Overview
In response to the “ResTOWN in 2006” presentation by the Reston Citizens Association (RCA) to Supervisor Hudgins on July 6, 2005, the Department of Management and Budget (DMB) analyzed the potential revenue sources of a proposed Town of Reston as well as potential expenditure requirements. Based on DMB analysis and using the RCA proposed real estate tax rate, a proposed Town of Reston could generate approximately $35.5 million in revenue including revenue that is currently generated from the Reston Community Center (RCC). Using the methodology discussed below, potential General Fund expenditures associated with a proposed Town of Reston could be approximately $54.6 million, resulting in a shortfall of $19.1 million. Additionally, DMB analysis indicates that the potential revenue loss to Fairfax County could total $22.6 million.
Assumptions
RCA did not provide specific information needed to complete this analysis; therefore, this analysis is based on the assumptions listed below. Please note, as RCA begins to operationalize their vision for the proposed Town of Reston, the assumptions may need to be modified. For example, when RCA determines what infrastructure is needed to process and collect BPOL, real estate taxes etc., or when they specifically outline what services will be provided, the expenditure estimates may need to be adjusted.
- Town Boundaries
For purposes of this analysis, it is assumed that the proposed Town of Reston boundaries will equal Small District 5. As of the 2000 census, the population in Small District 5 was 60,758, 6.3 percent of the County’s 2000 census population of 969,749. RCA proposes that Reston Community Center become part of the Town of Reston and the current Small District 5 tax district be eliminated. Small District 5 real estate taxes are the main revenue source for the Reston Community Center . RCA has also indicated that some boundary changes may be appropriate; however, specific changes have not been proposed.
- Expenditure Estimates
The RCA proposal indicates that current operating functions and expenses totaling $9.2 million will be transferred from RCA to the Town of Reston . However, it is unclear specifically what these functions include and whether they alone can sustain a town population of over 60,000 people. Additional operating expenses such as revenue collections, tax billing, zoning and planning, town administration, town attorney, and public works may be incurred.
While RCA indicates functions the proposed Town of Reston will be responsible for (e.g. traffic control, affordable housing, health care, virtual infrastructure) they do not include a list of specific services they will provide, or how theses services will be delivered. The RCA proposal does indicate; however, that Police services are not anticipated to be provided. Therefore, for this analysis, it is assumed that the proposed Town of Reston will provide services similar in scope to Vienna and Herndon excluding Police Department expenditures.
In order to estimate potential expenditures for the proposed Town of Reston , the FY 2006 Adopted Budgets for the three existing towns within Fairfax County ( Clifton , Herndon and Vienna ) were reviewed. The Town of Clifton was not included in the analysis since they do not levy a real estate tax (a key component to the RCA proposal). This analysis is based on per capita non-police related expenditures included in the FY 2006 Adopted Budgets of both Vienna and Herndon. This analysis excludes both Police Department expenditures and a portion of other potential expenditures that may decrease in the absence of the Police Department such as, administrative expenses. Additionally, only general fund expenditures were analyzed because the other funds across Vienna and Herndon are self sustaining and supported by user fees and not taxes (see Attachments 1 and 2 – General Fund statements for Herndon and Vienna).
- Revenue Estimates
Fairfax County revenue sources were reviewed to estimate the potential revenue that could be generated in the proposed Town of Reston and determine the revenue that Fairfax County could potentially lose if Reston becomes a town. The Code of Virginia determines the taxing relationship between counties and towns. In some cases, a town tax may be levied in addition to the county tax; while in other cases, only one of the jurisdictions has taxing authority.
RCA proposes a real estate tax rate of $0.11 per $100 of assessed value. Other potential revenue sources are also listed including a Business Professional and Occupational License (BPOL) tax. However, the RCA did not quantify how much revenue these sources may generate. Therefore, for taxes other than real estate, it was assumed that the proposed Town of Reston would levy the same types of taxes as Vienna and Herndon but at the current County tax rate. Please see Attachment 3 “Revenue and the Proposed Town of Reston” for a more detailed analysis on the potential sources of revenue. Revenue generated from the Reston Community Center is also included in this analysis.
