Volume 1 - Executive Summary - Office of the Chief Financial Officer

Local Fund
Property Taxes
Real-Property Tax
In FY 2011, $1.715 billion was collected before dedicated distributions; a 5.8 percent decrease from FY 2010. This
decrease in collections was driven by an approximately 12 percentage point drop in the growth rate of commercial
property (Class 2) collections, compared to 2010 collections. Class 2 collections account for approximately 67
percent of total real property tax collections. Despite declining residential (Class 1) property values due to the
lingering effects of the most recent economic recession and national real estate collapse, collections in this class
continued to increase primarily because the assessment cap policy for homestead properties causes the tax liability for
a significant number of homesteads to increase 10 percent annually, even though the respective home values did not
grow as much. Class 1 tax collections account for approximately 32 percent of total real property tax collections.
Residential Property. Due to the deflating housing bubble and the lingering economic recession, residential property
value declines continued in CY 2011 due to even fewer residential property sales. This sustained relative weakness in
the residential sector is expected to continue over the next few years. However, Class 1 tax collections are expected to
grow approximately 2.5 percent annually for FYs 2012 to 2016 due to rising property values of large apartment
buildings. Total Class 1 tax collections are also expected to grow because of the assessment cap for many homestead
properties that causes the annual tax liability to increase 10 percent annually notwithstanding the change in the
market value of such properties.
Commercial Property. Market rate sales of commercial property virtually disappeared in 2009 but began to rebound
in 2010. In the summer and fall of 2010, there was an increase in the number of large commercial property sales at
prices on average 30 percent above the 2010 assessment value. As a result, Class 2 assessment values will rebound in
FY 2012 almost to FY 2010 levels, but growth will begin to gradually moderate in FY 2013.
The factors that affect residential and commercial property assessment values mean that, after a decline of 6.9
percent in FY 2011, total real property tax revenue after dedicated distributions will grow 7.2 percent in FY 2012
and by only 6.2 percent in FY 2013.
General obligation bonds. In addition to providing revenue for government services, real property taxes support the
District’s general obligation bonds used for capital investment. For FY 2012, the percentage of real property tax
collections dedicated to the repayment of principal and interest on the District’s General Obligation Bonds is 14
percent.
Transfer to Tax Increment Financing (TIF) Fund: In FY 2012, $33.0 million of real property tax collections will be
dedicated to the repayment of Tax Increment Financing and PILOT bonds. This amount will increase to $36.6
million in FY 2013 due to continuing development progress at previously authorized TIF projects, expected increased
assessments for existing TIF properties, and TIF transfers that may be required for potential new debt issuances.
Personal Property Tax
In FY 2011, gross total personal property tax collections totaled $52.7 million. Based on national and regional
economic indicators that suggest a gradual increase in the level of business activity and a subsequent increase in the
total level of new business investment, gross collections are expected to grow 0.9 percent to $53.2 million in
FY 2012. Total gross personal property tax collections are expected to grow at an annual average rate of approximately
1.0 percent per annum for FY 2013 to FY 2016 as the District of Columbia’s economy recovers.
FY 2013 Proposed Budget and Financial Plan
Revenue
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