POWHATAN – The Powhatan County Board of Supervisors acknowledged last week that budgeting for the foreseeable future is going to be a matter of watching revenues like a hawk and being just as vigilant about reducing expenditures.
During a special workshop held on Thursday, April 16, the board discussed the need to completely reconsider the county’s fiscal year 2021 operating budget in light of the impact of the worldwide COVID-19 pandemic.
As one board member put it, the budget process has completely changed from what it was a few months ago when they were looking at a balanced budget with the luxury of considering new positions and capital projects.
Now, the next few months especially will be about watching the county’s revenue streams – especially state and local – and moving forward only on essential needs. The supervisors also seem committed to hold off on adopting the budget for as long as possible – with the exception of the school portion that has to be approved in May – with the reasoning that the more time they have to gather good data, the more informed their choices will be.
Bret Schardein, interim county administrator, gave a presentation to the board that looked at some of the scenarios and challenges staff has already identified. One of the key areas he focused on was the FY 2021 revenues from local real estate tax collection.
“This is our best guess at some of these numbers right now. They do seem to change daily or weekly as we get more information, but as of today, these are the scenarios we are looking at,” Schardein said to preface his presentation.
He emphasized that the board has until the end of June to adopt its budget and that “every single week that goes by we know more than we did the week before, both about this emergency and our financial situation in it.”
Real estate taxes
The first half of real estate taxes in Powhatan are due on June 5, and when preparing the budget in the past, the county usually estimates it will have a collection rate of 97 percent or better. However, one of the big worries surrounding the pandemic is that as businesses close and people lose their jobs, they won’t be able to pay their taxes. During the last recession, the county saw a 94 to 95 percent overall collection rate, Schardein said. With that challenge in mind, county staff is considering two budget scenarios based on real estate tax collection.
In the first scenario, the county estimates it would receive 100 percent of real estate taxes on escrow accounts, or about 46 percent of the properties. The rest would be calculated at a 94 percent collection rate. Under this scenario, staff would look to cut about $1.7 million from the budget, an overall reduction of 2.96 percent.
The more conservative scenario involves a straight 94 percent collection rate across the board and would look to cut about $2.66 million from the FY 2021 proposed budget, or a 4.64 perrcent overall reduction.
“That is where we would need to certainly work with you all, because then we are not talking about not doing new things or adding new things; we are actually going back and going to have to stop certain services or reduce certain services, reduce or eliminate programs. We are talking about actual employees,” Schardein said.
Both of these scenarios address the school transfer but not the overall school division budget, he said. The county would have to work with the schools and decide if they would share reductions evenly or have one side absorb more of the reductions.
Chairman David Williams, who represents District 1, asked Schardein to look at how other jurisdictions are working with their school systems to meet a target reduction of about 5 percent overall and reach out to Dr. Eric Jones, superintendent, to discuss measures that can be taken in Powhatan.
While the board did not talk extensively about the real estate tax rate, Schardein did provide the supervisors with a chart that looks at expected revenue for the FY 2021 proposed budget for the different collection percentages using different tax rates. He showed them figures starting at an 80-cent tax rate and then with each two-cent increase all the way up to an 88-cent tax rate.
The board is scheduled to decide at its May 4 budget workshop what real estate tax rate it wants to advertise. Schardein reminded them they can advertise a tax rate and then choose to lower it, but they can’t advertise a lower rate and then raise it.
Schardein outlined areas county staff has already identified where reductions can be made. The health insurance increases came in less than expected, which accounts for $33,810 in savings. Staff originally proposed $257,815 in new positions or changes to positions, which are off the table now. Both the schools and the county were also considering a 2 percent raise for all employees, and eliminating that garners another $226,995 in savings on the county side.
The county had originally considered funding the fire and rescue department’s volunteer recruitment and retention program when its current grant funding ran out, but staff recommended taking that out, along with funds for fire and rescue training. They also would take out third party plan review in the building inspections department.
Schardein mentioned four capital projects that staff put on hold pending more direction from the board: purchasing and implementing a new ERP (enterprise resource planning) financial system; renovating the bathrooms in the county administration building; creating an Eastern Convenience Center, and a courthouse parking expansion project.
Some of the projects are already funded through a bond package the county financed but moving forward might not be prudent because, beyond the initial project cost, they might lead to operations and personnel increases, he said.
The board had a discussion about evaluating the projects and whether they should be delayed or replaced altogether. Williams asked staff to take another look at the projects and bring back more information on the pros and cons of moving forward with each of them to help the members make a better decision.
Schardein said there are several projects that staff plans to proceed on, including renovating the Skaggs Road building to move all county staff out of rented offices; a continued partial renovation of the gym at the Pocahontas Landmark Center; security upgrades in the social services department and the commonwealth’s attorney’s office; Village street signs (already partially complete), and the aces backstop (safety issue).
Schardein also provided a long list of capital projects staff is recommending be moved out to future years.
While the bulk of the presentation focused on next year’s budget, Schardein said staff feels the county will be OK through the end of the current year’s budget.
“Generally we are pretty conservative anyways when we prepare a budget like this, and typically we come out significantly to the good at the end of the year with what is left over,” he said, adding all department heads have been asked to limit non-essential spending.
In one chart that showed the county’s estimated revenues and expenditures for FY 2020, expenditures are projected to exceed revenues by about $1.1 million. However, Charla Schubert, finance director, pointed out that included in that figure is the budgeted transfer to the capital projects fund, which comes from the capital maintenance reserve.
The board will have its next budget workshop at 6:30 p.m. on May 4, where they will adopt the school board budget and decide on what tax rate to advertise. They will also have budget workshops at 6:30 p.m. on June 1 (they decide what budget to advertise) and June 15 (public hearing on the real estate tax rate). A public hearing on the budget and fee schedule will be held during the regular meeting at 6:30 p.m. on June 22. The board has to adopt its budget, the real estate tax rate and the fee schedule by its budget workshop at 6:30 p.m. on June 29.
Laura McFarland may be reached at Lmcfarland@powhatantoday.com.