Lynchburg Council considers tax increases to cover $14M budget deficit

The Lynchburg City Council's Physical Development Committee convened on June 10, 2025, to discuss significant changes to the city's tax structure aimed at addressing a projected $14 million budget deficit. The proposed adjustments include increases in the real property tax rate, lodging tax, and nightly room fees, which together could generate approximately $14.15 million in revenue.

Under the new plan, the real property tax rate would rise from 89 cents to $1.02 per $100 of assessed value, potentially raising about $12 million. The lodging tax would increase from 6.5% to 8.5%, contributing an estimated $1 million, while the nightly room fee would jump from $1 to $3, adding another $866,000 to the city's coffers.

Committee members expressed concern about how these tax increases would impact local residents, particularly renters and homeowners. Currently, about 50% of Lynchburg households are renter-occupied, with many families owning at least one vehicle. The proposed changes could lead to tax savings for renters, with those owning one vehicle potentially saving around $264 annually, while those with two vehicles could see savings of about $528.

Homeowners, particularly those with properties assessed below $300,000, would also be affected. Approximately 91% of single-family homes fall below this threshold, meaning most homeowners would see a maximum annual tax of $4,100 under the new plan, compared to $3,560 under the original budget proposal.

However, the committee acknowledged that while renters might initially benefit from tax reductions, landlords could pass on increased property taxes through higher rents over time. This concern was echoed in discussions about the potential impact on multifamily residential properties, where increased property taxes could lead to gradual rent increases as leases are renewed.

The meeting also touched on the implications for hotel owners, who could face an average increase of nearly $10,000 in property taxes annually. This could lead to a rise in the cost of lodging, with the tax on a typical hotel room increasing from 7.11% to about 10.33%.

As the committee deliberates these changes, they are weighing the potential benefits against the risks of discouraging development in the city. Some council members raised concerns that higher taxes could deter developers from investing in Lynchburg, exacerbating the existing housing supply shortage.

The discussions from this meeting highlight the delicate balance the city must strike between generating necessary revenue and ensuring that Lynchburg remains an attractive place for residents and businesses alike. The committee's recommendations will be crucial in shaping the city's financial future and addressing the needs of its community.