Revenue realities hit home as local budgets take shape

While plummeting state tax revenues continue to grab headlines, it’s not just the state treasury that is getting walloped. As city, town and county executives ponder how to manage this year’s and next year’s budgets, local governing bodies are conducting public hearings, meeting with their school boards, and discussing legislative agendas with their local delegates and senators.

A new year, a new governor, and another General Assembly session are just weeks away. No one knows how state and local budget needs will be reconciled. In any case, here is the latest in a series of snapshots showing some of what is going on across the Commonwealth:

In a joint meeting of elected officials representing Harrisonburg and Rockingham County, Del. Matt Lohr and Sen. Emmett Hanger pledged to reduce unfunded mandates during the upcoming General Assembly session. With the expectation of further cuts from Richmond looming, local officials sought greater flexibility in how they spend the state dollars they do receive and relief from the state from some spending obligations. The local elected officials specifically urged the delegation: (1) to oppose shifting costs to localities for programs created by state statutes or regulations; (2) to resist efforts to cut state support for public education or to force localities to bear the entire burden for new, unfunded state-approved education standards and requirements; and (3) to fund transportation without resorting to transferring state responsibilities to localities. Harrisonburg’s commissioner of revenue asked legislators to support legislation giving her office the authority to use the city’s voter registration list to track down vehicle owners who owe personal property taxes. Seeking to potentially increase tax revenue at a time when state cuts are squeezing local budgets, the commissioner sees the voter list as a tool to track down tax scofflaws.

The Newport News City Council and School Board met with Sens. Thomas Norment and John Miller and Dels. Brenda Pogge, Glenn Oder and Mamye BaCote. Norment warned that “financial circumstances are dire and continue to deteriorate” and that local governments must get used to “doing more with less forever. The public sector has got to embrace that. You’re not going to get back to where you were.” Pogge said that the “idea that these cuts are permanent is long overdue.” Newport News officials asked lawmakers not to support proposals to decrease the proportion of state support for required education costs and to oppose any formula changes that reduce funding for non-instructional staff.

The Albemarle County Board of Supervisors and School Board affirmed their intent to deny teacher salary increases next school year. Officials have become increasingly concerned that the poor economy will make it difficult to pay teachers even at their current salaries without reducing the number of teachers. The county is offering a retirement benefits package as a move to replace higher paid employees with new, lower paid staff. The county is also axing new infrastructure projects to save money. The board of supervisors is using a 77.2 cents real estate tax rate in the five-year financial plan. This is a 3-cent increase over the current rate, but the average county homeowner would end up paying the same real-estate tax for the next two years as under the current rate.

In a meeting with South Boston officials, Sen. Frank Ruff and Del.-elect James Edmunds warned that public education and public safety will not be spared in the next round of state budget cuts. The town manager and the police chief expressed concerns that state assistance to local police departments (‘599’ program) would suffer further cuts. The police chief noted that the town relies heavily on the program.

In Goochland County, the school superintendent presented several cost-cutting measures for both this year’s and next year’s budgets. The county projects a revenue shortfall of $2.5 million this year and $5.4 million next year. The county administrator has said that in 2011 local funding for schools will be cut by 15 percent, or $2.9 million, and that the county is also asking schools to cut $650,000 from this year’s budget. Because staff makes up 79 percent of the school budget, the superintendent’s proposals include staff reductions in the instructional program, a reading specialist position and the gifted center as well as changes in bus schedules and school hours and reductions in school furniture and text books.

In Portsmouth, a three-way tussle involving the sheriff, the circuit court judges, and the city is underway. The sheriff says that state budget cuts will force him to lay off 11 employees by the end of FY10. The city recently agreed to cover half of the state cut. Nonetheless, the sheriff threatened to cancel operating the walk-through metal detectors at city courthouse entrances. The Circuit Court judges plan to discuss the sheriff’s plans.

The City of Fairfax faces a $7.5 million budget deficit in FY11 that could increase by another $3 million. This new projection could push the budget gap to more than 15 percent of the city budget. The gloomier outlook is based on the collapse of the assessed value of commercial real estate in the city. Commercial property assessments are down an average of 18 to 20 percent. Although single family detached homes are only projected to decline by 3 percent, residential condominiums are expected to fall by 12 percent. City officials told the council and school board that alternative scenarios to deal with the budget gap include increases in real estate taxes ranging up to an additional 25 cents to the current rate of $1.07 per $100 of assessed value. School board members expressed concerns over cuts to school funding. The school board chairman suggested that threshold funding could replace the city’s regular formula for transfers to the School Fund. Under this funding scheme, the schools’ apportionment would be based on an “annual floor of funding based on per pupil costs, instead of revenue sharing.”

