Supervisors adopt budget; completing annual financial plan process

By: Michael Campbell | Twitter: @PGJournal
Posted: June 5, 2020 | 12:30 p.m.

New hires, fee increases scrapped as COVID-19 derails revenue forecasts

PRINCE GEORGE – In what is likely to be one of the more memorable budget building exercises for supervisors since at least 2008 in the throws of the Great Recession, county leaders unanimously adopted their financial plan for the upcoming fiscal year, a budget transformed in mere weeks by novel coronavirus and the resulting economic fallout. 

Their action last week concludes a months-long process that featured a budget initially projected to see a boost in overall revenue following increased assessment values but due to COVID-19, much of that revenue evaporated as many of the county’s revenue streams took substantial hits paired with the decision to forgo planned hikes to business, professional, and occupational license tax and permit fees.

Between February and last month, County Administrator Percy Ashcraft’s then-proposed budget saw cuts to the tune of nearly $1.4 million from the general fund and almost $4 million from the total budget as the effects of COVID-19 weighed on revenues. 

Throughout April and May, Deputy County Administrator of Finance Betsy Drewry briefed supervisors on the stark realities faced by the county due to the virus’ impacts of its bottom line, noting expected declines of over $1 million in real estate and other revenue streams, with scrapped BPOL and permit fees adding to the declines.

The timing of COVID-19’s spread through Prince George County and the Commonwealth came as some supervisors debated reducing the real estate tax rate to help reduce the burden taxpayers are facing following continued increases in assessed values of their property.

When presented with the opportunity to alter the county’s rates, supervisors took no action to allow the real property rate to fall back its equalization rate of 80 cents per $100 of assessed value, a drop of six cents from its current 86 cent level. From there, supervisors narrowly approved maintaining levies at their current levels in early May.

Both Supervisors TJ Webb and Floyd Brown, Jr., who advocated for some form of real estate tax rate decrease leading up to last month, voted against leaving rates unchanged. 

“I know we have gone over the budget modifications and, as a result, that drove out the [real estate tax] rate,” Brown said during May’s public hearing. “My commitment was wanting to see the tax rate come down under 86 cents. I have looked at a lot of the options that were presented as to how we could get there but, there isn’t time to spend doing that in order to get tax bills out.”

A change in the county’s real estate tax rate would’ve further shrunk one of Prince George’s key revenue streams. According to county finance staff, a penny of real estate tax represents $280,000 in the county’s budget. Had the county allowed the rate to regress to its equalization rate, another $1.6 million in revenue would have been lost in the budget.

Paired with the over $1 million in COVID-19-related reductions already forecasted, the county would have stood to lose over $2.7 million just through real estate revenue and other virus-associated reductions. 

Tax rate changes also affect Prince George County Public Schools, who receive a percentage of real estate, personal property, and several other revenue streams as part of the county’s local contribution to the district. 

Through the coming year’s budget, the school district is expected to receive $16.6 million in local funding. That is down from the proposed $16.9 million local transfer in February, which was up $222,532 over the current fiscal year. The county continued its commitment to building a new school to replace the aging Walton Elementary School as the county’s $38 million list of capital projects is headlined by the new facility at nearly $32 million.

To support the projects, the county will make a capital reserve fund transfer of $1.2 million in the upcoming fiscal year.

Prior to their May 12 public hearing, supervisors agreed on sweeping changes to the county’s budget due to the projected shortfalls, cutting a number of planned new hires, including police officers and a deputy fire and EMS director, suspending career development programs, and reducing spending in a number of smaller sectors, like food, fuel, and supplies.

Ashcraft’s budget did not feature across-the-board pay increases for county employees when it was presented in February to the public for the first time and the adopted version remained as such. His budget in February did include funds to address pay compression but that proposal was removed as part of the county’s efforts to reduce spending. 

Planned increases to BPOL tax and fee increases were tabled for the upcoming year, which cut a further $263,862 from the county’s general fund budget for FY2021. Joining those rates increases in being passed over for the upcoming year were proposed hikes to water and sewer rates. 

Those increases, which Ashcraft said were “necessary to continue to maintain water and sewer operations and to pay for needed capital maintenance and expansion” would have seen county customers’ bills rise by three percent for water and one percent for sewer. The cut eliminated just over $140,000 from the self-supporting utility fund. 

The county also axed funding to locally based Richard Bland College and regional institution John Tyler Community College, with RBC receiving the largest reduction at $20,000. The Friends of the Lower Appomattox River, a nonprofit focused on protecting and encouraging the recreational use of the waterway also saw their funding completely eliminated in the FY2021 budget.

While the county is less dependent on meals and lodging taxes in regards to the general fund or capital spending, Prince George also made significant cuts to the economic development and tourism funds the revenue streams respectively fund due to expected cuts. 

For the tourism fund, the county has opted to eliminate the tourism fund contingency at $247,528, reduce its ball tournaments budget by over $38,000, and a series of other cuts and reductions. Most notably, with nearly eight-percent of the tax going to the Prince George Regional Heritage Center and expected reductions in that revenue, the center stands to lose $30,523 in county funding during the upcoming year.

The county will look to consider raising its lodging tax by two percent during an upcoming public hearing in June, which if passed, would add roughly $271,000 back into the fund during FY2021. 

Earlier this year, the General Assembly gave Prince George the green light to proceed with advertising the proposed increase, which is paid by visitors who stay at the county’s hotels.

Meals tax collections help finance the county’s economic development fund and, as COVID-19 continues to affect businesses due to lowered foot traffic or having to completely close, county officials are bracing for a dip in that special fund to the tune of $260,000, resulting in the fund dropping from its proposed $1.3 million in February to $1.04 million. 

As a result, similar size cuts have been made to their budget, which supports economic development-related projects, including completely eliminating advertising and professional services at a combined $10,000, cutting their convention and education budget in half to $10,000, and reducing contributions to Virginia’s Gateway Region, the county’s economic development partner agency, to $22,739.

In addition, two vehicle purchases at $55,000 and a cut in machinery and tools tax rebates at $104,325 were also included in the fund’s reductions. 

The county’s new financial plan is slated to take effect on July 1.

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