City of Fairfax, VA – The Fiscal Year 2027 (FY2027) budget for City of Fairfax outlines a broad financial plan that increases funding for schools, infrastructure, and public services while relying on a diversified set of revenue sources. Rather than a single large tax hike, the city spreads revenue adjustments across property taxes, business taxes, meals tax, hotel tax, and utility fees, creating a gradual but noticeable increase in overall costs for residents and businesses.
FY2027 continues a pattern of steady growth in city spending.
The budget increases funding for:
- Public schools (the largest single expenditure)
- Road and transportation improvements
- Water, sewer, and stormwater infrastructure
- Public safety and employee compensation
To support these priorities, the city increased revenue through a combination of tax rate adjustments and fee increases rather than expanding government dramatically.
Real estate taxes continue to serve as the primary source of city revenue. For the current fiscal cycle, the rate is established at $1.0725 for every $100 of assessed property value.
Key details regarding this tax include:
- Year-over-Year Change: The rate reflects a slight rise from the previous year.
- Financial Impact: Due to the rate adjustment specifically, typical homeowners can expect an added annual cost of approximately $120 to $130.
While property tax rates remain stable, rising assessments continue to increase total tax bills for homeowners.
The FY2027 budget introduces the first meals tax increase in approximately 20 years, raising the rate from 4.0% to 4.5%. From a practical standpoint, diners will experience a direct impact, with a standard $50 meal at a restaurant costing approximately $0.25 more.
The meals tax increase is designed to reduce the city’s reliance on property taxes by diversifying the tax base and capturing revenue from non-residents, such as visitors and commuters, who frequent local dining establishments. Although the per-transaction increase is small for individual diners, the high volume of restaurant activity in Fairfax ensures that these incremental amounts generate significant revenue for the city at large.
The Business, Professional, and Occupational License (BPOL) tax represents a primary business-side adjustment in the FY2027 budget.
As a gross receipts tax, BPOL is calculated based on total revenue rather than net profit. In addition, the city’s BPOL tax rate is not a single flat rate and varies by business classification and is assessed per $100 of gross receipts.
New BPOL rates example include:
- Professional services (e.g., real estate, financial, and consultants): Increased from $0.31 to $0.45 per $100 of gross receipts.
- Other service-based businesses (e.g., personal and repair services): Increased from $0.19 to $0.30 per $100 of gross receipts.
The Business, Professional, and Occupational License (BPOL) tax updates primarily impact contractors, consultants, real estate and self-employed professionals, and small service-oriented businesses. These changes are significant because even minor rate fluctuations can heavily impact entities operating with narrow margins despite high revenue. The city maintains that these updates provide long-overdue rate modernizations, align city rates with regional standards, and support city services while reducing the tax burden on homeowners.
Another major financial shift in the FY2027 budget is the substantial increase in the hotel tax, which rises from 4% to 10.5%. This rate applies to both traditional hotels and short-term lodging and results in a significant increase in costs for overnight stays. The policy’s purpose is to intentionally shift more of the city’s tax burden toward non-residents—specifically tourists and business travelers—which is a common revenue diversification strategy for urban areas with high visitor traffic.
Beyond taxes, several essential city services and external economic factors contribute to the rising financial pressure on residents. This includes projected increases of approximately 6% for wastewater utilities and 5% for stormwater fees to fund sewer maintenance, flood prevention, and infrastructure replacement. Additionally, other cost drivers such as rising property assessments increase tax bills even without rate hikes, while inflation affects city operations—specifically construction, fuel, and contracts. To remain competitive, the city also continues to adjust employee compensation, adding further to the overall budget requirements.
“This budget reflects responsive stewardship and a commitment to a stronger future,” Council Member Tom Peterson said in a press release. “We are protecting what makes Fairfax special while ensuring it remains affordable, safe, and resilient for years to come.”
The FY2027 budget spreads revenue across multiple groups—including homeowners with a modest increase, businesses through higher BPOL rates, visitors via a substantial hotel tax increase, and utility users through gradual fee hikes—to maintain city services and infrastructure investment without concentrating the financial burden solely on homeowners.
