Prince William County, Virginia - Prince William County Government

2MB Size 4 Downloads 17 Views

Jul 22, 2016 ... Representatives from the REALTOR® Association of Prince William: Liz Hernandez ... A real estate tax rate of $1.122 generates an average.

Estimate of General Revenue Adopted FY 2017-2021

Prince William County BOARD OF COUNTY SUPERVISORS Corey A. Stewart - At-Large Chairman Pete K. Candland - Gainesville District Vice-Chairman

Maureen S. Caddigan - Potomac District John D. Jenkins - Neabsco District Jeanine M. Lawson - Brentsville District Ruth M. Anderson - Occoquan District Martin E. Nohe - Coles District Frank J. Principi - Woodbridge District

Christopher E. Martino Acting County Executive

Adopted FY 2017 – FY 2021 Estimate of General County Revenue

This Report Prepared By: Department of Finance One County Complex Court Prince William, VA 22192-9201

Michelle L. Attreed Director of Finance Timothy M. Leclerc Deputy Finance Director Revenue Committee Christopher E. Martino, Acting County Executive Michelle Casciato, Budget Director Tom Bruun, Director of Public Works Wade Hugh, Director of Development Services Chris M. Price, Planning Director Tracy Gordon, Legislative and Intergovernmental Affairs Director Jeffrey A. Kaczmarek, Executive Director, Economic Development David S. Cline, Associate Superintendent for Finance and Support Services, PWC Schools John M. Wallingford, Director of Financial Services, PWC Schools

Revenue Committee Project Team Lillie Jo Krest, Project Manager Lynn Bailey ♦ Steve Ferlotti ♦ Rene Gapasin Veronica Gulliksen ♦ Mark Hinman Melissa Korzuch ♦ Allison Lindner ♦ Kerem Oner Susan Rodeheaver ♦ Allen Scarbrough

The Revenue Committee Expresses Its Appreciation to the Public and Private Sector Business Community Assisting in the Development of This Report

John Layman Chief Economist Virginia Department of Taxation Ann Battle Macheras Regional Research Vice President The Federal Reserve Bank of Richmond Steven Szakaly Chief Economist The National Automobile Dealers Association Representatives from the REALTOR® Association of Prince William: Liz Hernandez Realtor, Keller Williams Michael Hill Associate Broker, Coldwell Bankers April McMillian Chief Executive Officer Representatives from the Northern Virginia Building Industry Association: Sherman Patrick Planning and Land Use Consultant, Compton & Duling, LC J. Truett Young Vice President of Land Acquisition, Stanley Martin Homes Coleman Rector President & Principal Broker, Weber Rector, Inc. Mike Garcia President, Mike Garcia Construction Jason Dalley Land Market Manager, NVR Homes



1 County Complex Court, Prince William, Virginia 22192-9201 (703) 792-6700 Metro 631-1703, ext. 6700 FAX (703) 792-6882

Michelle L. Attreed Director of Finance

July 22, 2016 TO:

Christopher E. Martino Acting County Executive


Michelle L. Attreed Director of Finance


Revenue Committee Report, Fiscal Year 2017-2021

I am pleased to present the Adopted FY 2017 – FY 2021 Estimate of General Revenue. This report was prepared in accordance with the County’s Principles of Sound Financial Management as part of the responsibility to citizens to carefully plan for the funding of programs and services, including the provision and maintenance of public facilities. During the development of the revenue forecast, the Revenue Committee sought input from public and private sector representatives knowledgeable with the County’s major revenue sources. These discussions assisted the Committee in identifying and interpreting important local, state, and national economic conditions and trends. Average residential real estate values grew by 1.8% while commercial values increased 1.5% during calendar year 2015 (tax year 2016) while personal property values are flat. Sales tax and Business, Professional and Occupational License (BPOL) tax revenues are both projected to increase 3%. In December 2015, after months of speculation, the Federal Reserve increased the target fed funds rate from 0.25% to 0.50%. With recent global events, the timing of future increases remains uncertain. It is projected that the County’s investment income revenue will gradually improve but continue to be below historic levels when interest rates were higher. The assumptions determined by the Revenue Committee provide the capacity to maintain the real estate tax rate in FY 2017 at $1.122. A real estate tax rate of $1.122 generates an average residential tax bill of $3,799, a 1.8% increase over the FY 2016 average tax bill. This revenue policy directive for the FY 2017 budget was approved by the Board of County Supervisors on May 6, 2016. On June 21st, the Board of County Supervisors adopted the FY2017-2021 Five-Year Plan. This revenue driven plan reflects all BOCS decisions through FY2017 budget adoption and caps operating expenditure increases at 3.5% in the out years.

I recommend these revenue estimates be used in support of the FY 2017 Fiscal Plan, the Capital Improvement Plan for FY 2017-2022, and other financial plans. I would like to thank the members of the Revenue Committee, the participants from the business community, and all others who contributed to the preparation of this report.


REVIEW of the ECONOMY in 2015 and OUTLOOK for CALENDAR YEAR 2016….. 1 REAL ESTATE TAX RATE AND MAJOR REVENUE SOURCES..………………… 11 FY17 Proposed Real Estate Tax Rate and Average Tax Bill…………………..… 11 Major Revenue Sources……………………………….. …………………………. 11 Key Assumptions.………………………………………………………………… 12 Real Property Revenue …………………………………………………………… 13 Residential Real Estate …………………………………………………… 13 Commercial Real Estate ………………………………………………….. 16 Public Service Taxes ……………………………………………………... 17 Personal Property Revenue ………………………………………………………. 19 Local Sales Tax Revenue ………………………………………………………… 22 Consumer Utility Revenue ……………………………………………………….. 23 Communications Sales and Use Tax Revenue …………………………………… 24 BPOL Revenue …………………………………………………………………… 25 Investment Income ……………………………………………………………….. 27 All Other Revenue Sources ………………………………………………………. 29 Interest on Taxes …………………………………………………………. 29 Motor Vehicle License Fee ………………………………………………. 29 Recordation Tax ………………………………………………………….. 30 Tax on Deeds ……………………………………………………………... 31 Daily Rental Equipment Tax……………………………………………… 31 Bank Franchise Tax ………………………………………………………. 32 BPOL Taxes-Public Service ……………………………………………… 32 Transient Occupancy Tax ………………………………………………… 32 Interest Paid to Vendors ………………………………………………….. 32 Interest Paid on Refunds …………………………………………………. 32 Rolling Stock Tax ………………………………………………………… 32 Passenger Car Rental Tax ………………………………………………… 33 Manufactured (formerly Mobile) Home Titling Tax ……………………... 33 Payments in Lieu of Taxes (PILT) ……………………………………….. 33 APPENDIX A – GENERAL PROPERTY TAX RATES 2016

REVIEW OF THE ECONOMY IN 2015 AND OUTLOOK FOR CALENDAR YEAR 2016 The County’s revenues are affected, in varying degrees, by economic conditions at the national, state and local levels. Because of its proximity to the federal government and military employment centers, the local economy has some degree of insulation from the severity of cyclical downturns. The following narrative presents an economic assessment of the nation, the Commonwealth of Virginia, and Prince William County and highlights the relevant trends in place as we look forward to FY 2017.

National Real Gross Domestic Product (GDP) is the broadest measure of economic activity in the United States and is a reliable indication of the overall strength and performance of the national economy.

First quarter GDP for calendar year 2015, was a muted 0.6%, while the second quarter was reported at a more robust 3.9% and 2.0% in the third quarter. The advanced estimate for the fourth quarter of 2015 was 0.7%. Expectations are for moderate growth in 2016. Other parts of the economy also moved in the right direction over the course of the year, many appearing to pick up momentum towards the end of the year. The stock market and related indexes have been marked by volatile but steady growth since the depths of the Great Recession. Since the low point in 2009, the S&P has been largely positive and by December 31, 2015, the index stood above 2,000. In December 2015, national unemployment stood at 5.0% down from 5.6% one year earlier. Job creation, which declined severely during the most recent recession, continued an expanding trend in the 4th Quarter 2015 with 951,000 net new jobs reported. In two years, from December 2007 until December 2009, a net of over 8.5 million jobs were lost as the economic contraction took hold -- a loss of 5.9%. Since that time, however, a net total of 10.93 million jobs have been 1

added (through December 2015) -- an increase of 7.6% in 72 months. In 2015 (JanuaryDecember), non-farm payrolls have added 2.49 million net new jobs. Expectations going forward are for continued job growth and further reduction in the national unemployment rate as 2016 progresses. Also at the national level the homebuilding sector continued on a mostly stable, upward trend, though there is still much ground to be made up to return to a more normal activity level and overall, signs point to a slowing rate of growth towards the end of the year. Home affordability measures remain near all-time highs, even as younger first-time buyers seem reluctant or unable to take on home-ownership, indications that the national residential market continues a slow, but steady improvement. Across the nation, some 1.149 million housing starts were reported (annualized) in December 2015, a 6.3% increase from one year earlier and December 2015 permits totaled 1.232 million (annualized) -- a 16.2% increase, year-over-year. A total of 5.46 million existing homes were sold (annualized) in December 2015, a 7.7% annual increase and new sales (annualized) came in at 0.49 million, an increase of 13.6%. Wages and personal savings grew modestly during calendar year 2015, in part due to the impact of falling gas prices on consumers. Savings in fuel prices contributed to a boon to auto and light truck sales in 2015, however on the whole did not translate into increased consumerism in other retail areas. Retail activity, grew only modestly as the year progressed. U.S. retail and food services sales for December 2015 were down 0.1% from the previous month, but were up 0.1% from one year earlier. Gasoline sales declined by 1.1%, even as consumers were driving more. Clearly, rapidly falling prices in gasoline sales, which typically account for six to eight percent of total retail sales, are accounting for declines in overall retail sales volume, but are probably not an indication of consumer sentiment. In fact, as prices continue to decline, the average consumer may begin to use those savings on other purchases, like automobiles and light trucks, for example. Total sales of automobiles and light trucks, including imports, were reported at 17.3 million in December 2015, down from a strong 18.2 million sold in September 2015 but 5.5% higher than December 2014. Auto and truck sales during 2015 as a whole were at or near historic levels. Expectations are for auto and truck sales to continue at a robust pace in 2016.

