Virginia Municipal League

Building Better Communities Through Sound Government

BETTER COMMUNITIES THROUGH SOUND GOVERNMENT

eNews March 25, 2022

eNews: The newsletter of the Virginia Municipal League Friday, March 25, 2022 - 05:48pm

 

This edition of eNews is sponsored by:

 

With expertise and a passion for Playgrounds, Parks and Sports Infrastructure, our team provides consulting, design, installation, construction and maintenance services to a wide variety of commercial and governmental clients. Read more >

General Assembly Special Session begins April 4

Gov. Glenn Youngkin has called for the General Assembly to return for a special session to complete work on bills left in conference earlier this month, including the 2022 (Caboose) budget and the 2023-2024 biennial budget.

Most bills that VML followed during the regular 2022 session were resolved before the pause button was hit on March 12; however, there are a few of particular interest and with large potential impact in this category. They are discussed below. In addition to these bills of interest, we also provide a summary of the budget items of greatest importance in this issue of eNews.

This is the time for local officials to talk with their delegation members and budget conferees (if you have one or more) about these budget items and their importance to your community.

In this issue:

Bills of Interest

Budget Items of Importance

Neither Bill nor Budget

Opportunities of Note

 

Bills of Interest

And around we go: Grocery tax bills, a special session, and local budgets on the line

“The state is not in a position to make the localities whole. That’s not opposing. That’s being realistic.”

– Former Chairman of the Senate Finance Committee, Hunter Andrews

The Washington Post, December 8, 1996

Governor Youngkin’s call for the General Assembly to convene on April 4 for a Special Session on tax relief means it’s time to circle back to the unresolved tax issue that will affect localities the most: whether and how to expand Virginia’s sales tax exemption on groceries. This question is addressed in SB451 (Boysko) and HB90 (McNamara), the fate of which has yet to be decided.

Since the Special Session is scheduled to start the day after the Richmond NASCAR race and a few days before Martinsville’s event, let’s just say we hope the General Assembly and Governor get in gear, and quickly!

If the state makes the policy decision to reduce the state and local sales tax base, the results could be felt the next time Virginia experiences an economic downturn. Indeed, this would be a case of history repeating itself.

In the battle over the Car Tax in the late nineties and early 2000s, the Virginia General Assembly and Governor Gilmore passed a law that phased-in the exemption of the first $20,000 in car value from local personal property taxes. To protect local budgets – all of which depend on that local revenue source –the G.A. and Governor Gilmore pledged to “hold harmless” local budgets and replace the lost Car Tax revenue “dollar for dollar.”

The problem was that the G.A. and Governor Gilmore didn’t have fiscal certainty that the Commonwealth could afford to repay localities “dollar for dollar” for their lost car tax revenue. In fact, within a few years, the G.A. announced that the state could not afford to pay localities the full revenue. Then, in 2004, the G.A. and Governor Warner had to increase state taxes to prevent cuts to education and public safety.

The real danger with a revenue cut-and-repay plan, whether it’s for lost local car tax revenue or lost local grocery tax revenue, is that the state is essentially taking on a new spending commitment – paying the local governments for their lost revenue.

Inevitably, the day will come (just like it did 20 years ago) that the Commonwealth will be faced with an economic downturn and declining revenues. On that day, state policymakers will be forced to make the hard choices to cut the grocery repayments to localities, cut other public services, borrow more money, or raise taxes.

VML supports exempting groceries from sales taxes so long as local budgets are not harmed. If the G.A. chooses to reduce the local 1 percent sales tax, VML asks that it commit in the legislation to annually reviewing the repayment distributions to ensure their continued accuracy, particularly for Virginia’s fiscally distressed local governments.

The cut-and-repay method failed for Car Tax twenty years ago. But there is an alternative approach. If the state takes away a growing revenue source, like the grocery tax, it should provide a similarly sized growing revenue source to replace it. Short of that, the General Assembly and Governor will just be going around in circles.

