Housing standstill continues with no end on the horizon

In FY09, cities, towns and counties in Virginia collected more than $17 billion in real property taxes. These dollars accounted for some 52 percent of all local revenues. Real estate taxes are more than just the biggest egg in the local tax basket. Local governments are significantly dependent upon real property revenue to pay for education, public safety and other services.

Recent home sales reports from across the country are showing that a recovery is still very much beyond the horizon. Housing sales in July plunged to their lowest level in more than a decade. The National Association of Realtors said that the seasonally adjusted annual sales rate of 3.83 million units was 25.5 percent below the level of July a year ago. Most economists had expected a decline of about 13 percent, assuming that record-low mortgage rates and steep price declines would help buffer the market against the expected loss in sales related to the end of Uncle Sam’s tax credits for home purchases.

Some housing experts are predicting another drop in housing prices, perhaps as much as 10 percent this coming winter. Housing values, they say, will only keep up with inflation. And, unlike the early years of this decade, a home will return the money an owner puts in each month, but will not multiply in value.

The question is to what degree will the housing funk drag down other parts of a fragile national economy.

In Virginia, prospects of a real estate recovery are exacerbated by home foreclosures. The Lynchburg area has seen a continuing surge of foreclosures, jumping more than 40 percent in the past year. Some 220 residential properties foreclosed during the six-month period of January to June 2010, in the cities of Lynchburg and Bedford and the counties of Amherst, Appomattox, Bedford, and Campbell. That statistic is tantamount to one foreclosure for every four homes sold in the region. The number of foreclosures is 46 percent over the number of foreclosures in the first six months of 2009.

Foreclosure notices in Hampton Roads dropped 6 percent from June to July this year. Foreclosures, however, were up 109 percent from July 2008. The number of homeowners in the region who owed more on their mortgages than their homes were worth slid to just below 70,000 at the end of June. But, that is still more than one in five local mortgage borrowers – 21 percent – who are “underwater” on the loans. And, although the number of underwater homes has fallen by about 2,000 since the end of 2009, the decline may be tied to lenders foreclosing more quickly on underwater properties rather than home values stabilizing or going up. According to some in the lending industry, if home prices in the area decline 5 percent from current levels, another 22,500 mortgages could sink underwater.

Until public confidence returns to the housing market, local officials may wonder if their “bread and butter” revenue source will change to crackers and margarine. contents

Liquor sales

Privatization proposal prepared

The public’s first look at how Gov. Bob McDonnell proposes the state should privatize the sale of liquor is likely to occur on Wednesday at a committee meeting of his Commission on Government Reform and Restructuring.

The commission will hear a presentation that day on the details of the governor’s proposal. McDonnell has spent much of the summer crisscrossing the state conducting town hall meetings at which he has reiterated – in general terms – his belief that the state should get out of the retail liquor business. An additional town hall – Sept. 9 at 7 p.m. at the Central Virginia Community College in Lynchburg – has been added.

The full commission has the following three dates on its upcoming calendar:

• Sept. 13: Full commission meeting (at which time the privatization proposal is not scheduled to be discussed).
• Oct. 4: Full commission meeting at which time the privatization proposal is scheduled to be considered.
• Oct. 15: Date by which an interim report from the commission will be submitted to the governor.

The commission is scheduled to submit its final report to McDonnell by Dec. 1. Recommendations affecting local government that are likely to be adopted include those that would:

• Privatize the sale of liquor
• Transform the workings of the state Compensation Board
• Result in greater regional and local-state government cooperation
• Consolidate taxes not currently collected by the Department of Taxation
• Consolidate fees not currently collected by the Department of Taxation
• Update Virginia’s open meeting laws
• Increase budget transparency

Some local officials have spoken or submitted written comments at the town halls this summer, including Vienna Mayor Jane Seeman, who said that reducing or eliminating the BPOL tax would severely affect her town’s ability to provide core services to homeowners and businesses. Seeman also said that if ABC stores are privatized, local governments should retain their land use authority, including zoning and permitting, over the new retail outlets.

A special session of the General Assembly to take-up the privatization issue would presumably be held after Oct. 15. contents

Redistricting process gets underway; public hearings scheduled

Local government representatives will have a chance to comment on the redistricting process at a series of regional public hearings starting Sept. 8 in Roanoke.

Local officials may want to press the legislature to avoid splitting jurisdictions and precincts during the process of drawing lines for the various districts – Congressional, House of Delegates and state Senate. A special legislative session on redistricting is likely to be held next spring. Updated districts should be in place for the November 2011 elections for members of the House of Delegates and Senate, and for local elections.

According to the Division of Legislative Services (DLS), criteria such as respect for local and precinct boundaries should be given substantial weight in drawing and discussing district boundaries.

