eNews – June 13, 2025
Registration open for annual conference, Localities noncompliant with data on revenues and expenditures, Innovation award submissions...and more!
Friday, June 13, 2025/Categories: eNews
This edition of eNews is sponsored by Cavalry Real Estate Advisors whose suite of tax and advisory services slot into each phase of the real estate lifecycle, providing guidance across all deal types, anywhere in the country to ensure your investment drives maximum return. Learn more >.
In this issue:
VML News
Finance
Transportation
VML News
Registration is now open for the 2025 Mayors Institute & Annual Conference
Please make plans to join us at the amazing Hotel Roanoke this October.
The Mayors Institute begins Saturday, October 11 and concludes the morning of Sunday, October 12.
The Annual Conference begins in the afternoon of Sunday, October 12 and concludes mid-morning on Tuesday, October 14.
Event registration and lodging information are available here >.
See you in Roanoke!
VML Contact: Rob Bullington, rbullington@vml.org
VML now accepting 2025 Innovation Awards submissions
The Virginia Municipal League’s Innovation Awards celebrate the programs and individuals that make it possible for our local governments to solve pressing problems, address emerging needs, and adapt to changing circumstances.
Local governments of all sizes are encouraged to compete for coveted Innovation Awards across seven categories. The entries will be judged based on the scope and results of the project in relation to the community’s size, thereby putting all localities on a level playing field.
One of the seven category winners will be selected for the prestigious President’s Award for Innovation. The winner of the President’s Award will be revealed when all the award winners are honored during the Awards Banquet at the VML Annual Conference in Roanoke in October.
Don’t miss this premiere opportunity to spotlight innovative programs that make your town, city or county a great place for people to call home!
Learn more and download the entry form on VML’s website here >.
VML Contact: Manuel Timbreza, mtimbreza@vml.org
Please let us know about Federal grant funds being modified or eliminated in your locality
Almost every day, we hear about a federal grant that is being withheld, reduced, or eliminated. Although they originate at the federal level, these grants flow to local governments and community partners either directly or indirectly through state agencies. Unfortunately, no one in the Commonwealth appears to be tracking these decisions or the effects they are having on our communities.
The Virginia Municipal League, in partnership with Virginia Tech, is conducting a survey to allow local governments to provide real-time, specific information about grants that have been modified or eliminated.
Your participation is greatly appreciated!
Complete the survey here >.
Virginia Tech Contact: Stephanie Davis, sddavis@vt.edu.
Finance
Localities noncompliant with APA data on revenues and expenditures
Last week, Staci. A. Henshaw, the Commonwealth’s Auditor of Public Accounts (APA), provided an update to members of the Joint Legislative Audit and Review Commission (JLARC) regarding annual reporting requirements pursuant to section 15.2-2510 of the Code of Virginia. That provision states that “The treasurer or other chief financial officer of each locality shall file annually on or before December 15 with the Auditor of Public Accounts a detailed statement prepared according to the Auditor's specifications showing the amount of revenues, expenditures and fund balances of the locality for the preceding fiscal year, accompanied by the locality's audited financial report.”
In her report to JLARC, Ms. Henshaw pointed out that as of June 6, 2025, 21 local governments remained out of compliance with the reporting requirement (see list below). However, the APA acknowledged the constraints that local governments are under to complete and pay for these audits in a timely manner.
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Cities
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Towns
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Counties
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Colonial Heights
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Big Stone Gap
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Alleghany
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Emporia
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Blacksburg
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Buckingham
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Franklin
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Broadway
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Floyd
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Hopewell
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Clifton Forge
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Lee
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Manassas Park
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Marion
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Russell
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Martinsville
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South Hill
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Surry
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Norton
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Vinton
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Warren
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The APA went on to say that the Code of Virginia (Section 15.2-2511) also requires localities to notify the public about the audit delay. According to the APA, “If the audit is not completed as required by this section, the locality shall promptly post a statement on its website, if such website exists, declaring that the required audit is pending, the reasons for the delay, and the estimated date of completion.” Ten localities notified the APA of their audit delay but have not included the information on their website.
It is important that this information is provided to the APA as soon as possible so that all locality’s revenues and expenditures are included in the final report; the report will be updated to reflect additional responses. In addition, the data provided by localities is a valuable resource that VML uses to inform discussions about legislation being considered by the General Assembly.
Finally, towns with a population of less than 3,500 that voluntarily agree to prepare an audit are required to submit the results to the APA.
Please reach out to VML staff, if we can be of assistance.
