Loudoun County supervisors on Tuesday were briefed on a new proposed budgeting strategy that would limit annual spending growth and pour more cash into construction and affordable housing projects.
The presentation to the board’s finance committee continued the focus of the county’s budget staff on efforts to limit reliance on tax revenue generated by data centers.
Earlier this year, the staff suggested reductions to the tax rates on data centers because of concerns about the sector’s outsized impact on the budget. Supervisors quickly nixed that concept, saying their constituents expected to see savings in their own wallets while they are feeling more negative impacts from the growth of that industry.
Under the new proposal, the staff would seek to limit annual budget growth while seeking to maintain the real estate tax as the core funding source for government operations. The plan targets having real estate taxes represent more than 51.5% of tax revenues each year.
The plan also would establish single-digit growth rates for the budgets of the general county government and the school system. Local tax funding grew by 13% in fiscal year 2025 and 11% this year, according to the presentation.
As a starting point, the staff proposed a 9% increase in county funding and 8% for schools next year.
The plan also recommends holding the real estate and personal property tax rates at their current levels.
When tax collections exceed the funding required to meet the budget growth cap, the excess revenue would be allocated to the Capital Improvements Plan, reducing the amount of money that would be borrowed for construction projects. An alternative version of that plan also earmarks additional funding for the county’s Affordable Housing Trust Fund.
“What we started discussing with the board a year or two ago is looking at overall growth in [local tax funding], regardless if that revenue funds the operating budget and/or the debt service or capital budgets,” said Megan Bourke, the director of the Office of Management and Budget. “What we’re proposing today is that we shift the definition a little bit and focus, instead of on overall growth in LTF, focus on the overall growth of the county and school division’s operating budget—that’s the budget that supports department budgets, compensation contracts, etc., and excluding the CIP.”
Personal property tax revenue, the bulk of which is attributable to taxes on data center equipment, comprises nearly 40% of the county’s revenues.
Because of concerns about the potential for large fluctuations in collections based on the pace at which older equipment is replaced, the county established a special revenue stabilization fund in 2023. That fund holds in reserve the equivalent of 10% of the annual collection on data center equipment. To date, $119.7 million has been allocated to the reserve.
Bourke said a concern going forward is an anticipated end to the annual growth of data center revenues as the industry experiences full build-out in the county by the mid-2030s.
“In the early or late 2020s early 2030s, we anticipate that the majority of square footage of data centers will be fully constructed and outfitted, and so you’ll see a pretty significant plateau in the value we’re gaining from personal property in data centers,” she said. The increases in value that we’ll see there is when computer equipment is refreshed and replenished, but overall, once data centers are fully built out, that the increasing value and the increasing revenue coming from that equipment plateaus again.”
She acknowledged that concerns over power availability could slow data center development and impact those projections.
Under the proposal, up to $200 million in additional local tax funding would be expected next year, with $70 million going to general county operations and $105 million to schools, with $25 million funneled into construction projects. The staff presented alternatives with more money going to schools, allocations to the housing fund, or potential tax rate reductions.
Supervisors on the committee were supportive of the proposal, but said they were not ready dismiss options to lower tax rates, especially the car tax.
Supervisor Matthew F. Letourneau (R-Dulles) said with the continued tight real estate market, property owners could expect higher assessments resulting in higher tax bills unless the rate is reduced.
“The message that we’ve been sending for the last six months is we have a lot of revenue coming in from data centers. It’s difficult for me to not find a way to pass at least some of that savings on to our residents who feel like they’re living with some of the detrimental impacts and need to see sort of that that cushion,” he said. “And I think we’ve talked ad nauseam about the various uncertainties in the fiscal market, the pressure from tariffs, all these different things that may be impacting residents. So, I would still want to keep some level of reduction on personal property tax on the table, as well as residential property tax rate.”
Supervisor Laura A. TeKrony (D-Little River) said the board should continue efforts to lower car tax bills to zero, even if the rate reductions are smaller than last year’s $1.06 reduction.
“We really do need to give residents relief from data centers, and this is a direct relief from data center revenue,” she said. “I like to say I want to be accountable to the taxpayers, and I think this is the way to do it. We have revenue that is coming is increasing year over year from data centers, and I think we need to give it back to the people.”
County Chair Phyllis J. Randall (D-At Large) said she agreed in general with the staff’s goal of keeping rates stable as part of a long-term strategy but also was willing to look at some reductions.
“It is my job as a supervisor and as chair to not just do things that feel good right now,” she said. “For this board to be able to lower the real property tax, because we can right now, and then the board two boards from now has to raise our real property tax because we’ve lowered it so much. … We are supposed to be looking down the line to what a next board and the next board and the next board is supposed to do.”
“We could look at more on our car tax,” she added. “I’m willing to have that discussion and that’s a discussion worth having.”
Bourke said the staff’s next round of budget briefing for the board would include a look at tax rate reduction options.
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