Population estimates are included in Drawing the Line 2011: Redistricting in Virginia, the first of a series of articles on redistricting by DLS. It is posted at: http://bit.ly/d6tlK2.

DLS also is planning to prepare a guide to local redistricting.

Virginia grew 11.4 percent during the last decade, but growth was not spread evenly across the state.

The public hearings by the House Committee on Privileges & Elections subcommittee on redistricting will be held at 7 p.m. as follows:

Roanoke - Wednesday, Sept. 8 - Natural Science Center, Virginia Western Community College.

Norfolk - Wednesday, Sept. 22 - Roper Performing Arts Center, Tidewater Community College.

Fairfax - Tuesday, Oct. 5 - 7 pm, Mason Hall, George Mason University.

Danville - Monday, Oct. 18 - Regional Center for Advanced Technology and Training, Danville Community College.

Stafford - Monday, Dec. 6 - University Hall, University of Mary Washington (Stafford Campus).

Richmond - Friday, Dec. 17 - 10 a.m., 9th Floor Appropriations Room, General Assembly Building.

People wishing to register in advance to speak at one of the hearings in September may do so by contacting

Scott Maddrea by e-mail (smaddrea@house.virginia.gov) or call 804-698-1540. contents

Budget cuts promise changes to new school year

As the last care-free days of summer ended for many children who attend public schools in Virginia, students and parents alike will notice a number of changes that are in store for the new school year.

Here are just a few examples from around the state:

In Albemarle County, students are walking longer to bus stops, and older students are taking fewer classes at a time under a new scheduling plan. The school division has consolidated bus routes, resulting in fewer bus stops. The school transportation department’s routing analyst was answering about 80 to 100 phone calls per day as many families tried to get answers on where their children would be dropped off and at what time. As for new class schedules, middle and high school students will be under an eight-period hybrid schedule. Some classes will continue to be held every other day for a full school year, but many will be held daily for only half a year. The new system allows students to take more classes per year, but generally fewer classes at a given time. The reasons for changes are simple. According to school administrators, the actions save money after the school division’s budget was cut more than $6 million compared with the previous year’s budget. Among the cuts were 22 teaching positions, which mean classes will have an additional student in grades 4 through 12.

In Lynchburg, a new school calendar features fewer but longer school days, saving money on heating, transportation and other costs but sacrificing time for teacher planning. The school year shrinks from 180 days to 172 days. Some class sizes will increase at both elementary and secondary schools. The school board also approved a plan to raise parking fees for high school students and to eliminate the division’s drug testing program.

Appomattox County, Campbell County, and Bedford County have cut teacher and support staff positions. Appomattox schools cut 30 teaching and staff positions. Campbell County closed an elementary school, and eliminated 69 certified positions. Bedford County will have 79 fewer positions along with larger classroom sizes.

In Spotsylvania County, secondary students are walking farther to reach their bus stops, student-athletes are paying a new sports fee, and class room sizes are increasing. This is all a result of about $15 million in cuts from last year’s budget. The smaller school budget is caused, primarily, by a drop in state funding. Some 43 classroom teacher positions have been eliminated along with 95 support positions. (The number of employees within the school division has decreased by 270 over the past two years.) Middle and high school athletes in fall sports were charged a $100 fee per sport.

It is becoming apparent that the crisis in funding public services will no longer remain invisible. State budget cuts are now being balanced in the classroom. contents

VRS posts 14 percent return in 2010

The Virginia Retirement System (VRS) experienced a 14.1 percent return on its investment portfolio for fiscal year 2010, ending the year with $47.7 billion in assets, according to an Aug. 30 press release. This is good news. The higher the investment returns, the less rates have to be increased.

Even with this good news, however, the VRS trust fund has not returned to its high level mark of $60 billion, reached in October 2007 before the recession took hold.

VRS serves about 600,000 members, retirees and beneficiaries. The active employees include about 148,000 teachers, 104,000 local government employees and about 89,000 state employees. In addition, VRS provides benefits to over 148,000 retirees and beneficiaries. The retirement system ranks as the nation’s 22nd largest public or private pension fund. contents

Mitchell to address NBC-LEO luncheon; workshops take shape

National League of Cities First Vice President James Mitchell will speak at the National Black Caucus of Local Elected Officials luncheon on Oct. 4 during the VML Annual Conference. Mitchell, a city council member in Charlotte, N.C., is a past chair of the National League of Cities’ NBC-LEO. The annual conference will run from Oct. 3 until Oct. 5 at the Hampton Roads Convention Center in Hampton.

Social media, preserving open space, collective bargaining, predatory lenders, ordinances on massage therapists and connecting community volunteers are just a few of the topics that will be covered at workshops and roundtables during the conference.