Don’t expect that checkered flag anytime soon, folks.

VML Contact: Carter Hutchinson, chutchinson@vml.org

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Education legislation still in play

When the General Assembly adjourned Sine Die on March 12th, three pieces of education legislation being closely monitored by VML were still in conference: HB563 (O’Quinn), SB473 (McClellan), and SB471 (McClellan).

VML supports all three pieces of legislation and appreciates any effort to decrease the burdens placed on localities. They are discussed in detail below.

HB563 (O’Quinn) would establish the School Construction Grant Fund and loan rebate program (the Fund) as well as creating a data reserve tool. The Fund and data reserve tool are being established so localities have another funding source to begin diminishing the current $26 billion estimated maintenance costs for Virginia’s schools and have accurate data to determine which school divisions are most in need.

The School Construction Grant Fund seeks to provide loans to localities to be used for school construction and modernization needs. Loans will be awarded to localities based on a three-tiered system-based utilizing four qualifications. Money to fund this loan rebate programs would initially be from the General Fund and the Literary Fund as allocated by the budget. Following this biennium, the Fund will then be using money from future casino gaming revenue once casinos are functioning in the Commonwealth.

HB563 also establishes a data reserve tool monitored by the Department of General Services and the Department of Education. This tool will create a central location for information on true ages and actual maintenance needs of every school division in Virginia. Information will be collected from school boards and other tools as the Department of Education sees fit. Currently, there is no central database where this information kept making it difficult to understand the scope of the school construction problem in Virginia.

HB563 passed the Senate with a substitute but was rejected by the House sending this piece of legislation into conference.

SB473 (McClellan) would establish the School Construction Grant Fund as well as creating a data reserve tool almost identical to HB563. However, this legislation differs from the House version slightly. Instead of a three-tiered system and funds allocated by the budget, SB473 uses surplus funds as well as future casino gaming revenue.

SB473 passed the House with a substitute but was rejected by the Senate sending this piece of legislation into conference for further deliberation.

SB471 (McClellan) would expand the maximum loan amount available in the Literary Fund. Currently, the maximum loan amount available is $7.5 million. This legislation expands the available amount to $25 million. The Literary Fund was established to provide loans to localities for school construction purposes. However, over time interest rates, costs of construction, and other items have drastically increased. Due to these circumstances the Literary Fund is either unusable by many localities or is being used to supplement teacher retirement. This legislation seeks to change the Literary Fund so it may be used for the intended purpose.

SB471 was sent to the conference committee in which it was adopted by the House but passed by temporarily in the Senate.

Status

HB563, SB473, and SB471 have been carried over to the 2022 Special Session on Education the date for which has yet to be set. VML will provide updates as soon as more information is available.

VML Contact: Josette Bulova, jbulova@vml.org

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Budget Items of Importance

Budget Conferees with contact information

As a reminder, the budget conferees for both HB/SB29 and HB/SB30 are listed below. Clicking on each name will provide contact information for that Senator or Delegate.

House Appropriations

Senate Finance and Appropriations

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Cybersecurity: Another reason for the General Assembly and Governor to pass a budget

Last November, President Biden signed into law the bipartisan Infrastructure Investment and Jobs Act (IIJA), which included $550 billion in new federal investments to repair and strengthen America’s infrastructure. The law contains many, many, benefits that should flow to localities, including $1 billion to enhance the cybersecurity of state and local governments, 80 percent of which must go to local governments.

At the start of the 2022 General Assembly Session, budget amendments were introduced to create the structure under the Secretary of Administration to begin using these funds to strengthen state and local cybersecurity systems. Despite the House and Senate’s disagreements over the size of tax relief, the amendments related to the federal cyber funding made their way into the otherwise very different House and Senate budgets (Item 92 #1h to HB29, Item 93 #1h to HB30, Item 92 #1s to SB29, Item 93 #1s to SB30).

