Normally, during Fairfax City’s annual proposed budget presentation, its city manager recommends raising the real estate tax rate by a few cents. But when Acting City Manager Bryan Foster unveiled his FY 26 budget recommendations, last Tuesday, Feb. 25, he delivered two shocks to the residents.

First, he proposed a residential real-estate tax hike of 9.5 cents – increasing it from its current $1.03 per $100 assessed valuation to $1.125. He then advised the City to raise its meals tax from 4 percent to 6 percent, making it more expensive for people to dine out here.

As a result of the property-tax jump, owners of an average City home valued at $694,503 would see their annual, real-estate tax bill increase by $1,126. That amount includes the average 7-percent increase in residential real-estate assessments in the City.

And since residents’ stormwater and wastewater bills are each proposed to rise by 6-percent, that means they’d also pay an estimated $9.70/year more to the City’s Stormwater Utility Fund and $42.12/year more to the Wastewater Fund. These fee increases are needed to meet regulatory, operational and required infrastructure improvements. 

However, said Foster, even at $1.125, Fairfax’s residential real-estate tax rate would still be “one of the lowest, compared to the other Northern Virginia cities and towns. The projected proposed rate for the City of Falls Church is $1.21, and the Town of Herndon, $1.47. We currently have the third-lowest tax rate among our neighbors. And even with the proposed tax increase, we’d be the fourth lowest.”

Real-estate taxes comprise 48 percent – almost half – of Fairfax’s General Fund revenues and make it possible for the City to provide the high level of services its residents have come to expect. Indeed, explained Foster, “This budget will enable the City to plan, design and build the 130 projects in its proposed CIP [Capital Improvement Program] by appropriating $105.1 million for FY 26 and forecasting $618.3 million for FY 26 to FY 30.”

He said the document includes “significant, capital investments in key areas that will directly support the City’s ongoing development.” These include $10.3 million to Recreation to enhance community engagement and wellbeing; $30.6 million to Transportation to improve mobility and reduce traffic congestion; $11.8 million to Wastewater to ensure sustainability and address future environmental needs; and $24.5 million to General Government Projects to modernize operations and improve services.

Among the largest CIP amounts included in the proposed FY 26 budget for specific projects are $18 million toward the eventual construction of a new fire station to replace Station 3 on University Drive, and $14.3 million for the Jermantown Road corridor improvements. 

But Foster stressed that only half of the CIP is funded by City money, with the rest coming from both state and federal funding sources. For example, he said, “In recent years, $20 million of local dollars has leveraged $250 million in other funds – which is a 12-times return on our investment.”

He said his budget is also fully funding the City School Board’s “request of $71,427,547, which represents a 21.4-percent increase from FY 25.” The biggest share of General Fund expenditures – nearly $80 million, or 37 percent – goes toward education, with the majority earmarked for the tuition payment.

Foster noted, as well, that the City is “allocating $3 million as the initial funding for a multi-year plan to finance the $220 million school-bond referendum approved by City voters on Nov. 5, 2024.”

The bond money will be used to renovate the two elementary schools and give Fairfax High a new roof. The total includes $177 million for Providence and Daniels Run elementaries, $43 million for the roof, and financing costs. The work is anticipated to be done between FY 26 and FY 31.

Fairfax City’s proposed net total expenditures for all funds – General, Capital Projects, Old Town Service District, Transportation Tax, Cable, Wastewater, Stormwater Utility, Transit and Debt Service – equal $306,551,165. This amount is an increase of 21.3 percent from FY 25.

General Fund revenues and expenditures equal $207,062,898, a 14.6-percent jump from the adopted FY 25 budget and a 9.6-percent rise from the estimated FY 25 expenditure. And Capital Fund expenditures for General Fund-supported projects equal $50,714,164 – an increase of 55.4 percent from the FY 25 amount of $32,640,376. 

Foster said the “primary budget driver” this time is the increase in the school-tuition amount of $12.6 million. It represents the City’s payment to Fairfax County Public Schools for its program of instruction used in the four City schools. 

“Without any other revenue changes, a 13-1/2-cent [residential real estate] tax rate would be required to pay for this,” he said. “And there’s another potential 8-percent increase in [calendar years] 2026 and 2027 – and that’s not sustainable.”

But, said Foster, “The City’s still in good financial health, especially because of its AAA bond rating. And our real-estate tax base – which contributes to homeowners’ equity – has increased almost 50 percent over the past nine years.”

Regarding the proposed hike in the meals-tax rate, Foster said it’s needed because the revenue from a real-estate tax increase alone isn’t enough to fund the budget. And taking it from 4 to 6 percent would only cost a diner an additional dollar for a $50 meal.

Fairfax’s meals tax has historically been a stable source of revenue for the City, and Foster contends that bringing in more money this way would lessen the tax burden on City property owners, while supporting Fairfax’s growing needs. Each 1-percent increase is projected to generate approximately $2.2 million in additional revenue. 

According to the budget document, the 4-percent meals tax yielded $8.7 million to the City’s coffers in FY 24 and is projected to reap an estimated $9 million in FY 25. But with a 6-percent meals tax, that figure is expected to jump to $13.5 million in FY 26.

“The meals tax hasn’t changed in 21 years – since 2004 – when it went from 2 to 4 percent,” said Foster. “And it’s one way of capturing the costs from nonresidents who come here and benefit from the City’s amenities and services.”

He also recommended a 3.5-percent merit-pay increase for eligible, general pay-scale employees totaling $649,000, plus the annual step increase for public-safety personnel. These increases are intended to maintain the City’s competitiveness in recruiting and retaining top talent in its fire and police departments. And unlike with past budgets, he didn’t use any unallocated funds to help balance it.

“This budget positions the City for future success by creating debt capacity for the future,” explained Foster. “By doing the heavy lifting this year, you shouldn’t have to have a [tax] increase next year to facilitate the City’s debt service – especially on the school-bond projects.” 

Overall, he said his proposed budget will support “the significant progress we have made over the last several fiscal years and will help ensure a financially stable and vibrant City of Fairfax for generations to come.”

City residents will be able to weigh in on this budget proposal during 7 p.m. public hearings slated for March 11 and 25, and April 8 and 22, in Council chambers. Budget adoption is set for May 6.