Here’s just a sampling of some of the topics that will be covered:

Social media success stories (Monday workshop). Experts from Alexandria, Staunton and Virginia Beach will provide outstanding examples of how those cities are making effective use of social media, especially in the areas of emergency management, tourism and libraries. See for yourself how tools such as Facebook and Twitter have become essential for local governments committed to connecting with citizens. Speakers: Tony Castrilli, Director, Office of Communications, Alexandria; Sheryl Wagner, Director of Tourism, Staunton; and Cindy Hart, Virtual Librarian, Virginia Beach.

Preserving open spaces (Monday workshop). In recent years, municipalities have used open-space easements to permanently protect community resources such as parks and drinking water supplies. The state’s largest easement holder, the Virginia Outdoors Foundation (VOF), will lead a panel of easement experts and municipal officials in a discussion of the ins and outs of easements on public resources. Speakers: Jason McGarvey, VOF communications and outreach manager; Bruce Steward, VOF easement attorney; Robert Lazaro, mayor of Purcellville; Erik Nelson, Fredericksburg city planner; and Cynthia Hudson, Hampton city attorney.

The Economic Forecast: Where have we been, where are we now, and where are we going? (Monday workshop). Session will shine a spotlight on the national, state and local economies. Speakers will address the recession’s impact on jobs, housing and other economic issues. They will share their insights as to the current state of the economy, discussing today’s fragile recovery and tomorrow’s economic prospects. Speakers: Raymond Owens, Senior Economist and Research Advisor, Federal Reserve Bank of Richmond; John Layman, Director of Revenue Forecasting and Chief Economist, Virginia Department of Taxation; Jim Regimbal, Fiscal Analytics Ltd., Richmond.

State Budget Trends and Local Expectations (Monday workshop). In the last legislative session, the General Assembly and governor worked together to close a $4.5 billion budget gap. This was accomplished without any general tax increases, but what did these budget and policy decisions mean for local governments? Will economic stability mean a return of greater state investments in public education, public safety and public health? And, what do localities believe their fiscal future holds? Speakers will address these and other issues. Speakers: Jim Regimbal, Fiscal Analytics Ltd., Neal Menkes, Director of Fiscal Policy, VML.

Preparing youth for productive lives (Tuesday City Section). Learn approaches to ensuring that young adults will have the skills necessary to be productive citizens. The Petersburg Family Stabilization Initiative focuses on strengthening families in six core areas: financial stability, health and wellness, school performance, youth independent living skills, male involvement, and volunteerism. Ready by 21 is an innovative set of strategies developed at the national level that can be used in communities to improve the odds that all children will be ready for college, work and life. Speakers: Kimberley D. Willis, Director, Petersburg Department of Social Services; Elizabeth Gaines, Policy Director, Ready by 21.

Approaches to downtown revitalization (Tuesday Town Section). The session will feature two case studies on towns that have undertaken downtown revitalization projects. Find out how Gordonsville and Pearisburg have tackled the problems of updating the downtown areas and how these approaches could be used in your town. Speakers: John Schmidt, Land Planning and Design Associates; Stephen Steele, PE, Vice President of Anderson & Associates, Inc., Ken Vittum, Pearisburg Town Manager.

Civic participation: Connecting community volunteers and non-profits (Tuesday Roundtable). Learn how to connect volunteers with needy non-profits through an attractive, easy-to-use website. Volunteers have a chance to describe their skill sets; non-profits indicate what they need.  Since the site became active, it has connected a large number of volunteers and organizations in the Williamsburg area. Presenter: Roy Femenella, Vice President, VolunteerWilliamsburg.org.

Managing the nightlife (Tuesday Roundtable). Learn how the city of Fredericksburg Police Department reduced police-involved events at bars and alcohol-related offenses through the use of a community police program that educates employees of bars, restaurant and nightclubs. The approach combines the efforts of the police, the Fire Marshal, the regional Alcohol Beverage Control agent, and the Commonwealth’s Attorney. Presenter: Sgt. James Kuebler, Fredericksburg Police Department.

Massage therapists: What they do, who they are, and how they’re regulated (Tuesday Roundtable). Find out what massage therapists are and what they do, the educational and licensure requirements they are required to meet under state law, and a model business license that can be readily adapted for adoption by your locality. Presenter: Sandy Levy, Certified Massage Therapist, Alexandria.

Military personnel rights (Tuesday Roundtable). Find out the requirements localities have to meet under the federal Uniformed Services Employment and Reemployment Rights Act (“USERRA”) when dealing with their employees who are in the National Guard or Reserve, and learn what military service members are required to do in order to have any rights under USERRA. Presenter: Cindy Norwood, Senior Assistant Attorney General, Office of the Attorney General.

