Finance committee weighs tax-and-budget scenarios, staff recommends capping operating growth and directing excess revenue to CIP

Loudoun County staff presented budget-development scenarios on Sept. 9 that would limit county operating-budget growth while capturing short-term revenue gains tied to data-center development for one-time capital spending.

Megan Burke of the Office of Management and Budget asked the Finance, Government Operations and Economic Development Committee to consider a shift in the county's budgeting lens: instead of basing policy on the share of real property tax revenue, staff recommended anchoring decisions on an operating-budget growth target. Staff proposed constraining year-over-year operating-budget growth to about 9% and programming any excess local tax funding (LTF) to the capital improvement program (CIP) where cash could be swapped for planned debt.

OMB staff outlined four illustrative scenarios, all assuming no change to planned personal property tax reductions for tax year 2026 and a roughly $200 million estimate of new net LTF in the current forecast. Under Scenario 1, with no change to the real-property tax rate and a 9% county operating growth cap, the county share would receive about $70 million and the school division would receive about $105 million (an implied LCPS growth of about 8%); the remaining $25 million would be excess LTF suggested for the CIP.

Scenario 2 is similar but dedicates 10% of excess LTF to the county's housing fund (in addition to an existing penny already dedicated to housing). Staff described the additional housing contribution as short-term (not permanent) because data-center related revenues are expected to plateau in the early 2030s.

Scenario 3 would set both the county and the schools to the same 9% operating-budget growth, which would raise the school allotment in the scenario to $124 million but reduce the amount available to the CIP. Scenario 4 illustrated lowering the real-property tax rate by one penny (staff estimated one penny equals roughly $20 million), which would reduce short-term excess but provide direct rate relief.

Staff also recommended keeping the revenue-stabilization fund target at 10% of data-center related real and personal property tax revenue and said the county has capacity within debt-ratio guidelines but should not overprogram the CIP. Instead, staff proposed using short-term cash to reduce planned debt issuances for near-term CIP projects so the county benefits from current revenue while preserving future fiscal flexibility.

OMB briefed the committee on longer-term revenue modeling, explaining that data-center computer equipment is taxed as depreciable personal property and that assessed value and revenue from new equipment will plateau as built square footage reaches completion. Staff described a depreciation schedule they use for modeling: “the depreciation schedule starts at the second year at 50% of value and then depreciates fully to 10% over 5 years.” The county projected that revenues will continue to grow in the short term but that expenditures could exceed revenues in the early 2030s under a constant-rate scenario if operating budgets keep growing at recent double-digit rates.

Supervisors discussed tradeoffs among tax relief, housing funding and capital needs. Chair Bridal said she favored scenario 2 (redirecting some excess to housing) to address the county's housing shortage; other supervisors expressed interest in exploring modest vehicle personal-property reductions. Several supervisors asked staff for additional modeling, including sensitivity around assessment and power-availability assumptions for data-center construction timelines.

Committee members asked staff to return with formal budget guidance for the fall and told departments to flag resource requests that are direct results of federal changes. Staff said more detailed revenue and assessment information will arrive as the budget process proceeds, and that they would provide scenarios with smaller vehicle-rate reductions if members wanted those modeled.