This week, U.S. Senator Mark Warner, Chairman of the Senate Intelligence Committee, warned Virginians about the risk of a cyberattack from Russia and Russian-aligned groups. Our Delegates and State Senators no doubt recall that it was only four months ago that Virginia’s Division of Legislative Services (DLS) was rendered inoperable by a cyberattack that impacted the drafting of bills and prevented the staff of the House Appropriations Committee (HAC) and the Senate Finance and Appropriations Committee (SFAC) from accessing their computer files.

With reports that the federal cyber grant funding could be available before the end of the current fiscal year, Virginia’s local governments will be better protected from cyberattack if the G.A. and Governor Youngkin can come to a quick resolution of their tax relief standoff. Here’s hoping that the hard cybersecurity lessons learned back in December are not forgotten during the Special Session convening April 4.

VML Contact: Carter Hutchinson, chutchinson@vml.org

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Health and Human Resources: Items to support

CSA Local Administrative Funding (Item 284#1s)

VML and VACo sought an increase in the state administrative funding to local governments that administer the Children’s Services Act (CSA) on behalf of the state. Such funding had not been increased since FY2017.

The Senate budget includes an increase of $1 million each year of the biennium for local administrative costs. We support this budget proposal for the following reasons:

  • CSA is a highly complex program that cities and counties administer on behalf of the state.
  • Local CSA coordinators and community teams contend with complicated federal and state laws and policies across multiple agencies.
  • A state workgroup in 2021 recommended that the state provide additional administrative funding to ensure each local program receive at least $50,000 a year, including local matching dollars.
  • Localities provide $8.8 million in personnel costs and an additional $1.1 million in non-personnel costs to support local CSA efforts.

Alternative transportation/custody funding (Item 312#6h; Item 312#1s)

The issue of alternative transportation and custody for individuals with a temporary detention order (TDO) or emergency custody order (ECO) was a major issue this Session. The House and Senate budgets include items to fund efforts to help relieve local law enforcement of carrying out some of these extended custody situations and to provide alternative transportation and custody during the TDO/ECO process.

The House added funding in FY2023 to implement an alternative custody program for individuals subject to a TDO who are awaiting transport to an inpatient bed ($2 million in FY2023); the Senate added funds and language authorizing DBHDS to use funds to supplement its current transportation contract ($1.68 million each year). It also provides $1 million each year to reimburse local law enforcement agencies for use of auxiliary police for alternative custody options.

  • Local governments support efforts by both the House and Senate, including these budget items, to address issues with use of local law enforcement in TDO and ECO situations where other options could be safety used
  • Local governments support funding to help address ways to increase use of alternative transportation and custody.

VML Contact: Janet Areson, jareson@vml.org

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Health and Human Resources: Item to oppose

Require local funding for ASAP operations (Item 3#1s)

The Senate budget proposal includes a language item directing local Alcohol Safety Action Program (ASAP) organization members (i.e., local governments) to contribute to the operating costs of the organization at a negotiated rate.  VML would prefer that the language be changed to a study of the sustainability of the funding/structure of the program before any policy/funding decisions are made.

  • ASAP programs funded through fees;
  • The balance between revenues and expenditures for most ASAPs are increasingly out of balance; this puts into question the sustainability of the current funding structure (see recent study of ASAPs conducted by VCU);
  • The VASAP program has been around since the 1970s; a discussion or study of the VASAP program funding structure and potential new burdens on it (i.e., charges for marijuana-related driving impairments) could be helpful in creating the path forward for ASAPs.

VML Contact: Janet Areson, jareson@vml.org

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Law Enforcement: Items to support

Jail Per Diem Restoration (Item 73#1h; Item 73#4s; Item 73#3s)

Both the House and the Senate include funding in their budget proposals to help restore jail per diems back to the FY2010 level when funding was reduced because of the Great Recession. VML has been trying for several years to get funding restored and worked on amendments as a part of a coalition of public safety/local government partners this year.

