Lynchburg council debates lodging fee, personal property and real-estate rate as options to close FY26 gap

At a Lynchburg City Council budget work session on May 6, council members debated whether to rely more on consumption taxes — chiefly the lodging tax and a room-per-night fee — rather than increasing the local real-estate tax rate to balance the proposed FY26 budget.

Councilman Ferraldi urged the council to “start there” with taxes borne mostly by visitors rather than homeowners, saying a levy paid by nonresidents would reduce pressure on local property owners. “If there's a solution that prevents taxes going up on the folks I represent that is paid for by 99% of folks out of town, we start there,” Ferraldi said.

Why it matters: Council members framed the lodging and room-fee options as politically and economically preferable to large real-estate increases because those taxes are paid primarily by visitors and event attendees rather than by homeowners on fixed incomes. Staff said legal limits and market reactions must be weighed; pushing room charges too high can reduce taxable room rates and thus reduce revenue.

Details and staff estimates Donna, a budget staff member, laid out the city's current consumption levies and produced incremental-yield estimates. She told council that Lynchburg's lodging tax is currently 6.5% and that a 1-percentage-point increase would yield about $517,000. She also said a $1-per-night room fee would yield about $433,000 and estimated a 10¢ increase in the personal property tax would raise about $684,000.

On councilmember proposals, Ferraldi sketched more aggressive options during the discussion, including larger increases in the lodging percentage and a substantial per-night tariff; he proposed the concept of a sunset clause so such a fee could be removed after it helped reduce debt levels. A city staff member noted Virginia guidance from 2021 showing some localities had maximum lodging tax rates near 11% and per-night maxima as high as $3, but cautioned the data was from 2021 and local legal or public-notice requirements may apply.

Council members discussed potential impacts and unintended consequences. Vice Mayor Diemer and others warned that higher lodging levies could shift business to neighboring localities or affect hotels near jurisdictional boundaries. Councilman Mishins and others asked staff to model lodging-tax alternatives against likely hotel-market responses.

Assessment cycle and equity concerns Council members also discussed Lynchburg's two-year reassessment cycle, which is set by the city charter and requires state approval to change. Staff explained that longer reassessment intervals can create larger, less frequent tax shifts while annual reassessments tend to smooth changes year to year. Several council members said they prefer solutions that avoid forcing owner-occupied households to sell because of rising taxes.

Next steps and procedural items Councilman Ferraldi asked staff to produce a memo and revenue scenarios (including lodging-percentage increases and room-fee options) so the body could consider them before the next formal readings. Mayor and staff indicated they will prepare additional analysis; council discussed holding further meetings before the first reading of the budget to consider the options and any public-notice or hearing requirements.

Ending Councilmembers agreed to continue the discussion at upcoming meetings with staff-provided revenue scenarios and legal/notice requirements, leaving open consumption-tax options as a key alternative to larger local property tax increases.