Luray increases tax rates on real estate, TOT and cigarettes, while maintaining levy on meals

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By Randy Arrington

LURAY, April 26 — The Luray Council voted to raise three of four tax rates during Tuesday night’s special meeting on the FY23 budget. While conceding to negative feedback on any increase to the meals and beverage tax, council members approved increases to tax rates on real estate, transient occupancy and cigarettes.

In support of a two-cent increase to the rate on real estate, Councilman Jerry Schiro talked about the many amenities that the Town of Luray provides for both residents and tourists, and the rising costs of providing those services. The longest-tenured councilman also recommended consideration of smaller increases now to keep up with rising costs and inflation, rather than a big jump later on to play catch up.

“When citizens come before us, they are always asking for more…but no one showed up at the public hearing on the tax rate,” Schiro said. “We need to be bumping up revenue along with expenses…because I really feel we’re on the crest of some significant growth…We’re just taking the rate back to what it was a year ago.”

A motion by Councilman Ligon Webb to raise the tax rate on real estate from $0.267 to $0.29 (per $100 of assessed value) passed by a narrow 4-2 margin, with councilmen Joey Sours and Jason Pettit dissenting.

“We did get a large cash infusion as a Town,” Sours noted prior to the vote, citing federal funds flowing in during the COVID-19 pandemic. “I have a problem reconciling that…with a tax increase.”

The council proceeded to take another vote on another rate before circling back to rescind its vote on real estate, prompted by comments from Sours. The group swiftly and unanimously voted to leave the tax rate on meals and beverages at 4 percent (rather than increase to 5 percent) following negative feedback from owners of local eateries, who are still recovering from decreased business during the two-year pandemic. Revenues from the meals and beverage tax make up about 10 percent of the budget’s general fund.

During a discussion on the lodging tax, Sours prompted the council to go back and reconsider the tax rate on real estate, which they did — ultimately lowering it to 28 cents (per $100 of assessed value) by a 5-1 vote, with Councilman Pettit dissenting. The new rate represented a 1.3-cent increase over the current tax rate ($0.267), but it’s still one cent lower than last year’s real estate rate of $0.29. Revenues generated from the Town’s real estate tax make up about 17 percent of the annual budget’s general fund.

Town Manager Steve Burke got the town attorney on the phone to consult with the council on the proper procedure for rescinding its earlier vote and considering a new rate. One of the four council members who voted in support of the 29-cent rate had to make a motion to “reconsider the rate.” Council member Stephanie Lillard, who had hesitated about 30 seconds before casting the final and deciding vote to approve the 29-cent rate on real estate, was anxious to make the motion to reconsider.

An increase to the transient occupancy tax (TOT) rate from 5 to 6 percent, received swift and unanimous approval from the council, who saw the increased levy as a “pass-through” tax on tourists. TOT revenues collected by the Town make up about 3 percent of the annual budget’s general fund.

With equal swiftness and the least amount of discussion, the council unanimously voted to increase the tax on cigarettes from $0.15 to $0.20 per pack. The increase brings the levy in line with cigarette taxes collected in the county and the Town of Shenandoah.

Since the Town’s proposed FY23 budget had been drafted and balanced using current tax rates for revenue projections, the tax increases approved Tuesday night generated an additional $147,000 for the upcoming fiscal year that begins July 1. The real estate hike generated an additional $62,000, the increase on cigarettes created an additional $45,000 and the rise in TOT tax is estimated to bring in another $40,000. Before advertising the FY23 proposed budget to the public, the council needed to determine where to allocate these additional funds (although actual appropriations could change during the fiscal year).

The council reviewed a list of 39 unfunded requests that came in from various departments during the budget planning process, but never made it into the final proposed budget. Of those 39 items, 11 were highlighted as being eligible for federal ARPA funds, which the Town will continue to receive over the next few years. Taking away projects eligible for ARPA funds, the list still contained more than $1.9 million in requests.

Early on in the lengthy discussion on what to do with the $147,000 in additional revenue, the council unanimously agreed to fund a 2-percent Cost of Living (COLA) increase for Town employees at a cost of $38,238 and upgrade a position in the Treasurer’s office from part-time to full-time at a cost of $29,000.

The remaining $81,000 was haggled over for some time, as several key interests on the “the list” began to emerge. Incentive programs for employees in the Public Works and Parks and Recreation departments were ultimately funded at a cost of $40,000 ($5,000 less than proposed for both departments combined). An additional $10,000 was allocated to help provide benefits (insurance) for the program director of the Luray Downtown Initiative.

A new full-time officer for the police department was discussed at length, with the council ultimately earmarking about $31,000 for the position, which will start midway through the new fiscal year on Jan. 1, 2023.

To see a copy of the agenda for the April 26 meeting, complete with the list of requests, visit https://www.townofluray.com/assets/tol_062222.pdf

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