Budget realities prompt County to advertise 1-cent real estate tax hike

FRONT ROYAL – Despite a self-imposed mandate to balance its Fiscal Year 2019 budget without a tax increase, fiscal realities will lead the Warren County Board of Supervisors to advertise a 1-cent real estate tax hike as part of its budget proposal. That FY19 budget proposal will come to a public hearing at a special meeting on April 10, with a vote to approve at its regular meeting a week later, April 17. Both meetings will start at 7 p.m. The County’s current real estate tax rate is 65-cents per $100 of assessed value. Each penny of real estate tax produces $404,850, though additional revenues of about $107,000 were estimated based on real estate tax-based fees, primarily to Dominion Power.

The primary fiscal reality wrestled with at a Friday, March 23 work session was an initially projected $1.2-million revenue shortfall that climbed to $3 million in the face of the public school budget forwarded to the supervisors on March 7. The $1.8 million increase request in local funding to public schools was the result of a combination of factors, including health insurance rate hikes; the need to raise employee salaries to a competitive level after a decade of floundering in that regard; and other operational expenses including bus fleet maintenance and replacement; and school security.  See related story.

Factors impacting the county’s originally-projected revenue shortfall included the loss of over $570,000 in tax revenue from the Dominion Power plant due to a pollution-mitigation equipment exemption ruling by the State Corporation Commission; the loss of over $1-million in State Composite Index (which judges a community’s ability to fund its public schools) revenue; not to mention the potential loss of another $80,000 in State revenue based on thus-far submitted budgets by the Governor, State House and Senate, the latter two containing progressively smaller public school allocations than in the governor’s budget; and the health insurance rate hikes that are across the board.

County Administrator Doug Stanley presented a detailed revenue-expenditure plan with a number of cuts, as well as the penny of real estate tax hike; and the use of County General Fund reserves to present a total county revenue requirement in the neighborhood of $75.6 million; though Stanley later pointed out that final budget numbers won’t be presented until the next budget work session scheduled for March 27.

Primary among proposed cuts are implementation of both the school system and county staff COLA and Step salary increases on January 1, 2019, half way through the fiscal year. That would save $1,214,414 on the school side and $145,273 on the county administration side. Also implemented for only half the fiscal year would be the Sheriff’s Office Career Development Plan, saving another $71,573. Another proposal was to cut the Economic Development Authority operational budget in half, savings another $54,000. Total proposed cuts to the budget were $1,123,468.

Another big part of the staff balancing act is the use of General Fund Balance reserves of nearly $2 million to cover costs, including: two firefighter/EMT positions ($112,371); payment of a revenue sharing increase ($150,000); portion of Leach Run Parkway payment ($50,000); a roof replacement ($50,000); and portions of miscellaneous capital outlay items to the tune of another $530,000.

While Stanley observed that dipping as far into its General Fund reserves as the County will be doing is frowned upon by bond rating advisors, Supervisor Dan Murray noted that the County currently does not have any new major construction projects on the table where a bond rating would come into play. Stanley predicted the County would be able to replenish the fund before the next anticipated major capital improvement project, a new elementary school, comes up in what he estimated to be four or five years.

At an earlier budget work session the General Fund Balance was estimated at $13,068,741, down almost $2.7 million from its June 30, 2017 balance of $15,767,047. The $13-million fund balance is 12.37% of the FY18 $105.6-million budget. Where it will stand precisely in FY19 after subtracting another $2 million remains to be seen pending those final county budget numbers.

“We would have been in good shape without the Composite Index and Dominion tax revenue losses,” board Chairman Tony Carter observed of the double revenue hit of nearly $1.6 million.

Of his presentation, Stanley observed “There isn’t a lot of juice left to squeeze out of this rock,” adding that on some fronts the budget proposal was “kicking the can down the road.” But on the bright side, Carter observed, “This year will look easy compared to next year.” However, Stanley countered that in the wake of anticipated higher real estate re-assessments, the County might be in a better position to deal with next year’s budget dynamics.