611. We also found that some qualifying seniors in Virginia Beach own very expensive homes. More than 100 homes in the program are valued at more than $500,000. Six are worth more than $1 million. This raises issues that run counter to the intent of the program.
The proposed new income limit would still be the highest threshold in Hampton Roads, but it would save $1.1 million a year. This is a fair, reasonable and needed change to keep this program sustainable.