Paperless council agendas (Tuesday Roundtable). Learn how the City of Hampton is using iPads to save time and money in the printing of council agendas and background materials. Presenter: John Eagle, Assistant City Manager, Hampton.

Public safety coalitions (Tuesday Roundtable). Danville City Council has established the “Coalition for a Safe Danville” to unite community stakeholders, share information, develop strategies, engage and inform the public, and undertake coordinated, results-oriented crime prevention activities. The coalition not only combats crime, it increases public confidence that Danville is a safe community.  Presenter: Danville Mayor Sherman Saunders and City Manager Joe King.

Working effectively with constitutional officers (Tuesday Roundtable). There doesn’t have to be tug-of-war and budget battles between council and constitutional officers. Learn about one approach that has helped create an effective working relationship in Hampton. Presenter: Hampton Mayor Molly Ward. Conference registration/information> contents

Former council member promotes intercity rail

Virginia can create a versatile and efficient passenger rail network that brings convenient intercity rail access to at least 70 percent of its citizens, including the Shenandoah Valley and Southwest Virginia, concludes Meredith Richards in the August issue of The University of Virginia News Letter.

Richards, a former member of Charlottesville City Council, says that high-speed rail lines could connect Virginians easily to the Southeastern states and to the already well-served northeast high-speed rail corridor. Commuter rail could be operating smoothly in all the state’s major metropolitan areas. A complete copy of the report is available at http://bit.ly/c9ihEq. contents

Emergency

Amount, Duration, and Scope of Medical and Remedial Care Services. The Department of Medical Assistance Services has proposed these regulations to comply with the Appropriation Act of 2010. This action implements the results of a review of mental health services for children and adults. The amendments (i) update the name of the Department of Mental Health, Mental Retardation and Substance Abuse Services to the Department of Behavioral Health and Developmental Services; (ii) set forth rules and penalties related to the marketing of Medicaid mental health services; (iii) delete the allowance for a week of service for intensive in-home services without prior authorization; (iv) establish the penalties to be applied to providers of intense in-home services and therapeutic day treatments for children and adolescents that violate DMAS marketing restrictions, which is intended to eliminate claims processing issues that delayed payments to providers; (v) require a statement that prior authorization is required for day treatment for children and adolescents; (vi) require that specific assessment elements be included as part of the initial assessment for children’s mental health services; (vii) require that the initial assessment for intensive in-home services be conducted in the home and adopt caseload and supervision guidelines that were published by the Licensing Division of the Department of Behavioral Health and Developmental Services; (viii) specify staff ratios for day treatment for children and adolescents; and (ix) require coordination with providers of case management. The effective dates of this regulation are July 1, 2010 through June 30, 2011. For more information, contact Brian McCormack, Department of Medical Assistance Services, at 804/371-8856 or at brian.mccormack@dmas.virginia.gov. contents

COMMENTARY

State relies on ‘markers’ to balance the budget

In gambling parlance the term “marker” refers to a player making a bet with borrowed money (IOU). To bet with a marker, all players still active in the game must agree to accept it. Unfortunately for local governments, when the state itself uses a marker to balance the budget, localities do not have the opportunity to agree or disagree. We can only ante up for the next game.

For example, in the last legislative session, the General Assembly and governor agreed to a budget package that diverted, skipped or suspended state contributions made on behalf of state employees and teachers for retirement, life insurance, health care credits, and sickness and disability programs. These actions cut state spending by $849.9 million for the biennium. These actions also have consequences for localities. Earlier in the year the VRS Board had approved employer retirement rates for teachers of almost 13 percent. The “savings” resulting from the legislature’s actions reduced the rates to less than 4 percent, but they are short-lived. By the time VRS calculates the next round of new employer rates, some localities may be wistfully nostalgic for the 13 percent rate.

Another example is this year’s $60 million reduction in state aid to cities, counties and regional jails. Under this scheme (Item 473.10 of the 2010 Appropriation Act), localities pay back a portion of the state dollars based on the amounts received. (It’s like someone agreeing to pay you $100 to perform a service on their behalf, but then demanding $5 back because he really couldn’t afford the true cost and didn’t want to forego the service). The state offers a flexible payment plan in that localities may directly reimburse the Commonwealth for their portion of the reductions, designate the reductions to one or more of the state aid programs they participate in with the state, or choose a combination of program reductions and reimbursement payments. Localities were given a deadline for this week to report their “choices” to the state budget office.

Given a reported FY10 surplus of $403.2 million, one would think the $60 million reductions may not be necessary. VML and VACo wrote to the Gov. Bob McDonnell earlier in August to share that exact thought. contents

 

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