In Chesterfield, county officials are beginning to wonder if a real estate tax hike is in order with a budget shortfall for FY11 projected as between $55 million to $60 million. Roughly half of the shortfall is for county schools. The estimate assumes state funding remains constant. The county administrator says the effort now is “to alert the community about how the financial environment has affected our funding. … Phase two will be options and solutions.” It is unlikely that a strategy restricted to spending cuts can close the county’s budget gap without a substantial affect on programs and services.

Members of the Roanoke City Council may consider raising local taxes next year, as they face a challenging budget with decreased state support and declining local revenues. The mayor describes the budget situation as “grim.” During the FY10 budget process, city staff suggested the possibility of raising the meals tax and the transient occupancy tax, but the council chose instead to reduce services by $7.3 million. Citizens have begun to see the first effects of reduced services with the elimination of loose-leaf collections, reduced library hours, a trimmed Valley Metro bus service, and the near elimination of the police department’s mounted patrol. For the city’s first quarter revenues are down nearly 2 percent from last year. But, certain revenues are down considerably more than others. Sales tax is down 18 percent, meals tax by 3.5 percent and lodging tax by 10 percent.

James City County is holding a series of budget meetings, seeking resident feedback on potential service reductions and the need for additional revenues. The information will be used as the county puts together its new budget now showing a projected budget gap of $5 million to $6 million. The county administrator predicted that “citizens will see services they have enjoyed over the years reduced or eliminated. That’s why they need to attend these meetings so they can share what is important to them and what they can live without.”

According to the Washington Post, Fairfax County and Loudoun County are considering the meals tax as one means to address their projected budget gaps. To impose the tax in Loudoun, the county will need permission from the General Assembly. Facing nearly a half-billion dollars in red ink, some Fairfax officials may be ready to raise user fees or impose new ones, such as charging high school students who play team sports.

In Spotsylvania, members of the board of supervisors recently saw financial projections showing it will be very difficult to offer employee raises or more money for the school system and public safety without raising taxes in FY11. The county’s finance director anticipates at least a $1.5 million shortfall in the current budget. Finance staff also projects a $1.2 million shortfall in the zoning, planning and building departments, which are supported by fees. To compound matters, the staff estimates a 20 percent decrease in property values when the re-assessment process finishes in January. A 20 percent drop in real estate values would require an increase of the real estate tax rate by 16 cents to 78 cents per $100 of assessed value to generate the same amount of revenue in this current fiscal year. Sales tax revenue is at a four-year low. The county has the second-most foreclosures in the Northern Virginia region, behind Prince William County.

Although Charlottesville finished FY09 with a surplus, it was driven by spending cuts (more than $5 million) rather than growing revenues ($254,506). For FY10, city officials are anticipating that revenues will be down by about $2 million.

Isle of Wight County wants to assess a tobacco tax to ease the loss of the county’s largest taxpayer. International Paper Corp’s decision to cease operations next year leaves the county scrambling to make up a $5.2 million revenue loss. The county has worked with other counties to lobby the General Assembly for the authority to assess a local tobacco tax. Each year, the legislature kills the bill. contents

Deadline extended for Recovery Zone Bonds

Gov. Tim Kaine re-issued last week an executive order concerning the Recovery Zone Bond allocations assigned to Virginia’s cities and counties under the federal American Recovery and Reinvestment Act (ARRA).

The new executive order and the original one set out a procedure for local governments to follow for the waiver of allocations assigned to localities under the ARRA. The new executive order simply extends the filing deadline that localities must file to the governor’s chief-of-staff who is designated the re-allocation director.

According to the governor’s staff, the extra time and formal application process is needed because of the volume of requests submitted by localities seeking additional re-allocations. More information on the executive order and application process can be found at www.stimulus.virginia.gov. contents

Could another federal stimulus package be in the works?

The U.S. Treasury Department expects to recover all but $42 billion of the $370 billion lent to ailing companies since the financial crisis began in late 2008, with the portion loaned to banks actually showing a slight profit.

The improved picture is the result of higher-than-expected returns on the loans and the fact that, as the financial sector has recovered, the government has not had to use much more of its $700 billion in lending authority this year.

Congressional leaders are planning to use some of the program’s money for economic stimulus and job creation. According to the New York Times, Congressional Democrats have already decided to divert about $70 billion from what is left in the bailout fund to the cost of additional road-building and other construction projects, credit to small businesses and further aid to state and local governments.

The Obama Administration had wanted to dedicate unspent bailout money to the deficit but signaled to congressional leaders that it would not oppose their plans. contents

Uranium mining study progresses

A study on uranium mining in Virginia will be conducted by a private, nonprofit institution that provides science, technology and health policy advice.

