On the same day five years ago, Henrico and Chesterfield counties asked voters to allow them to collect a new meals tax to help pay to renovate and build new schools.
Henrico voters passed it, and the $112.6 million windfall has been higher than expected, allowing the county to build two new high schools by 2021.
In Chesterfield, where voters rejected the tax but overwhelmingly approved a $300 million bond package to revitalize schools, leaders have had to find other ways to make up for the $8 million a year they expected the tax to account for. Through new debt, cash reserves and real estate tax revenue, Chesterfield leaders say they’re building eight new schools in the same time frame despite not having the extra revenue stream they hoped for.
Chesterfield had a hard time balancing a budget in the immediate aftermath of the tax rejection, eventually increasing its real estate tax rate by a penny and stretching its seven-year timeline for the school projects approved in the 2013 bond referendum by four years.
Since then, the county has lowered its real estate tax rate back to 95 cents per $100 of assessed value, added nearly $100 million to the slate of capital projects approved and reverted back to its original project timeline.
Real estate values in Chesterfield declined for five years following the economic recession a decade ago, but have been trending upward since then, said Meghan Coates, the county’s budget director.
When bids for a few of the school projects came in over budget two years ago, county officials determined it would be more cost effective in the long run to replace the schools than renovate them.
“When comparing budgeted real estate tax revenue to actual real estate tax revenue collected, both have grown on average 4 percent year-over-year for the previous five years,” Coates said. “That return to more normal levels of growth is what has allowed us to accomplish the enhanced referendum program.”
The county so far has completed renovations at Providence Middle School and Monacan High School, and recently opened the new Beulah Elementary School over the summer.
In addition to building a new school in the western half of Chesterfield, the county plans to replace Enon Elementary School by next year.
The county is planning to replace Manchester Middle School and Matoaca and Harrowgate elementary schools by the start of the 2020-21 school year, and then finish building the new Crestwood, Reams and Ettrick elementary schools by the following year.
The school division also intends to spend $42.1 million for major maintenance projects throughout that time.
“We are in the midst of the largest school rehab program in the county’s history,” said Deputy County Administrator Matt Harris. “I can’t find anybody who is undergoing a program of the same scope and scale than we are.”
A whole charcoal rotisserie chicken with two sides from Chicken Fiesta in Chesterfield is 62 cents cheaper than it is in Henrico because there’s no meals tax.
Though the difference might seem negligible, those extra nickels and dimes in Henrico have fed the county an abundance of new revenue.
In four years, Henrico has collected $112.6 million in meals tax revenue, which is $31.6 million more than officials projected.
With about $100 million already budgeted for renovations to J.R. Tucker High School and a new technical center from a 2016 bond referendum, Henrico has proposed using $30 million in meals tax revenue and proceeds from another bond to pay an additional $60 million to replace Tucker and turn the proposed technical center into a new building for Highland Springs High School.
Instead of meals tax revenue, Chesterfield officials are confident that the growth of real estate tax revenues will see the county through its expanded set of 2013 bond referendum projects.
While the county earlier this year decided to reduce its real estate tax rate, a move that cuts revenue by $3 million, officials are projecting that overall revenue from that source will still increase by $15 million this year thanks to rising assessments and new development.
Harris, Chesterfield’s deputy administrator, said raising the tax rate several years ago was a “stabilization measure,” and that officials always intended to get the tax rate back down to encourage growth in the real estate market.
“We’re in a better place economically. It was the intention from the get-go that it was to keep public services level,” he said about the real estate tax rate.
A seven-year plan detailed in the county’s budget for the current fiscal year has debt financing pegged at $336.3 million. That’s about $50 million more than what was planned for in the budget for last year.
Harris declined to comment on how much the defeat of the meals tax, which county leaders tried to rally support for in dozens of public meetings before the vote, has impacted the county’s ability to pay for other services or further reduce real estate taxes in the subsequent years.
“We can’t do anything about that. ... We put our heads down and we’ve marched on,” he said.
In addition to the bonds, according to the budget for the current year, the county expects to use $37.2 million in cash reserves, $4.8 million in additional county funding and $23.8 million from cash proffers to cover the total cost of the referendum projects.
Meanwhile, the annual cost to pay off the debt from the projects will triple from $6.4 million this year to $18.7 million in fiscal year 2022.
While that might sound like a significant increase, Jay Stegmaier, the county’s former top administrator who retired in 2016, said he trusts Harris and other county officials to be responsible and maintain the county’s coveted credit agency ratings.
“No one is going to propose anything that would put them outside the boundaries of what a triple-AAA locality would do,” he said.
With budget development for fiscal year 2020 set to start before the end of the calendar year, other county leaders are anticipating friction over school funding.
While the county has consistently increased school funding in recent years, some advocates feel more is needed to support teachers and improve outcomes for students.
Sonia Smith, president of the Chesterfield Education Association, said some residents overlook that meal tax revenues could be tied to school funding.
“A lot of our schools are nearing capacity or are well-beyond capacity. That means teachers don’t have classrooms, hallways are crowded, lunchtimes are short because the lunch lines are long,” Smith said.
“To know we were very close to having a sensible solution for Chesterfield Public Schools, having money earmarked specifically for projects like building schools ... is extremely disappointing.”
Jim Holland, who represents the Dale District on the Board of Supervisors, supported the meals tax measure five years ago and still thinks it’s a good idea, especially if it can be implemented in a way that would let the county lower its real estate tax rate without losing any revenue overall.
“I’m very conservative. I don’t like paying taxes much, but there’s no free lunch,” said Holland, the only Democrat on the board. “We’re under an illusion if we think we can have things without paying for them.”
Holland, however, said he can’t ignore the 57,904 people, or 56 percent, who voted against the meals tax in 2013.
“We’ve continued to look at our services and do analyses on how to be more efficient. I think that’s something people don’t realize,” he said along with noting the additional revenue the county has seen from tax on growing real estate assessments.
Javaid Siddiqi, who represents Midlothian on the School Board, said he’s still dumbfounded that voters five years ago voted to increase expenditures without approving a new revenue stream. While the county has managed to find a way to pay for those projects, he said there are other operational needs that are not being met.
School funding advocates are unsure whether there will be new calls for the county to consider the tax, but they are preparing to push for new funding this year.
“As a school board, we don’t want to be put in a position where we have to choose between classroom teachers we have and the state of our facilities,” he said. “To me, that’s a lose-lose proposition.”
This story has been updated to reflect that the 2013 bond referendum allowed for the construction of a new school.