Tax increase may be needed to help pay for new schools

By: Michael Campbell | Twitter: @itsthesoup
Posted: Feb. 14, 2018 | 1:20 p.m.

PRINCE GEORGE – While Prince George County Administrator Percy Ashcraft isn’t expected to make his proposed budget presentation to supervisors until later this month, county staff has said a real estate tax increase may be possible to help pay for the possibility of one or two new schools.

During the Prince George Board of Supervisors first budget work session, Finance Director Betsy Drewry walked county leaders through a lengthy presentation that gave an overview of the county’s current financial situation balanced with the discussion of the county’s future going into the next fiscal year as massive projects loom on the horizon for the county.

One of the largest and most talked about projects the county is facing is a proposal to replace two of the county’s aging elementary schools, Walton and Beazley, with two new buildings. In August of 2017, Prince George Schools’ core committee made the proposal to replace the two campus-style schools and build two new facilities that can serve 750 students each. In addition, their plan sought to have an architect retained to look at design options and project budgets for a possible addition to Prince George High School.

According to core committee chair William Young, both Walton and Beazley are “beyond their useful life,” a conclusion he and the core committee drew following several meetings and walkthroughs of the county’s educational assets.

“If I had a fifth grader, after having toured Walton [Elementary School], I would rather have them attend my old school at Disputanta Elementary than going to Walton in its current condition,” he said, noting Walton’s age, having been built in 1960 while Beazley was constructed in 1964.

During last week’s budget work session, Drewry and the county’s financial consultant Davenport and Company both presented detailed scenarios of the estimated costs of financing the county’s current-year projects, next year’s capital improvement projects, and the impact of building no schools, one school, or both on the real estate tax rate.

For the upcoming Spring 2018 debt issuance, which features roughly $1 million in approved projects, including police vehicles, voting equipment that was purchased last year, a utility study at Southpoint Business Park, and other items, and $8 million in other projects for consideration, mainly made up of second wave of financing for the public safety radio project totaling $7.4 million, with the remaining going to the basement courthouse buildout and Central Wellness Center code compliance upgrades, no tax increase would be needed for the borrowing.

There are 11 projects listed in the FY2019 Capital Improvement Plan proposal, according to county documents, including each of the schools, a Route 156 utility expansion, Year 4 of the police vehicle purchases, and several other items. Without the schools, the county’s proposed FY2019 CIP totals $7.8 million while adding one school raises it to $36.9 million and adding both hikes it to $66 million.

According to Drewry, looking at a scenario where no schools are built in FY2019, there is little to no impact on the tax rate, meaning no tax increase would be needed to pay for the county’s projects.

When adding a new Walton Elementary School to the mix, that increases the total for FY2019 to $37.3 million and, depending on the type of financing used by the county, a real estate tax increase of anywhere from less than one cent up to five cents is projected based on Davenport’s estimations.

Click to enlarge: This chart breaks down various scenarios for funding the county’s Capital Improvement Plan, police vehicle purchases, current-year approved projects, and one or two schools as part of the plan to replace Walton and Beazley Elementary through various types and lengths of financing and other conditions.

Lines 1-5 detail the projects funded under each scenario, denoted by checkmarks. 

Line 18 represents the total projects funded.

Line 19 shows the proposed debt service costs.

Lines 27 & 28 shows projected real estate tax impacts of the various scenarios, represented in cents.

(Source: Prince George County/Davenport & Company)

Further, adding both schools and the county’s projects together in FY2019 totals $66.4 million and could result in a tax increase ranging from just over two cents to nearly ten cents based on the kind of financing used to cover the cost of paying for the projects.

Other projections where the schools are split across two different fiscal years show the possibility of real estate tax increases ranging from as little as two cents up to seven cents, or even a three-cent increase in FY2019 followed by an identical increase in FY2020.

The key regarding any the estimated real estate tax impacts listed in Davenport’s financial runs is that all of the listed increased would have to be “devoted” to paying for the schools, free of the memorandum of understanding between the county and Prince George County Public Schools.

That MOU, adopted in 2005, dictates the sharing of revenue between the county and the school division. According to the MOU, five revenue streams are subject to the ongoing agreement – real estate revenue, personal property tax, local sales tax, consumer utility tax, and motor vehicle licenses – and the percentage of those revenue sources the schools receive is based on the average of the last five years of the school division’s population and county population, which is currently 43.19 percent.

Based on that percentage, for every one cent of real estate tax revenue, which is worth $250,000, Prince George Schools receives $107,975, while the county keeps the remaining $142,025.

Given that the schools would be subject to over 40 percent of any real estate and other tax revenue, it has been proposed that county’s MOU with the schools be revised to allow for “revenue created by increases in rates of real estate, personal property, local sales, consumer utility (gas, mobile phone, telephone, and electric) taxes, and motor vehicle licenses … so long as such additional revenue is allocated to school capital expenditures.”

If the MOU isn’t modified, any tax increase would have to be nearly doubled to receive the proper financing to cover the costs of the projects relating to the new schools.

During the work session, Prince George County School Board Chair Robert Cox spoke briefly and said the board is willing to work with the county on developing language to allow for proceeds from any possible increases to be exempt from the MOU if they are going toward school capital projects.

“We do think it is time to revisit it,” Cox said to supervisors. “We would like to see our finance director, the county finance director, and the county attorney work on parameters of this and then bring it back to us and start looking at this together. The memorandum of understanding is an important document but it needs to be a working document.”

He added that the school board is committed to standing with supervisors if a tax increase is needed to build one or two new schools.

“I’m a taxpayer in the county so I don’t want to see my taxes go up either,” Cox said. “But when they need to go up for the needs of the county, I think we can all get behind that and support it. If it comes to a tax increase for schools, we are going to be standing shoulder-to-shoulder with you. If you’re raising them for schools, we share that load with you. We have to get better together.”

According to documents from the county, Prince George is roughly mid-pack among surrounding localities when it comes to real estate tax rates. Currently, the county’s real estate tax rate is 86 cents. Nearby Chesterfield has a rate of 96 cents but supervisors voted to reduce it by a penny to 95 cents as they build their budget for FY2019.

Dinwiddie rests at 79 cents, while Surry’s real estate tax totals 71 cents and Sussex at 58 cents.

County Administrator Ashcraft is expected to present his proposed budget to supervisors on Tuesday, February 27 during the board’s regular meeting. A decision on the tax rate is tentatively scheduled for March 7 with a public hearing and formal adoption of the rates scheduled for early April.

Copyright 2018 by Womack Publishing
Image: Beazley Elementary School/Facebook
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