As the price of real estate in Arlington skyrocketed, so did the county’s revenue from real estate taxes and dependence on that revenue stream to fund its budget. The housing market is softening, however, which could lead to a drop in such revenue and leave the county in a bind.

County real estate tax revenue more than doubled from approximately $165 million in 1995 to an estimated $420 million in 2007, according to Arlington budget projections and financial records. Since 2000, the percentage of total county revenue generated by real estate taxes has also grown from 40 percent to an estimated 51 percent in 2007, documents show.

The Arlington County Manager’s Office, in a report on the proposed 2007 budget, warned that homeowners are shouldering much of the real estate tax burden, as home prices are outpacing office space prices.

“The continued strength in Arlington’s residential real estate market — which translates into higher real estate assessments — is itself a double-edged sword,” the office wrote. “Because the Commonwealth mandates a single tax rate for both residential and commercial real estate (and restricts the County’s ability to raise revenues in other ways), the strong real estate market has led to greater and greater financial burdens placed on homeowners.”

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Mark Schwartz, Arlington’s deputy chief financial officer, said this disparity is a great concern of the County Board, as homeowners are paying a disproportionate amount of county real estate tax because of rising home assessments.

Geoff Schwartzman, a real estate agent and campaign manager for Republican County Board challenger Mike McMenamin, said it is fiscally irresponsible to continue to rely on this revenue as heavily as it is being now.

“Over the last several years, instead of working within a realistic budget, our county leaders earmarked or spent every dime of the income from real estate taxes,” he said. “There is no sign that they plan to curtail the increased rates of spending even at this troublesome time in the real estate market.”

Schwartz said financial losses from a housing slowdown would be cushioned by Arlington’s office space, which still makes up a significant portion of the tax base.

BY THE NUMBERS

» The county is also working with developers to convert affordable rental units into affordable condominium units for purchase.

» Between 125 and 150 workers are expected to benefit from the program in the next three years.

dfrancis@dcexaminer.com