Charlottesville City Council unanimously passed a $214 million budget for the next fiscal year Tuesday night, voting to raise the real estate tax rate by one cent.
The hike means homeowners will pay 96 cents per $100 of assessed values on their homes. The city initially advertised a potential 10-cent real estate tax rate increase in order to help fund the $76-million proposed renovation and expansion of Buford Middle School.
That expansion project is part of the schools reconfiguration project that would change which schools teach which grades. After councilors reviewed some alternative funding plans for the project, councilors decided a full 10-cent increase wasn’t necessary.
Funds raised from the one-cent increase will go to a capital improvement program fund.
While councilors voted unanimously to pass the tax rate increase, Mayor Lloyd Snook voiced his view that City Council should not raise the tax rate at all.
“I disagree with raising the real estate tax by one cent, but given the fact that we just passed a budget that now has to be funded, I’ll be voting yes,” he said. “It doesn’t change my underlying feeling, but we do have to balance the budget.”
The budget passed on Tuesday included some amendments from the budget initially proposed in early March. Many of these amendments were made because the city is anticipating a $12 million surplus from the current fiscal year budget.
Major funding amendments passed Tuesday include a nearly $2 million transfer to the capital improvement program contingency fund; nearly $2 million in debt service transfer for schools reconfiguration; $325,000 for three full-time engineering employees for Public Works; $300,000 for a new staff position and programming for the city’s Office of Diversity, Equity and Inclusion; $175,000 for affordable housing capacity fund; and $150,000 for climate action planning.
City Council also passed a budget amendment allocating $250,000 in additional tax relief funding to help offset the effects of the real estate tax increase.
The city’s personal property tax rate will remain the same but tax bills are expected to rise because property values in the city rose in the last year. Real estate taxes are based on market value of properties in combination with the tax rate.
City Council also had its first reading of an ordinance to raise the meals tax rate from 6% to 6.5%. The city levies the tax on the purchase of every meal sold in the city by a restaurant or caterer. The current rate has been in place since fiscal year 2020.
The meals tax is also paid by consumers of prepared hot foods sold for immediate consumption on and off premises, including restaurant and grocery store food bars. The tax does not apply to foods purchased for home consumption and preparation, which are taxed at 2.5%.
The increase is expected to bring in an additional $1.25 million in revenue for the city in fiscal year 2023.
City Council will vote whether to raise the meals tax rate in a second reading during its April 18 meeting.