Tax hikes proposed to fill Rappahannock school shortfall

State spending standoff forces tough local choices, $1 million gap

The county budget – normally long on detail and short on drama – has been yanked into a showdown over tax increases that promises a spring of debate and painful choices.  

Rappahannock’s proposed tax hikes, presented Wednesday evening by County Administrator Garrey Curry, are fueled by a winter standoff in the Virginia General Assembly. 

The Republican-controlled House passed a budget bill featuring a $1 billion tax cut endorsed by Governor Glenn Youngkin, while the Democratic-controlled Senate dropped the tax cut, but voted in new spending, particularly for the public schools. Then in a surprise setback for the county, a Senate committee shelved a House-approved measure lifting the ceiling on a portion of the state support for Rappahannock’s schools. 

That move blew a hole in the schools’ spending plan for the next fiscal year, and sent the county administrator’s office scrambling to fill the gap, which could exceed $1 million. The upshot: proposed tax increases that are sure to ignite one of the toughest local budget debates in years.  

“We all thought that there would be a quick (budget) session this year,” said Curry, adding, “but we don’t control what happens in Richmond.” The House and Senate will soon begin talks to reconcile their budget approaches, and it’s possible the extra funding Rappahannock had been counting on will be in the legislation sent to the governor. That would spare the county a grueling debate over a tax hike no one wants. However, Curry points out, “There’s no point to conjecture; we just have to wait” – and plan for a scenario that doesn’t include the levels of state support that the schools were counting on.   

Tapping the lifeline

In turning to property taxes to solve the problem, the county would be tapping the financial lifeline on which it’s long depended. Preserving an open landscape that excludes big-box retailers and a host of light industrial companies, Rappahannock has counted on property taxes for as much as 70% of its revenue from local tax sources. And with schools being the county’s largest single expenditure, it’s long been said that Rappahannock taxes land to educate kids.

What’s being proposed for the fiscal year beginning next July is a cluster of increases that would bring in $979,800 in added revenue the county can direct to the schools. 

Here are the main components of the the plan being presented:

• Real estate taxes to rise to 57 cents per $100 of assessed property value, up from 55 cents this year. That would bring in $387,200 of added revenue, to a total intake from real estate of $11,047,200. 

• The levy for fire and rescue services would increase to 6 cents per $100 of property value, up from 5 cents this year. The change would add $193,600 to county revenues, bringing the total from the fire levy to $1,161,600. 

• Personal property taxes generate revenue mainly from cars, but also from motorcycles, farm vehicles, boats and airplanes, applying differing formulae. Last year, the rates were cut to offset surging car prices, which had spiked as a result of Covid-related supply chain distortions. Used-car prices have since subsided and if the lowered rates remained, revenue from personal property taxes would decline. Increases proposed in the FY2024 budget would hold these tax revenues steady at $2,232,000, the level projected for the current year. But while taxpayers would be paying what they pay this year, the change would bring in $399,000 more than the county would collect if this year’s rates were left unchanged. 

The proposed tax increases would enable the county to send $547,163 more to the schools, bringing the total transfer to $9,466,057.

Relatively high real estate prices in Rappahannock County translate to real estate taxes that are significantly higher than those in neighboring counties. But at the same time, the county tax revenue is chopped by the heavy use of land-use tax breaks, which allow larger landowners to reduce taxes on acreage used for agriculture, horticulture or forestry. The land-use tax deferral blankets more than 83,000 acres of the county, about 60% of the 136,581 acres that are taxable. The arrangement, which results in lower effective tax rates for larger landowners, keeps farmers on their land, and generally helps preserve the open landscapes that county residents treasure.

Two other streams of tax revenues have become more significant: Sales taxes and meals and lodging taxes. Sales taxes are projected to be $1,026,000 in FY 2024, up 3.3% from the budgeted level in the current fiscal year. Meals and lodging taxes are expected to bring in $530,000 in the coming fiscal year, a jump of 9.7% from this year’s budget.

Notably, the county’s largest private enterprise, The Inn at Little Washington, doesn’t figure in the county’s meals and lodging calculations because its meals and lodging taxes are directed to the Town of Washington. 

The expected increases from sales taxes and meal and lodging taxes aren’t sufficient to cover the deficit that the state Senate’s recent move would create in the school finances. And Curry doesn’t see many opportunities to comb the school budget for potential savings. He said that Schools Superintendent Dr. Shannon Grimsley “is doing hard work to present a budget of need,” rather than a wish list. His conclusion: “We have to break out county funds.” 

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In Rappahannock’s budget process, the county administrator proposes a budget to the Board of Supervisors, and following hearings and working sessions, the supervisors come back with revisions that the administrator then hammers into a final budget in mid-May. Meanwhile in Richmond, the General Assembly will be working to reconcile the two divergent budget bills for the state, one of which eliminates the hoped-for change in the state levels of support for the schools. However, the state and county budget processes operate on different calendars, and while the county budget gets wrapped up in mid-May, the state lawmakers could go on wrangling into the summer.   

Expected resistance 

The proposed tax increases, which some residents consider inevitable, almost certainly will  ignite resistance.

Hampton Supervisor Keir Whitson led the push for last year’s tax cuts. Those would be reversed if the proposed increases go through. “Last year I was very proud of the fact that we found a way to lower taxes,” he said. “I want to see if we can find a way to keep the tax rate where it is.”  

He predicted that “we’re going to learn a lot and hopefully find some breathing room.” 

The schools, whose funding needs now are linked to the proposed tax increases, also will face scrutiny, as public hearings on the tax increases unfold this spring. Stonewall-Hawthorne Supervisor Van Carney noted that support for the schools can differ, even within households.

Some individuals back the education budget as ”indispensable,” while across the table, a spouse has long suspected that the schools “have grown top-heavy.” He added that in a climate where many citizens struggle to keep up with inflation, defending tax hikes is “a tough argument.” Others have chafed that while the school population has declined to fewer than 800 students, the education bill has only gone up.

Larger battles loom 

Alvin F. Henry Jr. , a real estate appraiser and long-time Planning Commission member representing the Hampton District, predicts that once this year’s school budget is resolved, larger tax battles loom. He reasoned that the tax increases at the center of this year’s budget debate will be dwarfed by those in coming years, when “the real discussion is going to be the courthouse.”

Washington’s courthouse renovation or replacement is still awaiting a new design that citizens and public officials find acceptable. But once the concept is embraced, the arduous, and likely rancorous, task of financing the new structure begins. Henry noted that estimates for the total cost range from $10 million to $14 million. The county likely will weigh a new bond issue, which would create debt service obligations that could run years into the future.

Moreover, the county can’t look to a growing population to share the tax burden. “We’re 7,000 people,” Henry said. “It’s not like we’ve grown to 9,000 people.” He added that with the population holding steady at about 7,000, and a costly courthouse project pending, this year’s debate may be only the first act of a longer drama centered on county taxes.

Foothills Forum is an independent, community-supported nonprofit tackling the need for in-depth research and reporting on Rappahannock County issues.

The group has an agreement with Rappahannock Media, owner of the Rappahannock News, to present this series and other award-winning reporting projects. More at foothillsforum.org