  • The House and Senate approaches differ, but local governments are greatly appreciative that both proposals move us in a positive direction
  • The Senate goes farther than the amendments we sought in that it includes an amendment to also increase the per diem for local responsible inmates with state charges by $1 a day (from $4 to $5).
  • Appreciation should be expressed to House and Senate members for ending the 12-year drought on per diem increases.

HB 599 and ARPA Funds for Local Police Departments (Item 408#1s in SB29; Item 410#1s and Item 486#1h in SB/HB30)

The introduced budget included no increase in the State Assistance to Local Law Enforcement (HB 599) program, despite the growth in state general fund revenue collections that would prompt an increase to HB 599 funding as required under the Code of Virginia (Sec. 9.1-165).

The House and Senate took different approaches to providing funding to local police departments, and VML would support the adoption of both approaches because they both address needs of local public safety.

The Senate increased funding to the HB 599 in the current year budget as well as both years of the new biennium ($2.35 million in FY2022; $19.1 million in FY2023; $27.9 million in FY2024).

The House directs that no less than $80 million in federal ARPA funds in FY2023 would be used for support of local law enforcement agencies (which could include sheriff’s departments as well as local police departments) to support training and purchase of equipment and supplies.

  • VML supports the specific increase in HB 599 funding as proposed by the Senate
  • VML supports the allocation of ARPA funds as proposed by the House
  • Both measures would help bridge the continued lag in state assistance to local law enforcement.

VML Contact: Janet Areson, jareson@vml.org

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Education: Items to support

Two education items in the budget were contingent on the passage of legislation: HB563 (O’Quinn) which is still in conference and SB238 (McPike) which passed both bodies and has been signed by the Speaker of the House of Delegates and the President of the Senate.

Item 137 #5s and Item 137 #19h would establish the funding mechanism for the School Construction Grant Fund. This Fund is to be used for the purpose of awarding grants on a competitive basis to localities for school construction needs.

The House version of the budget (HB30) establishes the funding mechanisms and designates $291.7 million from the General Fund and $250 million from the Literary Fund in the first year of the biennium. The Senate version of the budget (SB30) provides specific language but does not appropriate specific moneys. SB30 clarifies that school construction does not include parking lots or school facilities used predominantly for extracurricular athletic activities.

Item 137 #5s and Item 137 #19h are pursuant to the passage of HB563 which codifies the parameters for the School Construction Grant Fund.

Item 135 #1s funds and creates one new position at the Department of Education to be a data collector. This item was pursuant to the passage of SB238 which establishes a new data reserve tool where information will be collected and kept on the true ages and actual maintenance needs of school divisions across the Commonwealth.

Currently, 135 #1s now awaits the overall passage and approval of the General Assembly when they reconvene to approve the budget. Should Item 135 #1s fail to pass, the data reserve tool will still be implemented without funding.

VML supports these items and any effort made to help lessen the burden placed on localities.

VML Contact: Josette Buolva, jbulova@vml.org

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Neither Bill nor Budget

Gas-ping for relief: Governor Youngkin has ideas to counter the pinch at the pump, do they hold water?

As anyone who has filled up their gas tank recently can tell you, the cost of gas has gone through the roof (even for those of you driving convertibles). AAA reports the average price of gas in Virginia at $4.11 per gallon ($4.23 nationally) while just a month ago prices were $3.42 for a gallon of gas and a year ago the average gallon in Virginia cost $2.74.

Governor Youngkin is telling Virginians he wants to help them manage rising fuel costs by halting the collection of motor fuels taxes for at least 4 months and capping the rate motor fuels tax can rise at 2 percent each year after the motor fuels tax pause has ended. The governor points to the surplus in transportation revenues which he claims would allow for a pause to the motor fuels tax without harming existing programs.

Is this a good idea? A bill or specific language has not been released (yet) so what we know about this proposal is limited to what we can glean from recent statements. For a sense of some of the issues at play in this debate follow along as I explain Virginia’s transportation funding mechanisms and how the governor’s proposal might impact transportation funding.