The National Research Council (NRC) – an operating arm of the National Academy of Sciences – has agreed to conduct the study through the Virginia Center for Coal and Energy Research (VCCER) on behalf of the Virginia Commission on Coal and Energy. In a recent letter to Dr. Michael Karmis, director of VCCER, NRC Director Anthony de Souza said the council will conduct the study “contingent upon clarification of several issues.”

Specifically, NRC wants to confirm that the commission, which was set-up by the General Assembly to advise legislators, will be the study sponsor, although funding for the study will be provided by Virginia Uranium Mining Inc., a private, for-profit company that owns the rights to uranium deposits in Pittsylvania County.

In addition, NRC wants clarification that “contractual arrangements” for the study are made “solely” with VCCER on behalf of the commission and “… should include terms ensuring the independence of the NRC in carrying out the agreed-upon task.” Once these matters are clarified and confirmed, NRC will initiate the study.

Background

The commission’s uranium mining subcommittee approved a study in May to explore whether uranium can be mined and milled safely in the state. The General Assembly imposed a moratorium on uranium mining in the early 1980s. After completion of the 18-month study, legislation to lift the moratorium could be introduced in the General Assembly.

As part of its 2010 legislative program, VML supports the current moratorium “until evidence demonstrates that it is safe for the environment and health of citizens,” and that any study must include “modeling and simulation studies that show the consequences of probable maximum precipitation storms” on the ponds containing mining waste. The language in the approved scope of task states only that the effects of severe weather events on water and waste operations “… may also be considered.”

View the NRC letter (PDF).

Review the approved scope of task for the uranium mining study (PDF).

Staff Contact: Joe Lerch / jlerch@vml.org contents

Kaine announces four enterprise zone designations

Gov. Tim Kaine announced four Virginia Enterprise Zone designations in Portsmouth, Staunton, Prince George County, and a joint zone in Southampton County/City of Franklin.

The Virginia Enterprise Zone program supports job creation and private investment through grants based on real property investment and the numbers of jobs created. Businesses can earn up to $200,000 during a five-year period based on the Real Property Investment Grants, and upwards of $800 per position created, depending on the wages offered.

The General Assembly appropriated $14.5 million in FY07 for the Enterprise Zone Program. In the 2008 legislative session, the state budget bumped up the appropriation to $15.4 million for each year of the 2008-2010 biennium. These totals, however, were reduced by the 2009 session to $14.3 million in FY09 and $13.2 million in FY10. In September, Kaine further reduced the FY10 appropriation by another $1.3 million, leaving some $11.9 million in the program. The shrinking appropriation and program’s growing popularity have resulted in a proration of the benefits owed to businesses.

Prince George, Staunton and Portsmouth each had Enterprise Zone designations that were expiring. Portsmouth’s zone, however, was a joint zone with Norfolk. This is the first enterprise zone for Southampton and the City of Franklin. contents

Restaurant smoking ban takes effect

Three state agencies – the Department of Health, Department of Housing and Community Development and the Department of Agriculture and Consumer Services – have entered into a memorandum of understanding for enforcement of the inspection provisions of the new statewide ban on smoking in restaurants that took effect Dec. 1.

This agreement, as well as some recent actions, makes it fairly clear that the state plans to take primary responsibility for the law, which was made part of the Indoor Clean Air Act that is in Title 15.2 of the Code of Virginia. This same act gives local governments certain authority to regulate smoking.

The law allows a restaurant to build a self-contained, completely separate smoking area. The law requires the smoking chamber to be nearly airtight. Under the agreement, the local building official is charged with inspecting additions to build the smoking rooms. The building official is to ensure that the ventilation system doesn’t blow smoke on non-smokers and inspect for normal building code issues.

The local Health Department is to inspect each restaurant that plans on having smoking areas for no smoking signs, doors between the smoking and non-smoking areas that remain closed, and related issues.

The Agriculture Department is to inspect convenience stores and gas stations that have lunch counter style seating to ensure compliance with the law.

The memorandum of understanding therefore covers most of the administrative provisions of the new law – the parts that deal with smoking chambers’ being separated from non-smoking areas and similar issues.

Smoking in a non-smoking area is subject to a $25 civil penalty that is to be paid into the Virginia Health Care Fund. The act provides that any law enforcement officer may issue a summons for the civil penalty. The act does allow a local ordinance that could include smoking in restaurants, but the ordinance may not be stricter than the state law. Therefore, it is advisable to leave the enforcement to the parties in the memorandum of understanding. contents

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