Virginia John Layman, Chief Economist and Director of Revenue Forecasting for the Virginia Department of Taxation, addressed the Revenue Committee on November 19, 2015, and presented a summary of the economic outlook for the Commonwealth. Mr. Layman noted that during fiscal year 2015 the Virginia economy performed generally near expectations, with considerable improvement over fiscal year 2014. Wages and salaries across the Commonwealth, forecast to grow by 3.4%, actually grew by 3.0%. Jobs in the Commonwealth, forecast to grow at 0.9%, actually grew by a 0.8% during the fiscal year, with gains in professional/business services, construction/mining, education and health services, and government. The statewide unemployment rate stood at 4.2% in December 2015, compared to 4.8% one year earlier. Personal income in the Commonwealth, forecast to grow by 3.7% during fiscal year 2015, actually grew by 3.9% year-over-year. The Commonwealth’s individual income tax non-withholding collections were $316.4 million (11.6%) ahead of the annual estimate for fiscal year 2015. Payroll withholding tax collections exceeded the annual estimate by $140.4 million (1.3%) for the same time period. This was 2

largely attributed to gains in wages and salaries as well as employment gains throughout the Commonwealth. Total sales tax collections during fiscal year 2015 exceeded the forecasts by $17.6 million (1.6%), attributed primarily to the recovering housing market in Virginia during fiscal year 2015. The Commonwealths’ September 2015 Official and Working General Fund Forecast for Fiscal Year 2016 forecasts general funds revenue during fiscal year 2016 will exceed the forecast in the Chapter 665 Revenue Estimate for fiscal year 2016 by $345.5 million or 1.9%. The Governor’s Advisory Council on Revenue Estimates (GACRE) met in November, 2015 and issued its interim revenue forecast, based on the updated economic outlook for Virginia as approved by the Joint Advisory Board of Economists (JABE) and GACRE. A majority of JABE members supported the standard outlook, since it was similar to the official forecast. The members also unanimously approved of maintaining a key assumption that Virginia would underperform the nation; however, the gap between the U.S. and Virginia economic performance would be smaller than previously forecast. Employment growth in the Commonwealth over the next two years is expected to be 1.4% and 1.8% respectively. Personal income is forecast to grow by 3.8% and 4.8% in fiscal years 2016 and 2017. Wages and salaries growth, are currently forecast to grow by 3.5% and 4.6% during the same time frame. Despite weak job growth, withholding gains have been picking up across the Commonwealth as has sales tax revenue. The expectations are for continued economic growth in fiscal years 2016 and 2017.

Prince William County The Prince William County economy appears, for the most part, to be healthy and is the primary back drop that frames this outlook (relatively low gas prices, low interest rates, improving job market, and affordable housing relative to neighboring counties) is not expected to change dramatically over the near term. While the residential real estate market appears to have leveled off in terms of average sold price and number of sales, foreclosures continue on a downward pace, approaching levels recorded before the real estate downturn. Unemployment in the County continued to improve over the quarter and is still well below the national rate. Latest at-place employment data from the Virginia Employment Commission (2nd Quarter 2015) indicate growth, year-over-year, in establishments, employment and average weekly wages in the County. The Prince William County commercial inventory, still elevated in terms of historic vacancy rates, improved from one year earlier. The Prince William economy appears, despite a recent plateau in the housing market, to be healthy, with expectations of continued growth in the coming year. Population and Cost of Living Prince William County’s population was estimated at 431,863, on December 31, 2015, an increase of 1.4% year-over-year. The County population is estimated to have grown by 29,861 persons (7.43%) since April 1, 2010, when the population was 402,002. The MetropolitanWashington Council of Governments projects in its Round 8.4 Cooperative Forecast: Employment, Population and Households that Prince William County will grow to over 469,000 persons by the year 2020 or 15.70%, and to 535,629 by the year 2030 or 27.31% from 2010.


Labor Force The Prince William County civilian labor force, as reported by the Virginia Employment Commission was 230,954 in December 2015, a decrease of 757 (-0.03%) since December 2014 but a five-year increase of 10,909 (5.0%). Employed persons in the labor force (222,835) increased by 2,561 (1.2%) since December 2014 and by 15,116 (7.3%) in the last five years. Unemployed persons in the County (8,119) decreased by a 1,804 (-18.2%) since December 2014 and by 4,207 (-34.1%) since December 2010. The December 2015 unemployment rate for Prince William County was 3.5%, compared to 4.3% just one year earlier. Prince William County Labor Force 235,000


6.0% 5.5%

5.6% 5.4%


5.0% 5.0%



4.5% 4.3%



3.5% 3.5%


3.0% 2010 Labor Force


2012 Employed




Dec. Unemployment Rate

Job Market According to data from the U.S. Department of Labor and the Virginia Employment Commission, Prince William County has outpaced national, state and regional economies in business and job growth over the last five years but has lagged behind the state and region for at-place average weekly wage growth since 2009. The 2014 American Community Survey indicates that on the average, Prince William County workers continue to face long commute times. Some 24.9% of all County workers travel an hour or more one way to work. This figure is nearly three times the national number of 8.4% and is the fifteenth longest commute among the largest 828 counties in the United States. Of the 20 longest average commutes to work, eight are communities in the greater Washington area. The average travel time to work among Prince William County workers in 2014 was 39.2 minutes, an increase from 36.9 and 36 minutes in 2000 and 1990, respectively. The 2014 American Community Survey also indicated that 75.7% of Prince William County workers drive to work alone; 14.1% carpool to work; 5.1% use public transportation; 5.1% used other means, walked to work or worked at home. In 2015 (2nd Quarter), there were 8,489 employment establishments reported in Prince William County, a growth rate of 4.8% year-over-year and 16.7% since 2010. By comparison, Northern Virginia establishments grew by 3.8% in one year and 9.1% since 2010; statewide, establishments grew by 4.4% in the last year and 8.5% since 2010. 4

At-place employment in Prince William County (122,809 in the 2nd Quarter 2015) increased by 1.8% year-over-year and by 17.0% since 2010. By comparison, Northern Virginia employment increased by 1.4% in the last year and 4.8% since 2010. Employment in the Commonwealth grew by 1.6% in the last year, and increased by 4.9% since 2010. The average weekly wage in Prince William County ($838 in the 2nd Quarter 2015) grew by 1.9% year-over-year and 5.4% since 2010. At-place average weekly wages in Northern Virginia ($1,360) grew by 2.9% in the last year and 6.3% since 2010. In Virginia, weekly wages ($1,000) grew by 2.5% year-over-year and 7.6% since 2010. At-Place Establishments, Jobs and Weekly Wages One and Five Year Growth

Residential Housing Prince William County depends heavily on residential housing and consumer spending to maintain its prosperity and levels of local government services. In January 2015, all residential properties (including apartments) were valued at $44.8 billion -- an increase of over $3.2 billion, or 7.7% from January 2014. Residential properties (including apartments) currently account for 83% of the total land book value.


Prince William County History of the Real Estate Tax Base

Source: Prince William County Real Estate Assessments Office

Representatives from the REALTOR® Association of Prince William (PWAR), addressing the Revenue Committee, reflected on conditions in the market during the year, noting continued low levels in inventory, with moderate increases in market price and sales numbers as the year progressed. They noted a leveling off in terms of prices as the year waned and expressed some concern for conditions going forward. According to data from Metropolitan Regional Information Systems (MRIS), 2015 home sales (single family, townhouses and condominiums) in the County totaled 6,652, a 3.3% increase from the 6,052 units sold in 2014, but a 43.3% increase over the trough year of 2007 when only 4,642 homes were sold. Over the seven-year period 2000 to 2007 on average 7,961 homes were sold annually in the County. In the eight-year period 2008 to 2015, an average of 6,638 homes were sold annually (approximately 83% of the 2000 to 2007 average). The average sale price of homes sold in calendar year 2015 was $353,931 -- an increase of $2,016, or 0.6%, from the previous year, when the average sale price was $351,915. As illustrated in the chart below, annual growth rates for average sales price moderated while volume increased slightly during 2015, from the previous year, and are on a par with averages over the last five years.

(Source: MRIS)

During December 2015, the average home in Prince William County sold for $351,548, a decrease of 3.88% year-over-year. The number of homes sold in December 2015 was 547, an 6

increase of 4.39% from December 2014. The ratio of homes on the market to homes sold was 2.30, compared to 2.71 one year earlier. Average “days on the market” stood at 66 in December 2015, unchanged from the prior December. Foreclosure activity in Prince William County which increased substantially from 2007 to 2008 has steadily declined; however, the total number of foreclosures are still elevated by historic standards. A total of 506 foreclosures were reported for calendar year 2015, a decline of 6% since 2014 and 92% from 2008, the worst year in terms of numbers of foreclosures. Expectations are that the number of foreclosures will continue to decline.

Calendar Year 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Total Foreclosures 249 2,805 6,412 3,308 2,083 1,426 959 632 541 506