Currently, Virginia levies a 26.2 cents per gallon excise tax on the sale of gasoline to retail wholesalers. At 26.2 cents per gallon Virginia has a lower motor fuels tax rate than neighboring states Maryland, North Carolina, West Virginia, and Tennessee. This is a lower rate than neighboring states even after the 2020 General Assembly agreed to phase in a 10-cent increase in the motor fuels tax rate over 2 years. The motor fuels tax is set to be tied to inflation starting July 1 of 2022.

It’s worth noting that the tax on motor fuels is levied at the wholesale level, unlike a sales tax which would be collected at the pump. This leaves the decision up to gas retailers to determine how much of the gas tax is passed on to customers at the pump. As Senate Majority Leader Dick Saslaw has pointed out (several times) a pause in the gas tax leaves the decision up to retailers how much, or even if, they will pass savings on to consumers.

As a revenue source, motor fuels taxes represent one of the three largest revenue sources for transportation funding in Virginia with funds flowing to road construction, maintenance, bridge repairs, public transportation, rail funding, the Port of Virginia, aviation, and the space port. Virginia is projected to collect $4.6 billion in transportation revenues during FY22. Motor fuels taxes, the state sales and use tax, and the motor vehicle sales and use tax are the three largest sources of transportation revenue and are expected to generate roughly $3.9 billion during FY22. Motor fuels taxes are expected to account for $1.3 billion during the current fiscal year.

Pausing the collection of motor fuels taxes for 4 months would remove approximately $475 million from transportation funding. Without replacing this revenue and assuming this would impact transportation programs equally, the governor’s proposal would result in removing $240 million from maintenance funding and $230 million from construction funding as well as a loss of $53 million from transit and $17 million from rail funding. It’s possible some of these impacts could be offset by using new federal funds for things like some bridge maintenance projects but transit operating cost, for example, are ineligible for backfilling with federal funds. So, making various transportation funds whole if gas taxes are paused would be a critical issue.

While Governor Youngkin is correct that transportation revenues are exceeding revenue estimates this is not to say that all the Commonwealth’s transportation projects and identified needs are being met. Take the most recent example of transportation construction projects approved by the Commonwealth Transportation Board in Round 4 of SMART Scale. Nearly 400 transportation projects were submitted for consideration of projects from across Virginia for a total cost of $6.2 billion. However, only 126 projects were approved given there was only $1.3 billion allocated for these projects. That leaves nearly 200 projects at a cost of $5 billion left unfunded.

At the local level even the General Assembly’s auditors at the Joint Legislative Audit and Review Commission have found that locally maintained roads are in worse shape than state-maintained roads and we expect a study of local road conditions to assess this disparity in the coming year. As such, VML has continued to advocate for additional local street maintenance funds. So even if transportation revenues are running ahead of revenue estimates this does not mean that Virginia is funding all, or even most, of identified transportation needs.

As recent experience with transportation funding uncertainty has shown, local governments often bear the brunt of any revenue downturns. Many of you will recall then Secretary of Transportation Shannon Valentine’s 2020 decision to manage a sudden drop in transportation revenues by pausing the disbursement of revenue sharing funds and clawing funds back from already approved transportation projects. These moves had the effect of mothballing local project proposals and delaying some local transportation projects. Now two-years later – and faced with a transportation revenue surplus – Virginia’s governor has a new proposal: provide relief for Virginians at the pump. The only thing standing in the way is the Virginia General Assembly.

It remains to be seen how many legislators agree with the governor as to the wisdom of pausing collections of motor fuels taxes. Indeed, the governor may well succeed in pausing the motor fuels tax but it is important that local governments keep in mind that they are often the first to feel the pinch when revenue estimates do not align with revenue collections. Roads, bridges, rail, and transit are key systems that allow Virginia’s economy to thrive. Maintaining and developing these systems is an economic necessity. Any decision to tinker with transportation funding should not be done lightly because, as we have seen, revenue shortfalls often have a significant impact on local transportation projects and maintenance.

