It’s not clear whether Richmond has a serious chance of lowering real estate taxes any time soon. But City Councilor Reva Trammell (8th District) says now’s the time to talk about it.

After many Richmond homeowners received mailed notices saying their tax bills are going up again due to rising property values, Trammell introduced a plan this week to lower the city’s property tax rate by 4 cents. 

If approved, the proposal could save the average homeowner around $150 on their tax bill in 2025, according to city officials, based on the average home value of $366,163. It would cost the city government roughly $16 million in foregone tax revenue.

The City Council could vote on the proposal later this month, but Council President Kristen Nye (4th District) filed a competing ordinance to keep the tax rate unchanged at $1.20 per $100 of assessed property value. Trammell’s plan would set the rate at $1.16.

The dueling proposals set up an election-season tax debate as both City Council and mayoral candidates discuss how tax bills and rising real estate assessments factor into Richmond’s housing affordability issues.

Potential budget impact debated

In an interview, Trammell said she’s proposing the rate reduction because living costs are one of the top concerns she’s heard as she campaigns for reelection in her South Richmond district. With all the growth Richmond is seeing, she said, the city has the money to do it.

“Stop saying we can’t afford it,” Trammell said. “Everybody’s saying ‘Everybody in City Hall is getting all these high-priced salaries, you’re getting vacation time, you’re getting holidays.’ That’s what I’m hearing at the doors.”

Mayor Levar Stoney said the city can’t afford it.

“I don’t hear a lot of people clamoring for cutting services. I hear people clamoring for more services in Richmond,” Stoney said when asked about Trammel’s proposal at a news conference Wednesday. “When you cut the real estate tax rate you are also essentially signing on to cut services.”

Tax assessments have jumped dramatically in many Richmond neighborhoods over the past five years as the city has grown and the housing market has gotten more competitive. That has boosted on-paper property values, while also fueling concerns about the financial hit to lower-income residents who may not be able to afford the higher taxes that come with a home that’s suddenly worth a lot more.

Some city officials have stressed that an across-the-board rate reduction would disproportionately benefit Richmond’s wealthiest neighborhoods and commercial property owners, who could afford to pay more.

Assessments didn’t rise as sharply this year as they have in the recent past. The average increase was 6.8%.

“Things are still healthy and we’re still seeing revenues increase. But it’s not as aggressive as it was a couple years ago,” Nye said in an interview.

Nye said she was aligned with Trammell on a similar rate reduction plan that failed in 2022, when assessments went up more than they did this year. She said she filed the ordinance to keep the rate unchanged for 2025 because that’s traditionally been the responsibility of the council president.

“We all voted on the budget a couple months ago,” said Nye, who is not running for re-election this year. ‘“And if there is a tax reduction that is passed, let’s be honest that cuts have to be made.”

Rising values require rate reconsideration

In fiscal year 2020, the city collected about $300 million in real estate taxes, according to city budget documents. For fiscal year 2025, that number was projected to hit nearly $461 million at the same $1.20 rate that’s been in place since 2008.

Virginia law requires local governments to consider rolling back tax rates to level out big spikes in assessments and keep real estate tax bills relatively stable from year to year. It’s that rule that’s now forcing the City Council to go through a public process of choosing a different tax rate or keeping it the same.

Richmond routinely chooses not to roll back the rate and keep it at $1.20, which means more revenue to fund city services and higher taxes for anyone who saw their property’s value increase.

“That’s what’s hurting people,” Trammell said. “And you can’t stop that. Because look at the growth. Look at the development.”

If the council wanted to keep real estate tax bills level for 2025 and offset the higher assessments entirely, the new rate would drop to $1.136. That number is included in fine print on the assessment notices the city sent out, but isn’t expected to be considered by the City Council.

Dueling timelines create complications

Rolling back the rate is complicated by the fact that the city’s real estate assessment and budgeting functions operate on two separate timelines. New assessment notices usually go out around Sept. 1 and apply to taxes owed for the next calendar year. The city’s budget, which operates on fiscal years that start July 1, is put together in the spring.

That creates a built-in incentive to leave the tax rate unchanged as assessments go up, because lowering the rate during the budget year could require unplanned cuts to rebalance revenue and spending.

The city has already adopted a plan to sync up the two schedules to resolve the issue of having to reconsider tax rates after the budget is set. To get the two processes aligned, the city won’t conduct an assessment cycle in fiscal year 2027. Some officials are wary of changing the rate due to the uncertainty of how that process will go.

Real estate taxes in Richmond are higher than in neighboring counties. In Henrico County, the real estate tax rate is $0.85 per $100 of value. In Chesterfield County, it’s $0.90. That contrast is partly based on differences in services provided by the city and counties and the high levels of tax-exempt property in Richmond owned by the state government and Virginia Commonwealth University.

The city has other options for providing tax relief that don’t involve structural cuts to the real estate tax rate. In 2022, officials approved a one-time rebate, and the city has been looking at ways to expand more targeted programs that assist elderly homeowners and those with disabilities.

The Stoney administration is working on an alternative tax relief proposal that could involve rebates or more targeted relief to lower-income property owners, according to a City Hall source.

Trammell said she’s not concerned that wealthy property owners might also benefit from her plan, because “everybody” could use a break.

The City Council is expected to hold multiple public hearings on the tax rate in the weeks ahead. The proposals will first go to the Council’s Finance and Economic Development Standing Committee, which meets next Thursday at 1 p.m.