POWHATAN – The Powhatan County Board of Supervisors made some big decisions on May 18, with a mix of votes that saw them, among other decisions, adopting a reduced tax rate that still represents a tax increase; adopting the fiscal year 2023 operating budget; eliminating a $35 vehicle license fee levied on every vehicle in the county; eliminating the county’s revenue stabilization fund, and not taking action to reduce the impact inflated vehicle valuations are going to have on personal property bills.
The board’s meeting last Wednesday lasted three hours and touched on a myriad of topics, with both unanimous and divided votes. At the root of most of the decisions the board made was deciding how they planned to act – or not act – to balance accomplishing county business while lessening the burden on Powhatan residents at a time when staggering inflation, assessments and personal property valuations are hitting hard.
How hard the board’s May 18 decisions will hit residents will depend on a number of factors, including their 2022 reassessments, their incomes, and their vehicles, as the board did pass some measures that night and previously designed to provide relief.
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Powhatan County residents will see the impact of this budget season’s decisions on their June 2022 tax bills, which will be mailed out later than usual. Issues with holding public hearings pushed the board’s decision on the tax rate back to last week. As a result, the board voted unanimously to extend the due date of tax bills until June 24 to allow the county to send out bills that reflect all of the May 18 decisions. The penalty date will still be on the day after the due date, but the interest date was extended to Aug. 1.
The supervisors voted unanimously to adopt a real estate tax rate for Calendar Year (CY) 2022 of 77 cents per $100 of assessed value. This is the rate that taxpayers will pay on their June and November 2022 bills. This decision was passed in a unanimous 5-0 vote by chair Mike Byerly, who represents District 3; David Williams, District 1; Steve McClung, District 2; Bill Cox, District 4, and Karin Carmack, District 5.
The 77-cent rate is a reduction from the CY 2021 rate, which was 79 cents per $100 of assessed value. However, because of an increase in real estate assessments, Powhatan County’s actual equalized tax rate – the tax rate that would levy the same amount of real estate as last tax year when multiplied by the new total assessed value of real estate – would be 75 cents. That means that the 77-cent rate, while a reduction from last year’s real estate tax rate, is still a two-cent increase.
How it will impact homeowners will depend on their assessments, but most property owners are likely to see an increase on their real estate tax bills.
County administrator Ned Smither sent a review of budget changes document to the board members on Friday, May 13 that showed the county would lose $858,539 in revenue by reducing from 79 to 77 cents.
Discussion about the tax rate has been tense for weeks, with McClung, Byerly and Carmack maintaining a stance of adhering to a plan made last budget season to keep a stable 79-cent tax rate from year to year, with the understanding they don’t have the power to bind future boards. Meanwhile, Williams and Cox argued that, while they voted last year to keep the stable rate, they couldn’t have foreseen the way residents are being hammered – in soaring reassessments, inflation, gas prices and more.
The conversation took a turn at the board’s May 3 meeting, where it was never stated outright but implied that there had been a shift among board members and a tax rate lower than 79 cents seemed to be on the table. That concession seemed to open the floodgates at that May 3 meeting, with board members tossing out numerous possibilities of making cuts to revenue sources, some of which they followed up on last week.
Despite being such a point of contention before, the tax rate was actually one of the quickest decisions of the May 18 meeting, with only Cox offering much comment, giving a presentation about the county being able to afford reducing the tax rate and not being as financially fragile as some claim, he said. After that, the board voted unanimously on McClung’s motion to pass a 77-cent tax rate.
While many residents will be impacted by the tax increase, the board previously gave the promise of relief to some of the county’s most vulnerable adult citizens. During the board’s March 28 meeting, the board voted unanimously to amend the county’s code of ordinances to increase the maximum relief on taxes for the elderly and people with disabilities from $800 to $1,600. Smither told the board at the time that this change would cost the county about an additional $200,000.
That was the same night the board was unified on fixing the calendar year 2022 personal property tax rates, although there was discussion on May 3 about possibly lowering the long-established $3.60 rate.
Up until May 18, Powhatan County levied a license fee of $35 on every vehicle in the county. The board voted 3-2 in favor of eliminating that fee, with Byerly, McClung and Carmack supporting it and Williams and Cox opposing it.
When Byerly first proposed this cut on May 3, it seemed to have general support from all board members as it would save residents $35 for every vehicle they owned. With so many people owning multiple vehicles, and most owning at least one, it was viewed that getting rid of the fee could touch a wider swath of people.
The review of budget changes document that was sent to the board members on May 13 showed the county would lose $1,198,160 in revenue with the elimination of the license fee.
The dissent on the issue at last week’s meeting stemmed in large part from Cox and Williams saying the license fee was a small savings for taxpayers when stacked against a substantial increase in the personal property taxes people would be seeing on their bills (see next section). They didn’t seem opposed to eliminating the fee – Williams even called it a “great idea” – but they were opposed to only eliminating the fee.
After Byerly made the motion to eliminate it, the majority of the discussion that followed until the 3-2 vote was taken touched on the $35 fee but mostly in comparison to a proposal to address how to mitigate the impact of inflated vehicle values on personal property bills.
The county has to assign a fair market value for vehicle assessments using a recognized pricing guide (Powhatan uses J.D. Power). Based on those numbers, commissioner of the revenue Jamie Timberlake said there is as much as a 40% increase in vehicle values, which is going to increase most residents’ personal property tax bills.