The number of permits issued for new housing construction reflects a market for new homes that made modest gains in 2010 as it began to emerge from the real estate downturn. New residential construction lost momentum between 2011 and 2013 but gained some traction during 2014 and continued that modest growth in 2015, particularly in multi-family units, but still has not approached the levels seen before the downturn. In 2015, a total of 2,311 residential occupancy permits were issued for new homes: 609 single family homes, 484 townhouses and 1,218 multi-family units (including apartments). This represents an increase of 9.8% year-over-year and the largest annual number since 2010’s 2,312 total new units. The mix of housing types has shifted in ten years, reflecting a changed market. In 2005, 65% of all permits issued were for single family detached, while 29% were for townhouses and 6% for condominiums. In 2015, by comparison, 26.4% of all permits issued were for single family detached, while 20.9% were for townhouses and 52.7% were for multifamily units. A total of 948 permits were issued for rental apartments, accounting for 77.8% of all multi-family permits and 41.0% of all residential occupancy permits issued in 2015. Commercial Inventory During the course of 2015, commercial inventory saw gradually improving conditions, although new construction continues at a generally reduced level. In so much as the County’s commercial inventory is a part of the region’s inventory, it is affected by general conditions in the region’s economy. Overbuilding during the last economic expansion was in part responsible for an oversupply of office and industrial inventory as the economy began to worsen. Furthermore, in certain types of product -- notably flex, which is often characterized by single large and specific uses -- the movement of one or two tenants can greatly impact vacancy rates. Current conditions suggest that the commercial real estate market continues to be in an absorption phase, 7

particularly in office product. And, there is some evidence that the federal government as with the private sector, may be undergoing a change of sorts as to how and where business is conducted. As baby boomers move out of the labor force, some of the senior positions vacated may be allowed to lapse or be consolidated as younger, more productive and technically savvy workers move in. Furthermore, new ideas such as telecommuting and flex scheduling are gaining traction in the workplace -- all of which will affect the existing commercial inventory in Northern Virginia and Prince William County. With a marked improvement in industrial and flex vacancy rates, it is reasonable to expect demand for this product to increase at the local level. Retail space demand, which is largely population driven, will reflect in part the growth in the local population as well as individuals’ relative wealth and sense of well-being. Prince William County’s close proximity to the federal government and affiliated contractor industries has largely isolated it from severe economic downturns in the past. Not only has this relationship provided some insulation from inevitable business cycle troughs, it has also provided the County with a demand base for its housing and retail trade. As previously noted, this may not hold true in the future. Lingering uncertainty over future federal expenditures may have a negative impact on commercial markets in the area -- particularly in defense-related industries. On the positive side, the Base Realignment and Closing Act (BRAC) designated both Marine Corps Base Quantico and Fort Belvoir Army Base as recipients of additional personnel as the Department of Defense continues consolidation of bases around the nation. Prince William County’s location has meant, in the past, an increased demand for office and flex product in the Interstate 95/Potomac Communities corridor, particularly from contractors servicing the bases and the Department of Defense and Department of Homeland Security activities. In an era of declining defense budgets and changing security needs, future demand for this product is uncertain at best. In December 2015, according to Costar Realty Group (Costar), Prince William County commercial inventory included 44.6 million square feet (sq. ft.) of space in 1,982 buildings, with 2.84 million sq. ft. of vacant space -- a vacancy rate of 6.4%. Since 2011, some 1.77 million sq. ft. of commercial space has been added to the inventory, a growth rate of 4.1%. Vacancy rates moved lower in office and industrial products while increasing slightly in flex and retail Source: CoStar Realty Group categories since December 2014. Total vacancy across all categories in December 2015 was 6.4%, a decrease of 113,050 sq. ft. since December 2014, when the total vacancy rate was 6.7%. Total vacant space has declined by 852,202 sq. ft. since December 2011, when the total vacancy rate was 8.6%. Vehicles Vehicle additions are important to Prince William County in two ways. First, personally-owned vehicles are the County’s primary source of personal property tax revenue. Second, strong increases in the stock of vehicles in the County represent robust local consumer demand. Steven 8

Szakaly, Chief Economist from the National Automobile Dealers Association (NADA), addressed the Revenue Committee in December 2015 regarding national and local trends in vehicle sales. Mr. Szakaly noted that across the nation, sales of automobile and light trucks were at or near historic levels during 2015—led by robust sales in light trucks as gas prices continued to plummet as the year progressed. Expectations are that this trend will continue in 2016. In monitoring sales locally, month-by-month additions tend to be volatile and exhibit seasonal patterns. Therefore, the following graph includes a six-month moving average that shows the annual trend in net vehicle additions. Starting in April 2011, net vehicle additions in Prince William County experienced substantial gains driven by far fewer vehicles relinquished and very strong addition activity. Net new gains continued at a robust pace through 2012 and 2013, tailing down towards the end of 2013, before returning to very positive trends as 2014 progressed and continuing that trend during 2015.

Source: Virginia Department of Motor Vehicles

Retail Sales Tax Retail sales tax revenue provides financial resources to the County and serves as an indicator of consumer demand. According to the 2014 American Community Survey, the 2014 median household income in Prince William County was $92,104 and the 5-year average was $98,514. The County ranks twentieth among the largest communities in the United States, fifth among counties and cities in the Commonwealth, and is an indication of the relative wealth of Prince William County and the greater Washington metropolitan region, which included eleven of the top twenty counties in the nation for median household income. The County’s high level of household income should contribute to positive sales tax collection in the future.

Conclusion In conclusion, the 2015 economy at the national and local level exhibited growth that was somewhat tempered by uncertainty. As the year progressed, the national economy appeared to be strengthening in some areas, notably job creation and automobile sales. Other areas, such as manufacturing, the stock market and non-auto retail sales were volatile and corporate earnings were mixed. The housing market, still well below pre-recession levels, continued to grow modestly, but appeared to moderate towards the end of the year. Job creation and unemployment, stubbornly entrenched at unhealthy levels throughout 2010 and 2011, improved in 2012 and 2013, and continued that trend during 2014 and accelerated in 2015. Nationally, the price of gasoline tumbled -- particularly towards the end of the year and consumer 9

confidence appeared to grow modestly. At the local level, retail activity appeared to moderate toward the end of the year. Core inflation and mortgage rates remained low and home values in the nation continued to improve slowly during 2015, with growth rates moderating towards the end of the year. Locally, home values increased modestly over the course of the year, though new home construction has yet to make substantial headway. The monthly rate of foreclosures continued to ease throughout 2015. The County’s commercial inventory remained primarily in an absorption phase, with declining vacancy, but little new construction. Retail activity and automobile sales continued to expand, though many consumers were compelled to hold on to their existing vehicles longer. While there is reason for optimism in 2016, some challenges remain nationally, statewide and locally. Prince William County continues to boast remarkable characteristics that stand it in good stead -- exceptional human capital, a relatively diverse local business community, and the County’s enviable position as an integral part of the Northern Virginia region. There are concerns that a reduced role by the federal government with regards to job creation and economic expansion in the greater Washington D.C. Metropolitan area will have a broader lasting effect over the long term. In an environment of continued pressure on the federal budget, new challenges may be anticipated on the regional and local economies. Historically, however, Prince William County as part of the Washington D.C. Metropolitan area, and the Northern Virginia economy in particular, has shown remarkable resilience during the ups and downs of the normal business cycle.


REAL ESTATE TAX RATE AND MAJOR REVENUE SOURCES On April 23, 2015, the Board of County Supervisors adopted the FY 2016 Fiscal Plan. The adopted FY 2016 real estate tax rate of $1.122 had the following impacts on property owners:  

the “average” real estate tax bill on existing, residential properties increased $149 or 4.16%; and the “average” real estate tax bill on commercial properties increased 2.45%.

FY 2017 Adopted Real Estate Tax Rate and Average Tax Bill On May 6, 2016, the Board of County Supervisors adopted the FY 2017 Fiscal Plan. The adopted real estate tax rate of $1.122 has the following tax bill impacts on property owners:  

the “average” real estate tax bill on existing, residential properties will increase $67 or 1.80%; and the “average” real estate tax bill on existing, commercial properties will increase 1.50%.

The following chart illustrates the recent history and five-year plan of the County’s real estate tax rate and average residential real estate tax bill.

Major Revenue Sources 1 $1.122

Real Estate Tax Rate:

($ in 000s)

% to Total (FY 17)






FY 16 Revised

FY 17

FY 18

FY 19

FY 20

FY 21

Real Estate Taxes








Personal Property Taxes








Sales Tax








Consumer Utility Tax








Communications Sales Tax
















Investment Income








All Other















School Portion 1







County Portion







Total General Revenue

Transportation Fund Total General Revenue














On April 23, 2013, the Board of County Supervisors approved an amendment to the County/Schools Revenue Sharing Agreement to transfer 57.23% of all general revenues, excluding recordation tax revenue, to the Schools as support for the annual Schools budget and 42.77% to support the annual County budget in each year of the Five-Year Plan.


Key Assumptions The following sections of this report contain the key assumptions that were the topic of discussion at the Revenue Committee Meetings. The comments and insights from public and private sector participants contributed to the formation of these assumptions. Other references and information sources were used to supplement the assumptions derived in the committee discussions. FY 2017 - 2021 PRELIMINARY GENERAL COUNTY REVENUE ESTIMATE BY CATEGORY GENERAL REVENUE SOURCE Real Estate Rollback Suppement Real Estate Exonerations SUBTOTAL Real Estate-Public Service Real Estate Tax Deferral Land Redemption Real Estate Penalties TOTAL REAL ESTATE



20 41 21 25 160 $

Personal Property Personal Property Prior Year Personal Property Exonerations Personal Property Tax Deferral Personal Property Penalties TOTAL PERSONAL PROPERTY

71 72 79 81 170


210 220 235 510 1339

Interest on Taxes Daily Equipment Rental Tax Bank Franchise Tax BPOL - Public Service Vehicle Decals Recordation Tax Tax on Deeds Transient Occupancy Tax Interest Paid to Vendors Interest Paid on Refunds Rolling Stock Tax Passenger Car Rental Tax Mobile Home Tilting Tax Federal Payment in Lieu of Taxes Undistributed & Miscellaneous ALL OTHER REVENUE

140 $ 215 230 236 250 260 261 270 520 521 1303 1304 1305 1700 1150 $


FY 18 Forecast

FY 19 Forecast

FY 20 Forecast

FY 21 Forecast

603,997,000 $ 629,918,000 $ 100,000 100,000 (15,706,500) (16,380,500) 588,390,500 613,637,500 19,019,169 19,431,929 (500,000) (500,000) 315,000 315,000 1,532,000 1,640,000 608,756,669 $ 634,524,429 $

659,972,000 $ 100,000 (17,161,900) 642,910,100 19,781,875 (500,000) 315,000 1,718,000 664,224,975 $

686,992,000 $ 100,000 (17,864,400) 669,227,600 19,997,158 (500,000) 315,000 1,788,000 690,827,758 $

713,835,000 100,000 (18,562,300) 695,372,700 20,179,490 (500,000) 315,000 1,858,000 717,225,190

164,900,000 $ 171,000,000 $ 50,000 50,000 (500,000) (500,000) 1,830,000 1,900,000 166,280,000 $ 172,450,000 $

178,100,000 $ 50,000 (500,000) 1,980,000 179,630,000 $

185,400,000 $ 50,000 (500,000) 2,060,000 187,010,000 $

192,900,000 50,000 (500,000) 2,140,000 194,590,000

FY 17 Forecast



$ $ $ $ $ $


62,088,000 14,240,000 26,051,000 7,297,000 17,430,000

$ $ $ $ $

1,431,000 $ 190,000 1,500,000 1,518,000 8,460,000 7,340,000 1,730,000 1,400,000 (100,000) (55,000) 90,000 990,000 35,000 70,000 7,000 24,606,000 $

63,953,000 14,460,000 26,839,000 8,489,000 17,260,000

$ $ $ $ $

1,491,000 $ 194,000 1,200,000 1,564,000 8,660,000 7,490,000 1,740,000 1,428,000 (100,000) (55,000) 90,000 970,000 35,000 70,000 7,000 24,784,000 $

65,871,000 14,740,000 27,785,000 9,483,000 17,260,000

$ $ $ $ $

1,560,000 $ 198,000 1,200,000 1,611,000 8,900,000 7,640,000 1,770,000 1,457,000 (100,000) (55,000) 90,000 970,000 35,000 70,000 7,000 25,353,000 $

67,846,000 15,040,000 28,904,000 10,594,000 17,260,000

$ $ $ $ $

69,882,000 15,340,000 30,268,000 12,109,000 17,260,000

1,624,000 $ 202,000 1,200,000 1,659,000 9,140,000 7,790,000 1,810,000 1,486,000 (100,000) (55,000) 90,000 970,000 35,000 70,000 7,000 25,928,000 $

1,688,000 206,000 1,200,000 1,709,000 9,380,000 7,950,000 1,840,000 1,516,000 (100,000) (55,000) 90,000 970,000 35,000 70,000 7,000 26,506,000

926,748,669 $ 962,759,429 $ 1,004,346,975 $ 1,043,409,758 $ 1,083,180,190


REAL PROPERTY REVENUE Real estate revenues are broken down into the following categories: general real estate tax, public service tax, real estate tax deferral, land redemption, and real estate penalties.

Real Estate Taxes The real estate tax is the single largest revenue source for Prince William County contributing approximately 65.69% of general revenues (FY 2017 forecast). It is levied on all land, improvements, and leasehold interests on land or improvements (collectively called “real property”) except that which has been legally exempted from taxation by the Prince William County Code and the Code of Virginia. The revenue summary for the general real estate tax applies only to real property assessed locally, which includes residential, apartments, commercial and industrial, and agricultural and resource land property types. The table shows a five-year history of this revenue source and the five-year revenue forecast.

Revenue History FY 11 FY 12 FY 13 FY 14 FY 15 Current Year Adopted Current Year Revised

% Change 458,409,233 474,859,163 496,366,393 515,274,429 557,365,283

-0.2% 3.6% 4.5% 3.8% 8.2%





603,997,000 629,918,000 659,972,000 686,992,000 713,835,000

3.4% 4.3% 4.8% 4.1% 3.9%

Revenue Forecast FY 17 FY 18 FY 19 FY 20 FY 21

Note that public service properties including railroads, utilities, etc. are not assessed locally. Rather, these properties are assessed by the State Corporation Commission and the Virginia Department of Taxation. Therefore, real estate revenues from these properties are not included.

Residential Real Estate During calendar year 2015 (CY 2015) the residential real estate market continued to appreciate, albeit slowly due to the softness of the economy. Positive factors affecting the market were relatively low interest rates and strong sales activity. The negative factors such as lackluster wage growth held the market back. Following a 6.2% increase in values in 2014, the average existing home value increased approximately 1.8% in 2015. In 2015, there were 506 foreclosures of residential properties compared to 541 in 2014, a decrease of 6%. The average number of days on the market remained stable at 66 days from December 2014 to December 2015. Bank owned properties and short sales made up approximately 5% of all sales through the end of December 2015. The residential real estate market consists of four property types: single-family homes, townhouses, residential condominiums, and apartments. Duplex units are included within the townhouse category. The apartment category consists of units within rental apartment communities and apartment buildings with five or more units.


Residential Appreciation The following chart shows a history of actual residential appreciation (excluding rental apartments) from calendar year 1984 through 2014 and the General Revenue Committee’s estimates thereafter. 30% 27.20%

25% 20%







5% 0.10%

0% -1.79%

-5% -10%

Actual Residential Appreciation

-15% FY17-21 Forecast

-20% Average Residential Real Estate Appreciation 4.5%


CPI (Balt/Wash metro area)



CY84, FY86 CY85, FY87 CY86, FY88 CY87, FY89 CY88, FY90 CY89, FY91 CY90, FY92 CY91, FY93 CY92, FY94 CY93, FY95 CY94, FY96 CY95, FY97 CY96, FY98 CY97, FY99 CY98, FY00 CY99, FY01 CY00, FY02 CY01, FY03 CY02, FY04 CY03, FY05 CY04, FY06 CY05, FY07 CY06, FY08 CY07, FY09 CY08, FY10 CY09, FY11 CY10, FY12 CY11, FY13 CY12, FY14 CY13, FY15 CY14, FY16 CY15, FY17 CY16, FY18 CY17, FY19 CY18, FY20 CY19, FY21


CY of Value, FY of Revenue

Expected changes in appreciation for residential and apartment properties during the forecast period are as follows:

Revenue Year FY 17 FY 18 FY 19 FY 20 FY 21

Single-Family, Townhouse and Condominium 1.80% 2.00% 3.00% 3.00% 3.00%

Apartments 2.50% 2.50% 2.00% 2.00% 2.00%

The strengths of the Washington D.C. Metropolitan area include relatively low unemployment (compared to national and state unemployment rates) and stable job growth expectations. The residential market is forecast to continue to see slow but steady price improvement over the course of the next twelve to twenty-four months depending on how economic uncertainties unfold, although the number of transactions is expected to continue to trail the levels during the boom years. 14

Apartments Market Value Change Apartment values experienced an increase despite no change in base capitalization rates from last year according to the Fourth Quarter 2015 Price Waterhouse Coopers Real Estate Investor Survey. The reason for no change in the capitalization rate is the relative saturation of the apartment market. The apartment market has experienced increases in the net operating incomes stemming from higher rents and stable vacancies in Prince William County as well as newer high end apartment complexes. Appreciation is projected to continue throughout FY 2017 and FY 2018 at a rate of approximately 2.5% and 2% in FY 2019 through FY 2021.

Residential New Construction Units Growth is defined as the change in assessed value due to the subdivision of land and the construction of new residential units. Construction taking place in one calendar year affects real estate revenues two fiscal years later. For example, construction that occurred in calendar year 2015 will be reflected in the County’s January 1, 2016, land book which provides the basis for real estate tax revenue received in fiscal year 2017. The table summarizes the expected number of newly constructed residential units during the forecast period. The volume of new Residential Growth home starts is Total expected to rise Revenue Year / SingleCalendar Year Family Townhouse Condominium Apartments Units slowly as the 583 251 382 1,028 2,244 economy stabilizes FY17/CY15 FY18/CY16 600 300 350 300 1,550 and the inventory of FY19/CY17 600 300 350 300 1,550 foreclosed homes FY20/CY18 550 400 350 300 1,600 diminishes during the FY21/CY19 550 400 350 300 1,600 remainder of the forecast period. Construction of new apartment units is expected to add just over 1,000 units in FY 2017 and decline further during the remainder of the forecast period as the supply of apartments begins to outstrip demand.

Residential Values per New Unit The estimated average assessed value of a new home (all types) constructed during calendar year 2015 was approximately $434,558, a 3% decrease over the average assessed value of homes built in 2014 which was $449,100. It should be noted that the overall assessed value of a new home is affected by the mix of single family, townhouse, and condominium units constructed in any given year. The estimated average assessed value of a new single family home was approximately $560,800 in 2015. In 2015, the estimated average assessed value of a new townhouse and condominium unit was approximately $366,560 and $286,570 respectively.


New Residential Assessed Value per New Unit Overall Residential Revenue (Excludes Apts.) Year Single-Family Townhouse Condominium $560,800 $366,560 $286,570 FY 17 $434,558 FY 18 $437,416 $560,800 $366,600 $286,600 $295,200 $577,600 $377,600 FY 19 $450,528 $594,900 $388,900 $304,100 FY 20 $453,223 FY 21 $466,804 $612,700 $400,600 $313,200

Apartments $188,800 $190,700 $192,600 $194,500 $196,400

Commercial Real Estate Calendar year 2015 market activity in Prince William County resulted in commercial properties appreciating approximately 1.5%. Commercial real estate, particularly in terms of vacancy rates, strengthened as the year progressed but continues to be primarily in an absorption phase. A discussion of commercial property inventory and vacancy rates is available in the Introduction Section. Commercial appreciation for FY 2017 – FY 2021 is forecast at 1.5% for the first two years of the Five-Year Fiscal plan gradually increasing to 2.5% by FY 2021. Average assessed values per square foot for FY 2017 are determined based on the added building value resulting from new construction completed during calendar year 2015. 2 These unit values are then adjusted to reflect the general appreciation of commercial properties during the remainder of the forecast period. Commercial properties are categorized into five property types: retail, office, hotel, industrial, and special purpose. For FY 2017 (calendar year 2015 market activity), approximately 774,000 square feet of commercial space was added to the assessment rolls. New Commercial Construction Square Footage Revenue Year FY 17 FY 18 FY 19 FY 20 FY 21

Retail 88,884 50,000 50,000 50,000 50,000

Office 7,136 20,000 20,000 20,000 20,000

Hotel 183,884 72,150 50,000 50,000 50,000

Industrial 484,000 200,000 200,000 200,000 200,000

Misc. Properties 10,000 10,000 10,000 10,000 10,000

Special Use -

Total Commercial 773,904 352,150 330,000 330,000 330,000

Retail New construction in the retail sector accounted for approximately 12% of all commercial/industrial growth during calendar year 2015, adding nearly 89,000 square feet to the tax base. Shopping center capitalization rates decreased slightly in calendar year 2015. Vacancies and rents were also, for the most part, stable. Industrial Construction of industrial properties accounted for approximately 63% of all new commercial construction during calendar year 2015, adding approximately 484,000 square feet to the 2

Note that increases or decreases in dollars per square foot from one year to the next are not indicative of appreciation trends. Unit values are based on the contributory value of the new buildings in a category divided by the added square footage in that category. Building values per square foot vary widely among different building types within each category and the types of new buildings within categories vary from one year to the next. 16

commercial/industrial base. This represents an increase from the previous year and is directly linked to the level of inventory. Both rents and occupancy levels of industrial properties increased in 2015. Hotels In calendar year 2015, two new hotels were built which accounted for 24% of the commercial construction. Office Buildings In calendar year 2015, approximately 7,100 square feet of office space was added in the County. Growth within the office sector is expected to be sustained only at a low rate during the forecast period since there is an inventory overhang and accordingly very few projects in the pipeline. Special Use Properties within the special use category comprise taxable schools, healthcare facilities, and other types of properties that have no foreseeable alternate uses. There were no special use properties built in calendar year 2015.

