Divided council passes first reading of 2.9-cent real estate tax hike

Birth Local advocate Melanie Salins was back to make her case that tax-exempt Warren Memorial Hospital owner Valley Health share local tax burden through a PILOT (Payment In Lieu Of Taxes) program. Photo/Roger Bianchini

The specter of slavish acceptance of misinformation from the Economic Development Authority and the handing over of a $60-million EDA-financed loan to tax-exempt Valley Health for construction of a new, if reduced-medical services hospital hung HEAVY over public comments on a proposed 3.9-cent Real Estate Tax increase for the Town of Front Royal on Monday night.

In the end, Eugene Tewalt’s amended motion to Jacob Meza’s no tax increase motion, passed 4-3, with Mayor Hollis Tharpe casting the deciding vote. Tewalt proposed a 2.9-cent real estate hike, a penny below the proposed hike. Due to upward real estate assessments creating additional tax revenue from the current 16-cent rate, by law the Town must “equalize” its real estate tax rate to a level that is revenue equal to pre-reassessment levels. That equalization rate was set at 12.1 cents.

So Tewalt’s motion would raise the equalized 12.1-cent rate to 15 cents per $100 of assessed value. William Sealock and Gary Gillespie joined Tewalt in getting the vote to the mayor’s tiebreaker.

Included in Tewalt’s approved motion, seconded by Sealock, was Meza’s proposal to transfer $90,000 earmarked for phase two of the West Main Street connector road through ITFederal’s 30-acre parcel at the Royal Phoenix Business Park. As Meza pointed out, at this point that is “a road to nowhere” with second and third ITFederal buildings no longer planned for construction. The first ITFederal building is now planned to be sublet by ITFederal principal Truc “Curt” Tran. Phase one of the West Main Street connector that is largely completed will access that building.

Town Finance Director B. J. Wilson later explained to Royal Examiner that the wastewater pumping station project at Royal Phoenix on the former Avtex Superfund site will not be impacted by the tax rate proposal. The pumping station designed to serve over 4,000 people on seven commercial pads is funded through the utility/enterprise fund portion of the town budget, as opposed to the General Fund side.

At both public correspondences and a tax-rate public hearing speakers belabored the Front Royal Town Council for decisions in the past year that have created the need to tax town citizens to provide over a half-million dollars of additional revenue to fund the payback on construction of a new police headquarters.

As Royal Examiner has previously reported that $10-million development and construction project is currently being paid through a credit line of the EDA and will need to be paid back.

As also previously reported here, a council majority spearheaded by Meza and other younger council members ignored the advice of Bryan Phipps, People Inc. regional administrator of the New Market Tax Credit program, to seriously consider acceptance of a 30-year, 2.65% interest rate bond issue staff had on the table last year from a bank. That rejected bank-issued loan proposal would have resulted in annual debt service payments in the $340,000 range.

However, a council majority chose to bet on a NMTC program loan at an even lower annual rate ($240,000) that would save an estimated $3-million in principal paybacks. It was a bet the council majority lost.

With interest rates now in the 4.5% range and rising with no bond issue yet in place, council is looking at annual debt service payments approaching $600,000 over 20 or 30-year paybacks.

See council’s debate and public comment on the tax rate and police station funding in this Royal Examiner video: