Williamsburg's spending spree makes higher taxes inevitable (OPINION)
In just a few years, City likely to go from the lowest property tax rate to one of the highest
This guest post is opinion and commentary. The views expressed by the writer are not necessarily those of the Williamsburg Independent. Don’t agree with this opinion? Or have something else you want to share? Email us at contact@williamsburgindepedent.com.
The City of Williamsburg’s ongoing spending spree puts it in a precarious fiscal position, though one wouldn’t know by listening to its leadership. But the reality is their decisions have set the city on a path often seen in California, where decisions made in the past come home to roost, so to speak.
The city’s proposed Fiscal Year 2027 budget fails to accurately forecast the likelihood and extent of reduced revenue and rising costs. And it only takes a few minor changes in their fiscal assumptions to forecast deficits and the potential need to double the real estate tax rate by FY 2031 (rising from $.62 to ~$1.30 per $100 assessed value). The alternatives are significant cost cuts or using some of the city’s reserves.
Williamsburg currently has the lowest tax rate of any city in Virginia.
But if the writer’s projections are accurate, it could find itself with one of the highest …
Manassas Park — $1.43
Petersburg — $1.27
Buena Vista — $1.27
Norfolk — $1.23
Falls Church — $1.21
Newport News — $1.18
Hampton — $1.16
Source: Virginia Department of Taxation, TY 2024 Local Tax Rates, Table 2 (City Levies).
In January 2026, the City increased the meals and lodging tax rates and introduced a new 10% admissions tax. Fiscal Year 2027 represents the first full year of collecting revenue under these new rates, which is projected to generate an additional $3.2 million. This move underscores the pressing nature of the city’s spending problem, when better than “worst-case scenarios” (extra new tourism taxes, modestly increasing real estate taxes) still results in budget shortfalls. On top of the increased general government spending, the city’s proposed debt flirts with its self-imposed limitation on borrowings as a percent of the taxable real estate base.
The spending splurge is evident in the increase in general governmental expenditures over the last 5 years, totaling $24.4 million or 61.5%. Over that time, total expenditures for all funds per capita increased from $4,213 in FY2022 to $7,548, or 79% in the proposed FY2027 Budget — with no increase in our population! Rather, the increase has been financed by a combination of increasing real estate appraisals, increased tax rates on hotel stays and meals.
This hasn’t been enough though as city leadership has also chosen to significantly increase debt. According to its own projections, the city’s debt will be increased from $15 million in 2022 to $88 million by FY2030, representing a significant increase in total spending. These funds were mostly to put up new government buildings and implement fixes for long-ignored infrastructure issues, not to invest in our communities and businesses in any significant way.
The city presents a balanced budget for FY27 with no property tax increase.
But even modest forecast adjustments point to future budget deficits and the need to raise taxes …
Lower revenue
Real Estate taxes still up, but not as much. Annual increase in Real Estate Taxes reduced to 1% annually for FY2029 to FY2031
Annual increase for Other Local Taxes still up 1% for FY2029 to FY2031
No change in Miscellaneous and Intergovernmental revenue year over year
Higher expenses
Schools: I expect that education costs will be at least $500,000 higher annually than the city projects in FY2028 and FY2029 due to increased cost of educating the disadvantaged students in the City, as required under the new Joint Schools Agreement. The budget is slated to grow 2.5% thereafter. The city anticipates that school spending will total $15.9 million in FY31. I project that figure to be over $17 million.
Libraries: The probable costs to operate two new libraries continues to be misrepresented by the city. Their proposed FY27 budget predicts the city’s contribution for FY31 will be around $1.2 million. That’s an increase of only $100 thousand over 5 years. Of course this isn’t realistic and I believe that figure will be closer to $3.5 million. This is due in part to additional costs to operate new facilities, but also James City County’s desire to change the allocation of annual operating costs, as well as potential reduced usage of City library by JCC residents.
Hospitalization: The city predicts that hospitalization costs will increase from $3.1 million in FY27 to $3.5 million by FY31. But factoring in current industry cost trends, I think that figure is closer to $4.4 million annually.
Retirement costs: Due to change in assumptions for annual return on investments of 3.5% for FY2028/2029 and 4.5% for FY2030/2031, these should be expected to annually total several hundred thousand dollars more than the city projects.
Budget deficits
These and other higher expenses could result in $25 million in General Fund deficits. To make that up, the city would need to raise real estate tax rates 71 cents, a 115% increase.
Unfortunately, city leadership has shown no inclination to reduce costs. Recent comments from council members justifying increasing government spending due to the city’s exemplary status confirms the path we are on. These spending levels are not sustainable, but the City has developed a mindset and built an infrastructure that is increasingly costly. So residents should prepare themselves for steep tax increases in the future.
The current proposed Budget ignores our demographic realities and the real prospect of an economic downturn in the next few years. Adding substantial costs now will only make the situation more challenging in the future. This isn’t about not being “average”. It is about acting in a responsible fiscal manner.
The City of Williamsburg is a small town with several major institutions and attractions — College of William & Mary and Colonial Williamsburg — within its 9 square miles. It has a total population of about 16,030 including around 6,000 William & Mary Students. Since 2020, the population and K-12 student enrollment has remained flat. Plans by the city to increase density in the downtown area and encourage development of Colonial Williamsburg real estate cannot grow us out of this reality.
This year, tourism is benefiting from the Country’s 250th Anniversary, but past data shows 38 hotels/motels with an average occupancy rate of 40%, well below the national average of 63%. So future economic forces and their ripple effects beyond the city’s control cannot be ignored, such as developing economic clouds from wars and tariffs. In an upcoming post, I propose a number of changes to the city’s proposed FY2027 budget.
About the Writer: During a 45-year career, Robert Wilson worked with senior leadership teams to develop and implement innovative strategic and business plans that have fostered growth and profitability. Mr. Wilson holds a BBA degree from the College of William & Mary, a MS in Finance degree from the University of Arizona, and a Doctorate in Management from the University of Maryland Global Campus.
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