Real Estate Exonerations Estimated real estate tax exonerations are deducted from the gross local real estate tax revenue to arrive at the net local real estate tax revenue. Exonerations are decreases in revenue due to assessment reductions, changes in tax liability, or tax relief programs. Assessment reductions are typically caused by appeals of assessed values. Changes in tax liability occur when a property changes from a taxable to a tax-exempt status. Taxes are also exonerated for properties whose owners qualify for the Tax Relief Program for the Elderly and Disabled or the Tax Relief Program for Disabled Veterans and Surviving Spouses.

Public Service Taxes Public service taxes are levied on non-locally assessed properties. The State Corporation Commission (SCC) assesses all telecommunications companies, water companies, intrastate pipeline distribution companies, and electric light and power companies. The Virginia Department of Taxation assesses railroads and interstate pipeline transmission companies.

Revenue History

Historically, the majority of changes within the public service classification have been attributable to new construction growth. Public service market values are not subject to the same market changes as other real estate properties. The impact of reducing the tax rate over the next five years will reduce this revenue source.


% Change

FY 11 FY 12 FY 13 FY 14 FY 15

18,129,083 17,703,648 18,400,696 17,737,605 17,589,241

9.75% -2.35% 3.94% -3.60% -0.8%

Current Year Adopted



Current Year Revised



19,019,169 19,431,929 19,781,875 19,997,158 20,179,490

1.00% 2.17% 1.80% 1.09% 0.91%

Revenue Forecast FY 17 FY 18 FY 19 FY 20 FY 21

Real Estate Tax Deferrals If unpaid real estate taxes at the end of a fiscal year are less than at the beginning of that fiscal year, the amount of the reduction is recorded as revenue in real estate tax deferrals. If unpaid real estate taxes at the end of a fiscal year are more than at the beginning of that fiscal year, the amount of the increase is recorded as negative revenue in real estate tax deferrals. Real estate taxes collected after becoming more than three years delinquent are accounted for as land redemption revenue. On December 10, 1996, the Board of County Supervisors approved an initiative to decrease the percentage of unpaid property taxes at fiscal year-end. The BOCS has continued to support this initiative and at the end of FY 2015, the percentage of unpaid property taxes was 1.4% and the County’s best unpaid property tax rate since data was first collected in 1971. The revenue forecast is made by estimating collections of unpaid personal property taxes up to five years delinquent. This revenue category varies depending on the amount of unpaid taxes at the end of one year compared to the previous year due to 1) voluntary payment of taxes, 2) County resources allocated to collection efforts, and 3) the success of those collection efforts.

Land Redemption Land redemption is the recognition of real estate taxes collected after being more than three years delinquent. The Code of Virginia allows Prince William County to pursue the collection of delinquent real estate taxes for twenty years. This revenue category varies depending on the amount of unpaid taxes three years and older, and the level of success in collecting these past due amounts. The forecast estimates approximately 20% to 25% of the prior year’s unpaid land redemption taxes will be collected annually. A variety of methods are used to enforce the collection of back taxes, including filing suit to force the sale of the property for unpaid taxes. Unpaid land redemption taxes, as of June 30, 2015, were $1,356,560.

Real Estate Penalties Prince William County assesses a 10% penalty on the late payment of real estate taxes on the unpaid original tax balance. Interest at the rate of 10% per annum is added to any unpaid balance beginning on the first day of the month following the original due date. Revenue from real estate penalties is estimated by applying a fixed percentage (approximately 0.26%) to the real estate revenue forecast excluding public service properties.

Revenue History FY 11 FY 12 FY 13 FY 14 FY 15 Current Year Adopted Current Year Revised

% Change 1,365,811 1,265,550 1,261,388 1,199,280 1,252,000

-17.3% -7.3% -0.3% -4.9% 4.4%





1,532,000 1,640,000 1,718,000 1,788,000 1,858,000

3.6% 7.0% 4.8% 4.1% 3.9%

Revenue Forecast FY 17 FY 18 FY 19 FY 20 FY 21


PERSONAL PROPERTY REVENUE The personal property tax is assessed on vehicles, mobile homes, and business personal property. Approximately 82% of personal property tax revenue is forecast in FY 2016 to be generated by motor vehicles, trailers, and motor homes. The remaining 18% is forecast to be received from taxes levied on business equipment. Certain classifications of property do not generate tax bills because of their extremely low tax rate, such as farm equipment, vehicles that qualify for elderly tax relief, vanpool vans, handicapped-equipped vehicles, and vehicles owned by certain volunteer and auxiliary fire and rescue company members. In addition, some vehicles and property are tax exempt, such as vehicles used as daily rentals, vehicles owned by certain military personnel, and vehicles or business property owned by non-profit organizations that have been granted specific exemption.

Personal Property Tax on Vehicles Personal property tax revenue from vehicles is estimated based on the percentage change in average assessed value per vehicle and the percentage change in the number of units billed. Generally, the assessed value of taxable vehicles is obtained from standard pricing guides. Prince William County uses the clean trade-in values published in the National Automobile Dealers Association (NADA) value guide for new and older vehicles.

Car Tax Relief

Revenue History FY 11 FY 12 FY 13 FY 14 FY 15 Current Year Adopted Current Year Revised

% Change 127,961,926 131,167,427 135,784,664 150,835,836 158,750,155

6.1% 2.5% 3.5% 11.1% 5.2%







Revenue Forecast FY 17

A portion of the tax due on personal use vehicles is paid by FY 18 171,000,000 3.7% the Commonwealth directly to Prince William County FY 19 178,100,000 4.2% FY 20 185,400,000 4.1% under the Personal Property Tax Relief Act (PPTRA). FY 21 192,900,000 4.0% Through tax year 2005 (fiscal year 2006), the Commonwealth paid the County 70% of the tax due on the first $20,000 of assessed value for qualified vehicles. During the 2004 State budget sessions, legislation was enacted that changes how the amount of car tax relief is calculated under the PPTRA. The legislation capped the amount reimbursed to the County, which began in tax year 2006 (fiscal year 2007). Capping the car tax at a set dollar amount ($950 million state-wide) will typically reduce the percentage of the tax on qualifying vehicles paid by the Commonwealth in each successive year. To compensate, the County must increase the share of the tax paid by the taxpayer or face declining revenue, and so the County will increase the share paid by taxpayers as the total assessed value of qualifying vehicles grows so that revenues do not decline. The percentage of tax relief for qualifying vehicles in FY 2017 (tax year 2016) is 50%.


Change in Average Vehicle Value and Units Billed The FY 2017 (tax year 2016) forecast assumes no change in average assessed values for vehicles. The average assessment has flattened for vehicles in Prince William County, proximate with national trends that show used vehicle values up to eight years old approximately equal in value between November 2015 versus November 2014 (NADA Guidelines, December 2015). The forecast for FY 2018 – FY 2021 is for the average vehicle value to increase slightly in FY 2018 followed by the historical average increase of 1.78% for the remainder of the forecast years. The FY 2017 (tax year 2016) forecast assumes a 2% to 3% increase in the number of vehicle units billed. The FY 2017 – FY 2021 growth in forecasted units is attributable to the anticipated continued population and housing growth. Revenue Year FY 17 FY 18 FY 19 FY 20 FY 21

Assessed Value Avg. Value % Change $ 10,520 0.00% $ 10,655 1.28% $ 10,844 1.78% $ 11,038 1.78% $ 11,234 1.78%

Billiable Units % Change 2.32% 2.41% 2.77% 2.70% 2.63%

Business Personal Property Tax The business portion of the personal property tax is levied on all general office furniture and equipment, machinery and tools, equipment used for research and development, heavy construction equipment, and computer equipment located in Prince William County as of January 1st of each year. Each business is required to file a return annually declaring the item, its original cost, and year of purchase. Therefore, the assessed value is determined from its original cost, year of purchase, and use of the equipment. General business equipment and heavy equipment account for 68% and 6% of taxes on business equipment respectively. Taxes on computer equipment comprise 25% and taxes from machinery and tools account for the remaining 1%. Taxes from business equipment are expected to increase 2% in fiscal year 2017, followed by 2% increases for the remainder of the five-year plan. There is some evidence that the economy and the economic condition of local businesses has stabilized. Businesses may not be replacing equipment or adding significant amounts of new equipment, but there has been a trend up in recent years and so we are forecasting a modest increase for each of the years in the forecast.

Personal Property Prior Year This account records changes to prior year personal property taxes as a result of changes in estimated allowance for uncollectible taxes. These revenues are less than $50,000 a year, and are therefore not addressed in detail as are the other major revenue sources.


Personal Property Deferrals If unpaid personal property taxes at the end of a fiscal year are less than at the beginning of that fiscal year, the amount of the reduction is recorded as revenue in personal property tax deferrals. If unpaid personal property taxes at the end of a fiscal year are more than at the beginning of that fiscal year, the amount of the increase is recorded as negative revenue in personal property tax deferrals. The revenue forecast is made by estimating collections of unpaid personal property taxes up to five years delinquent. This revenue category varies depending on the amount of unpaid taxes at the end of one year compared to the previous year due to: 1) voluntary payment of taxes, 2) County resources allocated to collection efforts, and 3) the success of those collection efforts. At the end of FY 2015, the percentage of unpaid property taxes was 1.4%, and is the County’s best unpaid property tax rate since data was first collected in 1971.

Personal Property Penalties - Current Year Prince William County assesses a 10% penalty on the late payment of personal property taxes. The 10% personal property penalty on late payments Revenue History % Change applies only to the local share of the delinquency. The FY 11 $ 1,152,677 -2.3% penalty is not applied to the portion paid by the FY 12 $ 1,374,663 19.3% FY 13 $ 1,536,419 11.8% Commonwealth through the PPTRA. Personal property penalty revenue is projected to increase in each year of the FY 2017 – FY 2021 forecast period due to the increase in the estimate of personal property taxes billed each year.