VML Contact: Joe Flores, jflores@vml.org
BPOL work group holds first meeting; looks at out of state deductions
On Tuesday, June 3, 2025, staff from the Department of Taxation brought together a diverse group of interested parties in Richmond to review the local license tax (i.e., BPOL) deduction in Virginia for receipts attributable to out-of-state business. The group included representatives from VML, VACo, the Commissioners of the Revenue, the Virginia Society of Certified Public Accountants, the Council on State Taxation, the Virginia Chamber of Commerce, and other business tax representatives as required by HB 1743 (Watts) from the 2025 Session. As a reminder, the work group is required to review:
- current policy and methodology of the deduction set forth in subdivision B 2 of § 58.1-3732 of the Code of Virginia;
- any constitutional or case law concerns regarding the existing laws governing such deduction;
- any potential impact on local government revenue as a result of determining such deduction based upon receipts subject to a net income tax or gross receipts tax in another state or foreign jurisdiction and alternatives to phase in any such potential impact;
- the potential administrative complexities or benefits for taxpayers and the support structure necessary to verify across local jurisdictions the applicable tax deduction and to enforce compliance; and
- any impact to such deduction from other existing provisions of law.
No later than October 1, 2025, the Department of Taxation is required to submit a report of the work group’s findings and recommendations, if any, to the Joint Subcommittee on Tax Policy and to the Chairs of the Senate Committee on Finance and Appropriations and the House Committees on Finance and Appropriations.
Staff from the Department of Taxation kicked off the meeting by providing a helpful overview and history of the BPOL program, the genesis of the out-of-state deduction, and a simplified example of how the deduction operates. Interestingly, the current deduction grew out of a similar legislative work group that was convened 30 years ago to look at administration of the BPOL tax. The following statement from that 1995 report encapsulates much of the conversation from last week’s meeting:
“At its January 9, 1995 meeting, the Joint Subcommittee also adopted a deduction that effectively exempts all receipts that are subject to income tax in other states. This is contrary to the concept of a privilege tax, which generally looks to the place where the privilege was exercised rather than the destination of the goods. Localities are extremely concerned about such a provision, especially larger localities who contend it could cause significant revenue losses. The business community would prefer to exempt all gross receipts which have any connection with activity in other states. The provision, however, only exempts receipts when the activity in the other state has resulted in an actual income tax liability to the other state or foreign country.”
Thirty years later, whether to expand the out of state tax deduction beyond an income tax or a tax based on income remains in dispute. Of late, the issue has been complicated by states altering their tax policies as it relates to business income, which seems to be what brings the issue to the forefront again.
After the Department of Taxation’s presentation, various groups stated their points of view, concerns, and the impact of potential changes. The business community suggested that the deduction is complicated, unclear, and companies are being taxed twice, in Virginia and other states. The Commissioners of the Revenue, VML, and VACo jointly relayed their concerns to the group about the potential fiscal impact of any changes that broaden the current deduction for out-of-state receipts beyond income or other tax based upon income earned in other states. (The joint presentation from these groups is available here).
Del. Watts thanked those around the table and said the day’s discussion had reinforced her view that we need clarity and consistency in the law and logic behind what we’re doing. There is likely agreement on her sentiment. But changes that create an uncertain revenue impact on local finances, at a time when federal actions are likely to strain state and local budgets, will need to be scrutinized and understood before proceeding.
Whether an additional meeting is convened remains to be seen. In the meantime, if your community has strong feelings about this issue and wants to weigh in, please send a detailed message, and we’ll pass it along to the Department of Taxation. They are collecting comments for inclusion in the final report due at the beginning of October.
VML Contact: Joe Flores, jflores@vml.org
Transportation
CTB to meet June 24 to approve Round 6 of SMART Scale; final opportunity for localities to provide comments
The Commonwealth Transportation Board will meet next Tuesday June 24 and give final approval for Round 6 of SMART Scale which directs $986.3 million in state-controlled funds across 53 transportation construction projects statewide.
The resolution approved at the May meeting on Round 6 is available here >.
This round of SMART Scale received 270 project applications with just under 20 percent of those applications ultimately funded. The Richmond region saw the most projects approved with 14 projects receiving $338 million in funds while the Bristol and Staunton Districts tied for the fewest projects approved with 3 each. However, the Bristol District’s projects are receiving half as much funding ($27.2 million) as the Staunton District’s projects ($53.9 million).
The Overview of Round 6 Funding is available here >.
Notably, fewer regions received funds through the High Priority Projects fund in Round 6 than in the previous round. For the current round, Bristol, Lynchburg, Northern Virginia and Salem are not receiving any High Priority Projects funds. In the previous round, only Northern Virginia did not receive any funds from the High Priority Projects Fund.
The June meeting is when the final FY2026-2031 Six-Year Improvement Program (SYIP) will be acted upon which includes Round 6 SMART Scale project funding decisions as part of the SYIP. The June meeting is also the last opportunity for localities, members, and the public to provide comments on the Six Year Improvement Program and Round 6 of SMART Scale. The Commonwealth Transportation Board has already approved the current funding scenario except for one project that is on the agenda at the June meeting.
Localities with questions or concerns about projects funded in this round or other actions of the CTB should contact their CTB member.
VML Contact: Mitchell Smiley, msmiley@vml.or