Memo for fiscal year 2018, updated 2017-03-31

[Archived] Question #29: Can you please provide the revenue and expenditure impacts of a restoration of the AHOP if the Council were to consider adopting all, or some portion of, the Supplemental CIP?


In Fiscal Year 2011, the City wound down AHOP (the Affordable Homeownership Preservation Grant Program). Can you please provide the revenue and expenditure impacts of a restoration of the program if the Council were to consider adopting all, or some portion of, the Supplemental Capital Program?


Restoring the Affordable Homeownership Preservation Grant Program (AHOP), if reinstated at the prior participation and grant levels would result in foregone real property revenue of approximately $1.4 million to $1.9 million which can vary based on the grant amount provided to qualified applicants in a new program. Additionally, the restoration of this program would require expenses of approximately $0.1 million to administer the program.

The City’s Affordable Home Ownership Preservation Program existed from 2004 to 2008 when real estate assessments and real estate taxes rose rapidly. Parameters for the program varied each year, making comparisons difficult, but 2006 and 2007 had the highest participation levels and resulted in tax relief of $1.1 million. The chart below shows the program limits during the final year (2008) the program was in existence.

Income Range Designation Asset Limit Number in Household Assessment Limit* Grant Amount
$0 - $40,000 Low Income $50,000 Any $527,000 $1,200
$40,001 - $55,000 Medium Income $50,000 Any $527,000 $875
$55,001 - $72,000 High Income $50,000 Any $527,000 $375

  *Average assessed value of a residential property in calendar year 2007

In 2008 the program was minimized significantly when the program instituted lower income limits, and participation was limited to those who had qualified in the previous year. The number of approved applications changed from 1,381 in 2007 to 862 in 2008 and grant funding changed from $1.1 million to $0.7 million. In 2008 the income limit was reduced from $100,000 to $72,000, which is consistent with the income limit for the Elderly and Disabled Tax Relief Program (EDTR).

To estimate the costs in 2017, participation rates were applied to current property data. In 2007, the last year that new applicants were accepted to the program, approximately 19,000 postcards were mailed to property owners whose homes were assessed below the threshold of $527,000, which was the average assessed value of a residential property in Calendar Year 2007. Of this total number, ultimately 1,381 applications were approved.  In the final three years of the program, the distribution of grants was even across all income levels, meaning one third of the applicants received $1,200, one third received $875 and one third received $375. 

Using the grant amounts established in calendar year 2007 and the same methodology in which the same proportion of home owners with homes below the average assessed value (which is currently $528,421) would apply and qualify would result in approximately 1,685 qualified applications out of approximately 23,400 property owners.  With the same distribution, 567 property owners would receive a $1,200 grant, 567 would receive an $875 grant and 567 would receive a $375 grant.  The resulting tax relief would be $1.39 million in foregone real property tax revenue.    

Income Range Designation Count Grant Amount Revenue
$0 - $40,000 Low Income 567 $1,200 $680,400
$40,001 - $55,000 Medium Income 567 $875 $496,125
$55,001 - $72,000 High Income 567 $375 $212,625
Total 1,701 $1,389,150

In order to provide an equivalent relief of the tax burden for lower income property owners, grant amounts would need to be adjusted. Although the average assessed value of a residential property is only slightly higher, the tax rate in 2007 was $0.83 compared to the current proposed tax rate of $1.10, and the average income for Alexandria went from $70,632 to $77,142 increasing affordability. To provide the equivalent tax relief, if that was Council’s policy choice, the grant amounts would need to be increased. Rounded for simplicity, the grants would need to be $1,600 for the designation of low income, $1,175 for the designation of medium income and $500 for the designation of high income.  The resulting tax relief would be $1.86 million in foregone real property tax revenue to provide the same relief today as the program provided in 2007.

If Council’s desire to impact only a portion of the 2.7¢ to 5.7¢ increase in low/moderate income households tax bill, the cost would be less. It should be noted when Council eliminated this program in FY 2011 there was little negative feedback from prior program beneficiaries.

In addition to the revenue that would not be collected from the tax relief program there would be costs to administer the program. Assuming the administrative burden would be similar to the EDTR noted above, one additional Revenue Analyst III position would be necessary at a cost of approximately $94,000, including salary and benefits. Additional resources of about $10,000 are needed for postage and mailing.  

It should also be noted that the administration of this program will require programming support to accurately reflect the relief on a property owner’s tax bill. At this time, existing Finance and ITS Department staff are working above desired capacity with the programming requirements that are necessary to produce the semi-annual real property tax bills, a planned replacement of the City’s Real Estate Accounts Receivable System, and system changes required for the potential storm water utility fee and Old Town Business Improvement District (BID). In addition, existing Treasury and IT staff are working to ensure City-wide compliance with the Payment Card Industry (PCI) Data Security Standard for handling cardholder information for major credit and debit cards, and that payment cards comply with EMV standards, also known as chip cards. Dedicated IT programming support is necessary for any additional tax program expansion.     

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