FY 14 FY 15 Current Year Adopted Current Year Revised

$ $

1,353,225 1,936,103

-11.9% 43.1%







$ $ $ $ $

1,830,000 1,900,000 1,980,000 2,060,000 2,140,000

-1.1% 3.8% 4.2% 4.0% 3.9%

Revenue Forecast FY 17 FY 18 FY 19 FY 20 FY 21


LOCAL SALES TAX REVENUE Prince William County, by adopted ordinance, has elected to levy a 1% general retail sales tax. This tax is levied on the retail sale or rental of tangible property, excluding motor vehicle sales and trailers, vehicle rentals, boat sales, gasoline sales, natural gas, electricity, and water, and the purchases by organizations that have received tax exempt status. Sales tax revenue is collected by the Virginia Department of Taxation, and is distributed to the County monthly. There is a two-month lag between the date of sale and the actual receipt of funds by the County. The four incorporated towns within Prince William County (Dumfries, Haymarket, Occoquan, and Quantico) share in the local sales tax based on the ratio of school age population in the towns to the school age population of the entire County according to the latest state-wide school census. Therefore, the County realizes approximately 99% of the monthly sales taxes collected. Retail activity, as reflected by sales tax revenue, continued to increase through FY 2015 (see chart below) making the fourth straight year of growth. In December 2015 (FY 2016), a total of $6.19 million sales tax revenue was reported, a monthly year-over-year decrease of 8.5% following November’s 11% decrease. Despite these latest months, year-to-date revenue is slightly ahead of the current forecast. FY 2016 to date has shown moderating sales activity and yet retailers are hopeful going forward into calendar 2016 of continued robust activity. The new projection is for a 3% annual increase in the County’s sales tax revenue for FY 2017 through FY 2021.

Revenue History

% Change

FY 11 FY 12 FY 13 FY 14 FY 15 Current Year Adopted Current Year Revised

$ $ $ $ $

49,554,397 52,002,967 55,169,386 56,510,664 59,708,982

7.4% 4.9% 6.1% 2.4% 5.7%







$ $ $ $ $

62,088,000 63,953,000 65,871,000 67,846,000 69,882,000

3.0% 3.0% 3.0% 3.0% 3.0%

Revenue Forecast FY 17 FY 18 FY 19 FY 20 FY 21

The factors believed to have contributed to the County’s sales tax revenue increase are:  an improving local economy;  an increase in the number of retail establishments;  a high level of household income in the County;  improving employment and increased consumer confidence; and  continued population growth. Growth in Sales Tax Collections 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% -4.0%

FY15 Monthly and Year-to-Date 17.9%

13.6% 11.5%

Forecast: 3.0%



6.0% 2.2%

1.1% -1.4% Jul





-2.1% Sept












CONSUMER UTILITY REVENUE Prince William County levies a consumer utility tax on electric and natural gas utilities. The County does not tax water and sewer services. Effective January 1, 2001, the Code of Virginia 3 required Prince William County to convert its existing tax on purchasers of natural gas and electricity from a dollar-based tax to a consumption-based tax. Since consumer utility taxes are capped, inflation and utility rate increases are not a factor in the five-year forecast. The FY 2017 – FY 2021 forecast reflects the projected increase in new, residential housing units. The levy for electricity 4 consumption based on kilowatt hours (kWh) is: Residential users: $1.40 minimum billing charge plus the rate of $0.01509 on each kWh delivered monthly by a service provider not to exceed $3.00 per month. Commercial users: $2.29 minimum billing charge plus the rate of $0.013487 on each kWh delivered monthly to commercial consumers, not to exceed $100.00 monthly. 5

The levy for natural gas consumption based on 100 units of cubic feet (CCF) is: Residential consumers: $1.60 minimum billing charge plus the rate of $0.06 on each CCF delivered monthly to residential consumers, not to exceed $3.00 per month. Commercial consumers: $3.35 minimum billing charge plus the rate of $0.085 on each CCF delivered monthly to commercial consumers, not to exceed $100.00 monthly.

Revenue History FY 11 FY 12 FY 13 FY 14 FY 15 Current Year Adopted Current Year Revised

% Change $ $ $ $ $

13,190,410 13,075,017 13,489,925 13,765,596 13,974,213

2.7% -0.9% 3.2% 2.0% 1.5%







$ $ $ $ $

14,240,000 14,460,000 14,740,000 15,040,000 15,340,000

2.2% 1.5% 1.9% 2.0% 2.0%

Revenue Forecast FY 17 FY 18 FY 19 FY 20 FY 21

Electricity and Gas Revenue Growth The following table shows the five-year history of electric and gas utility revenue growth in Prince William County. Revenue Year FY 11 FY 12 FY 13 FY 14 FY 15


Utilities Electric 2.95% -0.84% 2.74% 1.84% 1.75%

Gas 2.18% -0.88% 4.18% 2.54% 0.94%

Code of Virginia §58.1-3814 Prince William County, VA-Code of Ordinance Sec. 26-111 5 Prince William County, VA-Code of Ordinance Sec. 26-112 23 4

COMMUNICATIONS SALES AND USE TAX REVENUE Under legislation enacted by the 2006 General Assembly, House Bill 568, the Virginia communications sales and use tax, also referred to as the communications sales tax, replaced most of the previous state and local taxes and fees on communications services, effective on January 1, 2007 6. The communications sales tax, which is imposed on the charge for sale of communications services at the rate of 5%, is generally collected from consumers by their service providers and remitted to the Virginia Department of Taxation each month on the following services:

Services Previously Taxed Locally: Landline Telephone Services Wireless Telephone Services Cable Television Services

Revenue History FY 11 FY 12 FY 13 FY 14 FY 15 Current Year Adopted Current Year Revised

% Change 18,878,231 18,377,146 18,536,004 18,229,981 18,070,352

-0.1% -2.7% 0.9% -1.7% -0.9%

$ 18,600,000


$ 17,700,000


$ $ $ $ $

-1.5% -1.0% 0.0% 0.0% 0.0%

$ $ $ $ $

Revenue Forecast FY 17 FY 18 FY 19 FY 20 FY 21

17,430,000 17,260,000 17,260,000 17,260,000 17,260,000

Services Not Previously Taxed: Satellite Television Services Paging Services Voice Over Internet Protocol (VOIP) Services

Due to the Virginia communications sales and use tax, Prince William County no longer has the authority to levy the following taxes and fees:   

Local consumer utility tax on landline and wireless telephone service; Cable franchise fees; and Local E-911 tax (Note: E-911 revenue is not included in the general revenue projection)

As enumerated in Section 58.1-662 of the Code of Virginia, the communications sales and use tax revenue will be distributed to localities according to the percentage of telecommunications and cable television tax revenue each locality received relative to the statewide total. The County’s current allocation is 4.63% of the statewide telecommunications sales and use tax. Despite housing and population growth, this revenue source continues to decrease with the continued loss of landline services. Data is not available to determine if this decline will continue throughout the five-year revenue forecast period, therefore slight decreases have been projected for the next two fiscal years. Staff will continue to monitor the trends in this revenue source and seek information from the Commonwealth as it becomes available.


Fiscal year 2007 actual revenue represented only a half-year levy of the new communications tax. Fiscal year 2008 represented the first full-year the tax was implemented. 24

BPOL REVENUE The Business, Professional, and Occupational License (BPOL) tax is imposed on commercial and home occupational businesses operating in Prince William County. The County has adopted a multiple tax rate schedule according to the type of business activity subject to the tax. On April 21, 2015, the Board of County Supervisors (BOCS) directed staff to prepare an amendment to the BPOL Ordinance to change the gross receipts threshold from $250,000 to $300,000 with subsequent $50,000 incremental increases to the threshold over the remaining four years of the Five-Year Plan. The Amendment to the BPOL ordinance was ordained by the BOCS on November 17, 2015, via Ordinance No. 15-54. The BPOL tax is currently levied on 7:    

businesses with annual gross receipts (from the prior calendar year) greater than $300,000; new businesses based on an estimate if gross receipts are greater than $300,000 for the current year; and both full-time as well as part-time businesses, as long as the business meets or exceeds the $300,000 threshold.

Revenue History FY 11 FY 12 FY 13 FY 14 FY 15 Current Year Adopted Current Year Revised

% Change $ $ $ $ $

20,965,419 21,724,838 22,913,378 23,772,169 24,744,036

3.44% 3.62% 5.47% 3.75% 4.09%







$ $ $ $ $

26,051,000 26,839,000 27,785,000 28,904,000 30,268,000

3.0% 3.0% 3.5% 4.0% 4.7%

Revenue Forecast FY 17 FY 18 FY 19 FY 20 FY 21

The basis for the FY 2016 BPOL tax revenue is gross revenue receipts from calendar year 2015. Therefore, forecasting 2016 gross receipts (FY 2017) has a one-year lag in availability of actual prior year figures on which to base an estimate. The forecast model assumes that BPOL will change at an average close to growth plus inflation for businesses. For FY 2017 and FY 2018, the combined increase of growth and inflation for businesses is assumed to be +3%, marginally lower than the actual for FY 2015 of 4.09% reflecting somewhat slowing inflation. For FY 2019, the change is projected to be 3.5% with continued growth throughout the remainder of the forecast period.