Analysis of Potential Expenditure Requirements
Expenditure requirements for the proposed Town of Reston in this analysis are estimated based on the per capita cost for Vienna and Herndon. Since RCA did not provide a specific list of services they will provide, it is assumed that the proposed Town of Reston will provide services similar in scope to Vienna and Herndon (excluding police related expenditures). The per capita cost in Vienna is $822 while Herndon is $975. These are based on the FY 2006 Adopted General Fund expenditure totals of $11.9 million and $21.1 million respectively. According to the 2000 census, the population in Small District 5 is 60,758. Therefore, using Vienna ’s and Herndon’s per capita expenditures, General Fund expenditures for the proposed Town of Reston is estimated to be between $49.9 million and $59.3 million. For purposes of this analysis, the proposed Town of Reston General Fund expenditures are estimated to be $54.6 million, the average General Fund expenditures for Vienna and Herndon.
| Potential Expenditure Requirements for a Proposed Town of Reston Based on Non-Police Related Expenditures in Vienna and Herndon |
|---|
| | Town of Vienna | Town of Herndon | Potential Town of Reston |
|---|
| 2000 Census Population | 14,453 | 21,655 | 60,758 |
| Total General Fund FY 2006 Budget* | $11,879,133 | $21,122,652 | $54,601,134 |
| Per Capita | $821.91 | $975.42 | $898.67 |
| *Excluding police related expenditures - (Police Department and proportional amount of Finance and Administration) |
Discussion of Potential Revenue Sources for a Town of Reston
RCA proposes that a Town of Reston could be supported with a real estate tax of $0.11 per $100 of assessed value. In addition to the real estate tax, RCA estimates that, on average, a household would still be required to pay $53 in homeowner association dues. According to RCA, homeowner dues cannot be eliminated entirely since covenants, POAA and associated administrative costs would remain a function of RCA, all other RCA functions would be transferred to the town. The Department of Tax Administration has calculated Small District 5 FY 2006 total assessed value of real property to be $12.1 billion. This would yield approximately $13.3 million in revenue at the proposed rate of $0.11 per $100 of assessed value. This, combined with the other potential revenue sources, as estimated in this analysis, totaling $21.4 million and non-real estate tax revenue from the Reston Community Center totaling $0.8 million, would yield approximately $35.5 million in revenue. Estimated proposed Town of Reston revenue for taxes imposed by Vienna and Herndon are as follows:
| Potential Revenue Sources for a Proposed Town of Reston | Revenue Estimate |
|---|
| Real Estate Tax at $0.11 | $13,284,492 |
| BPOL | 9,922,647 |
| Consumer Utility Tax | 4,905,937 |
| Sales and Use Tax | 4,060,101 |
| Bank Franchise | 800,000 |
| Reston Community Center1 | 792,140 |
| Vehicle Decal Tax | 770,481 |
| Transient Occupancy Tax | 873,979 |
| ABC Profits | 30,400 |
| ABC Licenses | 15,600 |
| Total | $35,455,777 |
Other options available to towns to increase revenue, but not included in this analysis, include levying a meals tax, levying an admissions tax, and levying a personal property tax in addition to the County’s tax. Data are not available to estimate the potential revenue generated from a meals tax or admissions tax. Revenue from a town personal property tax was not included in this analysis because Vienna and Herndon do not levy this tax. However, a personal property tax in the town could generate an estimated $34,685 for every 1 cent tax levied.
Disparity between Potential Expenditures and Potential Revenue
Based on this analysis of expenditures and revenues, it is estimated that a Town of Reston could have General Fund expenditures of $54.6 million and could generate revenue of approximately $35.5 million. Therefore, based on this analysis, a Town of Reston could face a deficit of $19.1 million. In order to cover the shortfall, the proposed Town of Reston would need to decrease expenditures and/or increase revenues. To cover the entire $19.1 million shortfall, the real estate tax rate would need to be increased to $0.27 per $100 of assessed value.
At the RCA proposed real estate tax rate of $0.11 per $100 of assessed value and the average home value in Small District 5, the average homeowner in the proposed town would pay $424.05 per year; however, at $0.27 per $100 of assessed value, the average homeowner would pay $1,040.85 per year, in addition to the County’s Real Estate tax. This compares to Vienna ’s average real estate tax bill of $993.70 per year and Herndon’s average real estate tax bill of $860.76 per year. Any town real estate tax is in addition to the County’s real estate tax currently levied at a rate of $1.00 per $100 of assessed value.