VML will continue to track this issue and keep members apprised as to how they might be impacted as the General Assembly returns for the Special Session in April.

VML Contact: Mitchell Smiley, msmiley@vml.org

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Opportunities of Note

Webinar: Drinking water funds for localities scheduled for March 30

Virginia Department of Health – Office of Drinking Water (VDH-ODW) has ARPA funds remaining with more coming from the Infrastructure Investment and Jobs Act.

Join Barry E. Matthews, CPG, Director – Division of Training, Capacity Development and Outreach for a discussion of how these funds can be best distributed to local governments.

This will be a free virtual event on Wednesday, March 30 from 1:00 PM – 2:00 PM ET.

Registration is available here >.

This event is hosted by the Virginia Municipal League in cooperation with the Virginia Association of Planning District Commissions, the Virginia Association of Counties, and the Virginia Municipal Drinking Water Association.

VML Contact: Rob Bullington, rbullington@vml.org

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Broadband Together event coming May 18-19 in Richmond

Hosted by VML, The Broadband Association of Virginia, and the Virginia Association of Counties, this “Conference to Connect Virginia” will be held at the Hilton Short Pump, May 18-19.

Topics to be discussed include:

  • Broadband Legislative Recap
  • Broadband and Economic Development
  • Broadband Affordability and Adoption
  • How Broadband Effects Home Ownership
  • Broadband Technology and Innovation
  • …and more!

The full agenda, room booking, and event registration information are all available here >.

VML Contact: Rob Bullington, rbullington@vml.org

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VML now accepting entries for 2022 Innovation Awards

It’s time again for our members are to spotlight programs and individuals that have made a big difference to your residents by creating innovative solutions to address emerging needs.

Award-winning projects typically demonstrate innovative ways of delivering services, addressing community needs, or significantly improving an existing service.

One winning project from the category winners will be selected for the top prize – the President’s Award.

All entries must be received via e-mail by 5 p.m., Monday, Aug. 15, 2022. The awards will be presented at VML’s Annual Conference in Richmond in October.

More details and a link to the official entry form are available here >.

VML Contact: Manuel Timbreza, mtimbreza@vml.org

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VDOT Coordinating Transportation and Land Use Planning Forum happening on May 11

On May 11th, VDOT is going to hold its statewide, biennial Transportation & Land Use Forum. The Forum is composed of locality, PDC & MPO officials, the development community & VDOT staff. This year’s Forum will be held virtually.

Local government officials and staff are welcome to attend.

This event is free & participants usually receive APA/AICP credit for participating in the event.

Registration and additional information are available here >.

VDOT Contact: Highway Systems Program Manager Lynne Lloyd, lynne.lloyd@vdot.virginia.gov

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Get published in VML’s magazine! Tell us about your favorite outdoor recreation location in Virginia

For our 2022 “Virginia You Love” magazine issue this summer we want our readers to tell us their perfect place to have fun outside. It could be a favorite hiking trail or the stadium bleachers of the hometown ball team. Perhaps you can be found in a mountain lake with family or at the dog park with your furry friend. Maybe you like the challenges of long fairways and fast greens or the peace and quiet of a bench under a shady tree. Vita courses, ropes courses, pump tracks, brewery decks…Wherever, whatever, we want to hear about it!

Have your place featured in our magazine!

If you tell us about your favorite place for outdoor fun, we will put it on the list of possible places to feature in the July/August issue of Virginia Town & City. You can nominate any place you like…just so long as it’s outdoors and in Virginia.

It’s super easy to participate

Learn more and complete the short online survey here >.

VML Contact: Manuel Timbreza, mtimbreza@vml.org

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Comments and questions about this website or the data provided may be addressed to Manuel Timbreza
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