An average for all business classifications is used because it is difficult to project a change in any one classification, and difficult to predict changes across years. Even retail, which most would think to be somewhat stable has variability that does not track national or regional economic indicators. This can be explained by shifts between spending categories and by the effects of borrowing (in


November 22, 2011, PWC Code amended the gross receipts threshold for business from $100,000 to $200,000. October 2, 2012, BOCS amended the PWC Code for business with gross receipts from $200,000 to $250,000 or higher. November 17, 2015, BOCS amended the PWC Code for businesses with gross receipts from $250,000 to $300,000 (FY16); $300,000 to $350,000 (FY17); $350,000 to $400,000 (FY18); $400,000 to $450,000 (FY19); and $450,000 to $500,000 (FY20 and thereafter). 25

the case of construction and contracting), so it makes sense to use an aggregate measure and one which smooths out the effects of spending shifts. Approximately 88% of FY 2015 BPOL revenue was generated by four sectors of the County’s local economy: retail, contractors, personal services, and professional services. The following table summarizes the year-over-year change in revenue in each category over the last five fiscal years. Change in Revenue by Major BPOL Classification Revenue Retail Construction & Other Professional Year Merchants Contracting Services Occupations FY 11 3% -7% 20% -5% FY 12 12% -7% -4% 12% FY 13 8% 6% 11% 7% FY 14 2% 9% 6% -3% FY 15 4% 10% 4% 6%


INVESTMENT INCOME Investment income represents interest receipts, interest accrual, and gains or losses from the sale of investments for Prince William County’s share of earnings on the “general” cash investment portfolio. The general portfolio consists of those funds that are not restricted. The general fund available cash constitutes 55 to 58 percent of the total pooled investments. All funds are invested in accordance with the Board adopted Investment Policy that sets the County’s investment guidelines based on the core principles of legality, safety, liquidity, and yield. Prince William County’s investment strategy addresses these guidelines by investing in a diversified portfolio with specific security types, financial institutions, and maintaining sufficient liquidity to meet anticipated operating requirements. In addition, the County seeks to match its cash flow needs to the overall maturity structure of the portfolio in order to maximize yield. To forecast investment income, the average portfolio yield and portfolio value are projected to determine the current or estimated future year’s investment revenue. The general fund share is calculated based on the prior year actual share of cash balances available to invest. The average total dollar value of the portfolio is affected by the increase in County revenues and fund balance. Therefore, the revenue forecast itself becomes a key determinate of interest income. The table on the right shows the forecasted growth in the portfolio. Increases in portfolio size typically come from additions to fund balance/year-end savings as well as a portion of annual revenue growth. Revenue History FY 11 FY 12 FY 13 FY 14 FY 15 Current Year Adopted Current Year Revised

% Change 11,507,416 8,601,580 8,388,449 6,834,816 6,036,382

-30.5% -25.3% -2.5% -18.5% -11.7%





7,297,000 8,489,000 9,483,000 10,594,000 12,109,000

6.7% 16.3% 11.7% 11.7% 14.3%

Projected Portfolio Value (in 000s) FY 17 920,000 $ FY 18 $ 925,000 FY 19 $ 930,000 FY 20 935,000 $ FY 21 $ 950,000

Prince William County’s portfolio earnings yield is broadly correlated to the Federal Funds Rate. The Federal Open Market Committee (FOMC) reduced the target Federal Funds rate to a range of between 0.00% and 0.25% in December of 2008 and maintained that record low target until December 2015. At the December 16, 2015, meeting, the committee raised interest rates by 0.25%. The FOMC is still forecasting two interest rate hikes in 2016, however the market is not pricing in any rate hikes in 2016.

Revenue Forecast FY 17 FY 18 FY 19 FY 20 FY 21

Consequently, it is expected that short-term interest rates will remain near current levels, or only marginally higher, over the next year.


The following graph presents a history of the Federal Funds Rate:

Fed Funds Rate Remains at Historical Lows 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0%

The Federal Funds Rate trend is a significant driver for the average yield of Prince William County’s portfolio. Additionally, the timing of security purchases, cash flow requirements, interest rate environment at the time of purchasing securities, and the securities’ duration are also all major factors affecting the portfolio’s yield. Most forecasting sources provide interest rate projections up to four quarters beyond current dates. Therefore, estimates after the final half of FY 2017 are made without authoritative source data as a basis for the projections. In this environment, short term interest rates should continue low for the near term, however, the low interest rates should have little additional stimulative impact on the economy since this “sub 1% Fed Funds Rate” environment has been the status quo for over seven years.


ALL OTHER REVENUE SOURCES Interest on Taxes Delinquent personal property and real estate tax accounts incur interest at 10% of the unpaid amount the first year. Subsequent years are incurred at 10% or the Internal Revenue Service (IRS) delinquent tax rate, whichever is greater. Revenue History FY 11 FY 12 FY 13 FY 14 FY 15 Current Year Adopted Current Year Revised

% Change 1,272,419 1,194,874 1,190,891 1,161,413 1,436,749

-11.9% -6.1% -0.3% -2.5% 23.7%





1,431,000 1,491,000 1,560,000 1,624,000 1,688,000

3.3% 4.2% 4.6% 4.1% 3.9%

The revenue estimate is computed by multiplying a fixed percentage of 0.19% by the combined estimate for gross current year real property tax revenue (excluding public service revenue) and personal property tax revenue. Interest on tax revenue is projected to increase 5.0% in FY 2017 due to an increase in real and personal property tax revenue.

Revenue Forecast FY 17 FY 18 FY 19 FY 20 FY 21

Motor Vehicle License Fee Section 46.2-752 Code of Virginia, Annotated authorizes the County to levy a vehicle license fee. The amount of the license tax cannot be greater than the annual or one-year fee imposed by the Commonwealth on motor vehicles. The adopted, local fee is $24 per year for each passenger car and truck normally garaged or parked in the County. The adopted fee per year for each motorcycle is $12. In May 2009, the Board of County Supervisors eliminated the distribution of vehicle decals to County residents as part of FY 2010 budget reductions. However, the motor vehicle license fee continues to be levied in conjunction with the personal property tax. The license fee revenue forecast is derived by multiplying the decal fee by the estimated billable units in the County.


Revenue History FY 11 FY 12 FY 13 FY 14 FY 15 Current Year Adopted Current Year Revised

% Change $ 7,503,626 $ 7,591,084 $ 7,876,682 $ 7,907,376 $ 8,052,600

3.9% 1.2% 3.8% 0.4% 1.8%

$ 8,400,000


$ 8,270,000


$ 8,460,000 $ 8,660,000 $ 8,900,000 $ 9,140,000 $ 9,380,000

2.3% 2.4% 2.8% 2.7% 2.6%

Revenue Forecast FY 17 FY 18 FY 19 FY 20 FY 21

Recordation Tax A recordation tax is levied when a legal instrument regarding real property such as a deed or deed of trust is recorded with the Clerk of the Circuit Court. This tax is charged for transfers in ownership of property, deeds of trust, and mortgage refinancing. On April 28, 2004, the Commonwealth of Virginia increased the State recordation tax rate from $0.15 per $100 of value to $0.25 per $100 of value effective September 1, 2004 (FY 2005). Section 58.1-814 of the Code of Virginia grants Prince William County the authority to levy an optional, local recordation tax rate equal to one-third of the State recordation tax rate. Therefore, the local recordation tax rate increased from $0.05 per $100 of value to $0.083 per $100 of value. The forecast reflects only Prince William County’s share of recordation tax revenue and does not include the state portion of recordation revenue. Recordation tax revenue is driven by home sale activity and price appreciation as well as refinance activity. The FY 2016 forecast was revised upward during the first quarter as results from calendar year 2015 depicted increased sales as well as modest increases in sales price. The FY 2017 forecast reflects the belief that sales prices are moving to a more historically normal rate of appreciation. However, home sales activity continues to be limited by low inventory and that contributes to a conservative projection of revenue in the five year forecast.

Revenue History FY 11 FY 12 FY 13 FY 14 FY 15 Current Year Adopted Current Year Revised

% Change $ $ $ $ $

6,021,787 6,508,666 8,617,265 6,273,132 7,174,961

-0.7% 8.1% 32.4% -27.2% 14.4%







$ $ $ $ $

7,340,000 7,490,000 7,640,000 7,790,000 7,950,000

1.9% 2.0% 2.0% 2.0% 2.1%

Revenue Forecast FY 17 FY 18 FY 19 FY 20 FY 21

On October 26, 2004, the Board of County Supervisors adopted Resolution 04-1034, which earmarks a portion of recordation tax revenues for transportation purposes in the County. Beginning in FY 2006, recordation tax revenues generated by the rate increase of $0.033 plus a portion of recordation tax revenues generated from the base rate of $0.05 will be used to improve County roads. The remaining amount of recordation tax revenue is retained by the County government as general revenue. The table below identifies the portion of recordation tax revenues designated for transportation and general revenue use in each year of the forecast. General County Revenue

Total Transportation Recordation Fund Tax Revenue

FY17 $

1,890,000 $

5,450,000 $


FY18 $

1,930,000 $

5,560,000 $


FY19 $

1,970,000 $

5,670,000 $


FY20 $ FY21 $

2,010,000 $ 2,050,000 $

5,780,000 $ 5,900,000 $

7,790,000 7,950,000


Tax on Deeds Revenue History

The tax on deeds is imposed when real estate deeds of conveyance (not deeds of trust) are recorded with the Clerk of the Circuit Court. The tax on deeds is levied when:   

FY 11 FY 12 FY 13 FY 14 FY 15

property ownership changes; property ownership is conveyed in any manner; or a legal instrument is recorded with a transfer amount

Current Year Adopted Current Year Revised

The tax on deeds rate is $1.00 per $1,000 of value. The State and locality each receive half of the revenue generated by this tax (equal to $0.50 per $1,000 of value). The revenue forecast depicted below reflects only Prince William County’s share of revenues.

% Change $ $ $ $ $

1,540,221 1,505,522 1,659,764 1,605,397 1,693,083

-11.9% -2.3% 10.2% -3.3% 5.5%







$ $ $ $ $

1,730,000 1,740,000 1,770,000 1,810,000 1,840,000

1.2% 0.6% 1.7% 2.3% 1.7%

Revenue Forecast FY 17 FY 18 FY 19 FY 20 FY 21

The FY 2017 forecast represents a slight increase over the revised FY 2016 forecast as home sales activity is limited by inventory. It is important to note that the tax on deeds is not levied on mortgage refinancing.