| Average Real Estate Tax Bill |
|---|
| | Town of Vienna | Town of Herndon | Potential Town of Reston |
|---|
| Town Real Estate Tax Rate | $0.22 | $0.27 | $0.11 | $0.27 |
| Average Residential Property Value | $451,680 | $318,800 | $385,500 | $355,500 |
| Average Real Estate Tax Bill | $993.70 | $860.76 | $424.05 | $1,040.85 |
Staffing Issues
DMB analysis also indicates that the staffing proposed by RCA may not be sufficient if the proposed Town of Reston provides non-police related services similar to services provided in Herndon and Vienna. RCA proposes 103.25 FTEs or one employee for every 588 citizens. This compares to Vienna where there is one employee for every 145 citizens and Herndon where there is one employee for every 117 citizens. The Vienna and Herndon ratios exclude Police Department personnel as the proposed Town of Reston is not expected to maintain a Police Department. RCA indicates they will also maintain a Department of Design and Planning and Zoning Department of Infrastructure; however, RCA did not provide staffing information. When this information is available, the employee to citizen ratio may need to be adjusted. The proposed staffing also includes decreasing the number of merit positions at RCC from 38 to 23. RCA did not detail how they would be able to reduce these positions, although they do state that some RCC functions will be transferred to the Town. It is yet unclear which functions and in what capacity.
timate the potential revenue that could be generated in the proposed Town of Reston and determine the revenue that Fairfax County could potentially lose if Reston becomes a town. The Code of Virginia determines the taxing relationship between counties and towns. In some cases, a town tax may be levied in addition to the county tax; while in other cases, only one of the jurisdictions has taxing authority.
RCA proposes a real estate tax rate of $0.11 per $100 of assessed value. Other potential revenue sources are also listed including a Business Professional and Occupational License (BPOL) tax. However, the RCA did not quantify how much revenue these sources may generate. Therefore, for taxes other than real estate, it was assumed that the proposed Town of Reston would levy the same types of taxes as Vienna and Herndon but at the current County tax rate. Please see Attachment 3 “Revenue and the Proposed Town of Reston” for a more detailed analysis on the potential sources of revenue. Revenue generated from the Reston Community Center is also included in this analysis.
Analysis of Potential Expenditure Requirements
Expenditure requirements for the proposed Town of Reston in this analysis are estimated based on the per capita cost for Vienna and Herndon. Since RCA did not provide a specific list of services they will provide, it is assumed that the proposed Town of Reston will provide services similar in scope to Vienna and Herndon (excluding police related expenditures). The per capita cost in Vienna is $822 while Herndon is $975. These are based on the FY 2006 Adopted General Fund expenditure totals of $11.9 million and $21.1 million respectively. According to the 2000 census, the population in Small District 5 is 60,758. Therefore, using Vienna ’s and Herndon’s per capita expenditures, General Fund expenditures for the proposed Town of Reston is estimated to be between $49.9 million and $59.3 million. For purposes of this analysis, the proposed Town of Reston General Fund expenditures are estimated to be $54.6 million, the average General Fund expenditures for Vienna and Herndon.
| Ratio of Employees to Population* |
|---|
| | Town of Vienna | Town of Herndon | Potential Town of Reston |
|---|
| 2000 Census Population | 14,453 | 21,655 | 60,758 |
| Merit/Regular Employees | 99.8 | 185.5 | 103.25 |
| Employee to Citizen Ratio | 1:145 | 1:117 | 1:588 |
| *Excludes police related positions |
Analysis of Potential Revenue Loss to Fairfax County
General Fund revenue totaling $22.6 million could be diverted from the County to a proposed Town of Reston. The table below lists the revenue categories and estimated dollar amount the County may lose should the proposed Town of Reston levy the same taxes imposed by Vienna and Herndon at the current County rate. Please see Attachment 2 “Revenue and the Proposed Town of Reston” for a detailed analysis of each revenue category.
| Revenue Categories | Net Revenue Loss to Fairfax County |
|---|
| BPOL | 9,922,647 |
| Consumer Utility | 6,091,966 |
| Sales and Use Tax | 4,060,101 |
| Transient Occupancy Tax | 873,979 |
| Bank Franchise | 800,000 |
| Vehicle Decal Tax | 770,481 |
| ABC Profits | 30,400 |
| ABC Licenses | 15,600 |
| Total | $22,565,174 |
County revenue sources not impacted by the proposed Town of Reston because the town does not have the authority to levy the tax include the E-911, mobile phone tax and cigarette tax. Taxes the proposed Town of Reston may levy in addition to the County tax include real estate tax, personal property tax and short-term daily rental tax. RCA has indicated they will levy the real estate tax but not the personal property tax or short-term daily rental tax.
