Charlottesville staff proposes 2-cent real estate tax increase; council agrees to advertise for public hearing

Charlottesville city staff presented a proposed FY2027 general fund budget of about $279.6 million and told council it includes a two‑cent increase in the real estate tax rate to help close an estimated $2.5 million structural gap.

"This budget does include a two cent real estate tax rate increase," said Sam, a city staff member leading the revenue presentation. Staff estimated the increase would yield roughly $6.4 million in additional real‑estate tax revenue compared with FY2026 and noted reassessment effects will also raise many individual tax bills.

Todd, the city’s tax‑relief program lead, described adjustments to relief programs that are indexed to HUD’s area median family‑income measures so eligibility thresholds move with local incomes. "We have very intentionally built these programs now ... so as our local incomes increase these thresholds increase," Todd said, noting grant levels range from $1,000 to $2,500 depending on income bands.

Council members expressed concern about both immediate and multi‑year impacts. Several said they were willing to advertise the two‑cent increase for the public hearing but asked staff to identify alternative cuts and to quantify long‑term exposure from collective‑bargaining agreements and transit commitments. "If we're not increasing we have work to do," one council member said, urging staff to present alternatives that could avoid a tax increase.

Staff warned that relying on one‑time surplus to close recurring gaps would create structural problems and could trigger scrutiny from bond‑rating agencies. They also reiterated that pending state legislation to authorize an additional 1% local sales tax remains uncertain and—if enacted—would be legally restricted to capital uses under current draft language.

Council instructed staff to advertise a two‑cent rate for the required public hearing, with an informal public forum planned March 16 and the official advertised hearing scheduled for April 6; the council is slated to formally adopt the budget on April 9. Staff said the budget materials and a tax‑calculator showing household impacts would be posted on the city website.

Next steps: staff will publish the notice to meet advertising deadlines, continue to build cost‑cutting scenarios for council review and prepare materials for the March community budget forum and the April public hearing.