Miscellaneous Revenue Sources Listed below are additional County general revenue sources estimated to be less than $5 million each. Even though these sources sometimes have large changes in revenue on a percentage basis, such changes have an insignificant impact on overall revenues throughout the forecast period. The forecast and a description of each revenue source follows: FY 15 ACTUAL


$ $ $ $ $ $ $ $ $ $ $


190,797 1,669,984 1,430,868 1,370,044 (40,908) (79,857) 340 89,433 986,866 61,247 84,723

FY 16 Revised $ $ $ $ $ $ $ $ $ $ $

5,763,538 $

206,000 1,500,000 1,474,000 1,400,000 (100,000) (55,000) 7,000 101,000 1,035,000 35,000 70,000

FY 17 Forecast $ $ $ $ $ $ $ $ $ $ $

5,673,000 $

190,000 1,500,000 1,518,000 1,400,000 (100,000) (55,000) 7,000 90,000 990,000 35,000 70,000

FY 18 Forecast $ $ $ $ $ $ $ $ $ $ $

5,645,000 $

194,000 1,200,000 1,564,000 1,428,000 (100,000) (55,000) 7,000 90,000 970,000 35,000 70,000

FY 19 Forecast $ $ $ $ $ $ $ $ $ $ $

5,403,000 $

198,000 1,200,000 1,611,000 1,457,000 (100,000) (55,000) 7,000 90,000 970,000 35,000 70,000

FY 20 Forecast $ $ $ $ $ $ $ $ $ $ $

5,483,000 $

202,000 1,200,000 1,659,000 1,486,000 (100,000) (55,000) 7,000 90,000 970,000 35,000 70,000

FY 21 Forecast $ $ $ $ $ $ $ $ $ $ $

206,000 1,200,000 1,709,000 1,516,000 (100,000) (55,000) 7,000 90,000 970,000 35,000 70,000

5,564,000 $


Daily Rental Equipment Tax The County levies a daily rental tax of 1% on certified short-term rental businesses. The tax applies to businesses that rent items held by users for less than 91 consecutive days. Examples of such businesses include bowling alleys, hardware stores, and equipment rental stores. These businesses are required to collect 1% of the daily rent and remit it to the County quarterly. 31

Bank Franchise Tax The County levies a bank franchise tax on the net capital of each bank, banking association, savings bank, or trust company that operates in the County. The tax is based on 0.8% of the net capital multiplied by the percentage of deposits on hand at that branch compared to its statewide deposits.

BPOL Taxes - Public Service The Business, Professional, and Occupational License (BPOL) tax is imposed on public utility companies that operate in the County. The tax of $0.29/$100 of assessed value was identical to the County’s BPOL tax on other businesses, but was authorized under separate statute. The Commonwealth repealed the tax for electric companies and replaced it with the Corporate Net Income Tax and the declining Consumption Tax. The State set the latter at a maximum of $0.50/$100 of assessed value. If a locality’s rate is below the maximum, the State receives the difference. Therefore, the Board of County Supervisors increased this tax only for electric companies from $0.29/$100 of assessed value to $0.50/$100 of assessed value effective January 1, 2001.

Transient Occupancy Tax The County levies a transient occupancy tax of 5% of the amount charged for the occupancy of hotels, motels, boarding houses, travel campgrounds and other facilities offering guest rooms rented out for continuous occupancy for fewer than 30 consecutive days. This tax does not apply to miscellaneous charges such as in-room telephone usage, movie rentals, etc. The tax is remitted directly to the County on a monthly basis. The general revenue share of this tax is 40% and the remaining 60% is budgeted for tourism-related purposes such as the Convention & Visitors Bureau (CVB). Board appropriation is based on budgetary requirements submitted by the CVB. The transient occupancy tax forecast is based on number of hotel rooms in the County, occupancy rates, and room rates.

Interest Paid to Vendors When a vendor with whom the County does business overpays for any reason, or when a performance bond is repaid to a developer, the refunded amount includes interest. This interest is recorded as negative revenue.

Interest Paid on Refunds The County must pay interest on taxpayer refunds based on delinquent taxes that were erroneously assessed. This interest is recorded as negative revenue.

Rolling Stock Tax The rolling stock of railroads, freight car companies and certified vehicle carriers doing business in the Commonwealth is taxed at the rate of $1.00 on each $100 of assessed value. This tax is levied in lieu of the personal property tax. Revenues are distributed to counties, cities, and incorporated towns based on: (i) the percentage of track miles located in the locality versus the 32

State-wide total or (ii) vehicle miles operated by a carrier in the locality versus the State-wide total.

Passenger Car Rental Tax Motor vehicles rented on a daily basis are often moved from location to location and have no fixed site for personal property taxation. In lieu of the local personal property tax, the Virginia Department of Taxation administers and collects a tax for short-term rentals from rental businesses, automobile dealerships and other establishments located in the County. The State remits 4% of the rental fee for motor vehicles rented for a period of less than twelve months to the County.

Manufactured (formerly Mobile) Home Titling Tax The Manufactured Home Titling Tax is a 3% tax on mobile homes titled in the Commonwealth. The vendor pays the tax to the Department of Motor Vehicles who remits it to the locality where the home is registered.

Payments in Lieu of Taxes (PILT) Payments in Lieu of Taxes (PILT) are Federal payments to local governments that help offset losses in property taxes due to nontaxable Federal lands within their boundaries. The formula used to compute this payment is contained in the PILT Act and based on population, receipt sharing payments, and the amount of Federal land within an affected county. The President's Fiscal Year 2016 Budget Submission to Congress requested a one-year extension of the PILT program. The extension would fund PILT payments in FY 2016. Legislation was signed December 18, 2015, that provides for the 2016 Payments in Lieu of Taxes (PILT) program. Also included in PILT are funds received from the U.S. Fish and Wildlife Service.


Appendix A

Department of Finance Tax Rates 2016

PERSONAL PROPERTY Personal Property - Tax Relief (PPTRA) Assessed Value of a Vehicle $1,000 or less $1,001 - $20,000 $20,000 or more Personal Property - License Fee Vehicles - Include Automobiles, Trucks, and Motorhomes Motorcycles

Percent of Tax Relief 100% 50% 50% on the first $20,000 of assessed value $24.00 $12.00

Personal Property - per $100 of valuation General Class: vehicles, certain trailers, and $ 3.70 motorcycles General Class: business equipment, furniture, fixtures $ 3.70 Heavy Equipment and Machinery $ 3.70 Mining & Manufacturing Tools $ 2.00 Mobile Homes $ 1.122 Programmable Computer Equipment and Peripherals $ 1.25 used in a Trade/Business Research & Development $ 1.00 Due to the low tax rate (.00001) per $100 of assessed value for property tax classifications listed below, no tax bills are generated if the assessed value is $50,000,000 or less. Aircraft $ 0.00 Volunteer Fire & Rescue Members' Vehicle $ 0.00 Auxiliary Volunteer Fire & Rescue Members' Vehicle $ 0.00 Farmers Machinery and Tools $ 0.00 Personal Property owned by Certain Elderly and $ 0.00 Handicapped Persons Privately owned Recreational Campers/Motor $ 0.00 Homes/Recreational Travel Trailers/Horse Trailers Van Pool Vans $ 0.00 Vehicles Modified for Disabled $ 0.00 Watercraft $ 0.00

1 Prince William County Department of Finance - Tax Rates 2016

REAL ESTATE Real Estate - per $100 of valuation Base Rate Fire and Rescue Levies (Countywide, except for the Town of Quantico) Mosquito and Forest Pest Management (previously Gypsy Moth)

$ 1.122 $ 0.0705 $ 0.0025

Solid Waste Management Annual Fee Single Family Townhouse

$ 70.00 $ 63.00

Mobile Home

$ 56.00

Multi Family (Apartment or Condo)

$ 47.00

Business/Non-Residential (per SFE where a SFE = 1.3 tons)

$ 70.00

Storm Water Management Annual Fee Single Family

$ 39.36


$ 29.54

Mobile Home

$ 29.54

Multi Family (Apartment or Condo)

$ 29.54

Business/Non-Residential (per 1,000 sq. ft. of impervious area)

$ 19.12

Service District Levies Bull Run Mountain

$ 0.1377

Lake Jackson

$ 0.1650

Transportation District Levies Prince William Parkway

$ 0.0000


$ 0.0200

Overlapping Governments Town of Dumfries (real estate)

call 703-221-3400

Town of Haymarket (real estate and business personal property) Town of Occoquan (real estate)

call 703-754-4816

Town of Quantico (real estate)

call 703-640-7411

2 Prince William County Department of Finance - Tax Rates 2016

call 703-491-1918

BUSINESS Business License - per $100 gross receipts Professional Occupation Retail Merchants Wholesale Merchants Builders and Developer Contractors Financial Services Real Estate Services Hotels and Motels Repair Services Business Services Personal Services Other Services Peddlers (Flat Fee) Mixed Drink License (Flat Fee)

$ 0.33 $ 0.17 $ 0.05 $ 0.13 $ 0.13 $ 0.33 $ 0.33 $ 0.26 $ 0.21 $ 0.21 $ 0.21 $ 0.21 $ 500 $200 - $500

UTILITIES Natural Gas - Consumer Utility Tax Residential Users - Minimum Billing Charge $1.60 + $0.06 per CCF not to exceed $3.00 per month. Commercial Users - Minimum Billing Charge $3.35 + $0.085 per CCF not to exceed $100.00 per month.

Natural Gas - Local Consumption Tax All Users - $.004 per CCF with a consumption ceiling of 500 CCF per state code.

Electricity - Consumer Utility Tax Residential Users - Minimum Billing Charge $1.40 + $0.01509 per kWh not to exceed $3.00 per month. Commercial Users - Minimum Billing Charge $2.29 + $0.013487 per kWh not to exceed $100.00 per month.

Electricity - Local Consumption Tax All Users $0.00038 per kWh from 0 to 2,500 kWh, per state code $0.00024 per kWh from 2,501 to 50,000 kWh, per state code $0.00018 per kWh in excess of 50,000 kWh, per state code

Telephones (Land Lines/Cellular/E-911) The Virginia communications tax replaced the taxes and fees on landline/cellular telephone bills issued on or after Jan. 1, 2007, as follows:  Local consumer utility tax  Local E-911 tax  Local BPOL tax currently billed to customers in some localities  Virginia Relay Center fee The Virginia communications sales and use tax rate is 5% of the amount billed for taxable services. The State E-911 Tax is $0.75 per line.

Cable TV Beginning Jan. 1, 2007, cable television bills reflected the following charges:  Virginia communications sales and use tax  Cable television public rights-of-way use fee The Virginia communications sales and use tax rate is 5% of the amount billed for taxable services. The cable television public rights-of-way use fee is currently $0.64 per subscriber. 3 Prince William County Department of Finance - Tax Rates 2016

MISCELLANEOUS Miscellaneous Tax Types Daily Rental Tax - 1% of short term rentals Transient Occupancy Tax - 7% rental of motel/hotel rooms

4 Prince William County Department of Finance - Tax Rates 2016