Despite 3-2 majority, council fails to approve 1-cent tax hike in budget

To paraphrase the old baseball movie Field of Dreams – ‘Build it and they will pay for it’ – though exactly how is yet to be seen. File Photo/Courtesy Town of FR

FRONT ROYAL – Despite two tries and a 3-2 majority on Monday night, March 12, the Front Royal Town Council failed to include a first reading approval of a one-cent real estate tax hike as part of the Fiscal Year-2019 budget. While Eugene Tewalt, William Sealock and Jacob Meza outnumbered no-tax-hike voters Chris Morrison and Gary Gillispie, a 4-2 supermajority is required for approval of such high-dollar or tax-related budget items.

It was unclear to several of his colleagues polled after the meeting, Meza and Sealock, how the absent John Connolly’s vote might have gone had he been present. While a supporter of the new police station, Connolly has been generally conservative on tax increases, though measured in addressing the need to provide funding for approved projects.

The $110,000 of revenue a one-cent real estate hike would provide would have been committed to debt service payment on one or several capital improvement projects either underway or on the table for approval. At the top of that list is the $10-million-plus new Front Royal Police headquarters under construction on Kendrick Lane across from the Royal Phoenix Business Park site. Also up for consideration of a portion of that initially-voted down tax revenue are the West Main Street connector road through the Royal Phoenix Business Park and Phase 2 of Happy Creek Road improvement project.

The Town’s current real estate tax rate is 13.5-cents per $100 of assessed value.

Only one person, Joe Andrews, addressed council during the public hearing on the proposal. Andrews opposed any tax increase, calling any budget shortfall he cited at an estimated $80,000, a product of “frivolous spending” rather than an issue of revenue shortfall.

In addition to raising the real estate tax from 13.5 cents to 14.5 cents, other portions of the tax proposal voted down Monday included keeping personal property taxes flat at 64-cents per $100 of value; setting a personal property tax relief rate of 60-percent of value on the first $20,000 of assessed value on qualifying vehicles assessed at over $1,000 of value; and a corresponding tax relief rate of 100-percent for qualifying vehicles assessed at $1,000 or less; and adjustment of town codes to accommodate any changes.

Sealock made the initial motion to approve the tax rates as presented, Tewalt seconded the motion. After the failure due to the super-majority requirement, Meza asked the two councilmen who voted against the tax increase for their reasoning so that he could attempt to adjust the motion to gain at least one of their votes.

With debt services on the horizon, Gillispie said he saw no need for a tax increase this year. Morrison indicated he believed the countywide real estate reassessments now underway would eventually provide enough of a revenue increase to cover what was being sought by the one-cent hike this year. Later queried on his confidence assessments would increase values, Morrison said he based that on a continued rising of the value of his home property. Asked about the necessity of municipalities to equalize the tax rate so that higher assessments do not automatically increase municipal tax revenue above what has been approved, Morrison indicated that it would be easier to achieve a tax increase following such an equalization reduction in the tax rate.

Meza took another shot, adding a “sunset clause” to Sealock’s original motion, stating that once the police station debt service was paid off, this one-cent added to the town real estate tax rate would come off. However, Meza’s motion failed by the same 3-2 for margin as Sealock’s, again failing to net the required supermajority.

The matter was set of council’s work session next week, prior to a second attempt to reach a compromise.

Councilman Tewalt was the most scathing in criticizing his colleagues voting against the tax hike. After reminding them he had been against the $9-million to $11-million price tag eventually put on the police headquarters, he noted they had supported the project. And once the majority had approved that capital improvement project, Tewalt noted that he had supported incremental tax increases to provide the revenue to pay off the debt service.

He estimated that debt service initially, if financed through the New Market Tax Credit program that would see the first nine years in interest only payments, at $275,000. When the full debt service kicks in Tewalt said the annual payments would be in the $700,000 to $800,000 range.

“We can’t keep pulling money out of our reserves … if we add one cent tonight we won’t have to add four or five cents all at once in the future. You can’t just wait until the money is needed – if you vote for a project and not to pay for it,” Tewalt hesitated in frustration before adding, “I don’t know how some people on this council run their homes.”

Morrison said rejecting what he called an “old way of doing things” as far as financing “will force us to be more creative” in coming up with funding solutions.

We’ll see what creative financing idea Councilman Morrison has up his sleeve at council’s March 19 work session.