Timberlake sent an email to the board of supervisors in February 2021 warning them of the dramatic rise in car values impacting personal property tax revenues, meaning citizens are paying higher taxes. He sent the board another email on Jan. 25, 2022, giving them the same warning.
“Last year this resulted in approximately $2.5 million increase in the (personal property) book which was not true growth but inflated assessments due to the market value increase,” Timberlake wrote on Jan. 25. “This year the values are up even higher again due to the continued strain on the supply system in the auto market.”
Several board members admitted last week that they did not listen to Timberlake’s warning.
In the May 13 budget review document Smither sent the board members, it laid out that the county is expecting an increase in the personal property tax estimated at $2,911,126. (More on how this excess revenue will be used in the budget section.)
Williams advocated for a plan that Timberlake had offered that proposed adjusting the tax bills before they are sent out to lower the percentage the county taxes them at (vehicles would be assessed at 100% but taxed at a percentage of that) so taxpayers’ bills would be more in line with a normal depreciation level were it not for this high assessment “bubble.” There was a discussion about this choice being “smoke and mirrors” but Timberlake said he wouldn’t recommend it longterm, only as a tool to deal with the current situation.
When Williams initially presented the plan, it would have involved pushing back the due dates for personal property tax bills until after the end of the fiscal year, June 30, 20
22, which McClung, Byerly and Carmack adamantly opposed, saying it was not good practice and worrying about the impact on the audit and the budget.
While the board was discussing, Timberlake and treasurer Becky Nunnally conferred and said that to make this change in the bills before the end of the fiscal year, personal property tax due dates would needed to be extended to June 29 and the board would have needed to make a decision that night.
The kink in the plan for McClung, Byerly and Carmack came with its execution. At the time of the meeting, neither the constitutional officers nor staff could accurately project the reduced percentage the county would need to value vehicles at to bring bills down to a more normalized amount and eliminate that additional $2.9 million the county expects to receive in excess personal property tax revenue.
Williams and Cox proposed Timberlake work with Nunnally, Smither and key finance staff to determine what that percentage was, but the other three supervisors were not comfortable with passing the plan without a set figure.
Byerly also said that even if they got a rate and started the process, they would be relying on everything in the process to go perfectly. One of the big reservations with trusting that can happen involves the struggles the county has faced with the implementation of Keystone Information Systems, its new mass appraisal system and countywide ERP system. He pointed out staff repeatedly reporting how Keystone was not performing as it should and their confidence in it was low.
The eventual vote on this matter did not come until after the budget was passed, with Williams making a motion to implement the plan to extend the personal property bill due date to June 29 and have staff come up with the correct percentage to eliminate the “bubble.” However, the motion failed in a 2-3 vote, with Cox and Williams supporting it. This vote means most personal property tax bills will see a significant increase.
The board voted 3-2 in favor of passing a proposed budget of $109,908,958 net of transfers. Byerly, McClung and Carmack voted to pass the budget and Williams and Cox voted against it.
The adopted FY2023 budget represents a $9.83 million (9.8%) increase from the FY2022 adopted budget.
The board has talked about different aspects of the budget in the past. Some – but not all – of the key features of this approved budget are a 5% raise for all county and school employees; fully funding the school budget as proposed by Smither, including a $2.1 million increase in the county transfer; covering a 19.1% increase in health insurance rates for county employees, and $400,000 to address compression issues for county employees.
While there had been talk about making changes to some of those or to projects in the county’s capital improvement plan (CIP) during other workshops and meetings, they were all adopted in the budget as discussed.
However, where there was apparently confusion that wasn’t cleared up until after the budget was already passed came with how the budget was balanced in the face of cutting two cents from the tax rate and eliminating the license fee.
According to Smither’s May 13 budget review document, the board would eliminate $858,539 in revenue by lowering the tax rate two cents to 77 cents and $1,198,160 by eliminating the license fee. The way the May 13 budget review document proposed offsetting that total reduction of $2,056,699 in revenue – as well as reducing the amount of the county’s fund balance being used for pay-as-you-go CIP projects by $854,427 – was to use the $2.911 million in personal property increases.
That means the tax reduction, elimination fee and part of the CIP will be paid for with the excess revenues brought in by the inflated vehicle values.
There was a good deal of confusion on this issue as Williams’ motion to follow the plan regarding reducing the personal property tax rates by an as-yet-unknown percentage came after the budget was passed. Cox, Williams and Timberlake had said a few times that returning the $2.9 million to taxpayers would not impact the budget as it was not built into the current budget figures, apparently not immediately understanding that, by passing the budget, the money had already been budgeted to offset the reductions the board voted on earlier to the real estate tax rate and with the elimination of the license fee.
Revenue stabilization fund
The board also voted 3-2 in favor of ending the county’s revenue stabilization fund and returning those funds to the general fund balance. Byerly, McClung and Carmack voted for this action and Williams and Cox against.
Before it was eliminated, the fund, which was adopted in 2020 in reaction to the uncertainty about COVID-19, accrued 3% of the total annual adopted general fund budget, plus the non-local portion of the school operating fund budget, over and above the 15% fund balance minimum the county currently keeps.
Finance director Charla Schubert said in a separate email May 18 that the reservation of fund balance for the revenue stabilization fund was $2,861,863 as of June 30, 2021. The county will not have an updated number until the end of the current fiscal year.