By. Brent Wilson
At the March 12th meeting of the Greene County Board of Supervisors the discussion centered around the Capital Improvement Plan vs. the growth in the Reserve Fund. The BOS had previously approved the county’s CIP in total but had struggled to identify which projects would receive funding in the next 3 to 5 years.
Several projects were immediately identified as needing to be accomplished in the near future – a Rescue Squad building and an expansion to the high school cafeteria (there are four lunch periods starting at 10:42 am due to the lack of space) – all agreed these need to happen soon. One possible source of funding for the school cafeteria expansion is by retiring of existing school debt.
The BOS discussed whether the new task force on CIPs should handle the prioritization or should a request go back to each department to sort out their critical needs in the next 5 year. Chairman Jim Frydl (Midway) proposed that the BOS request all departments to provide back a list of 5 year must have projects with written justification for each project. This was agreed by all 5 supervisors.
The discussion moved on to how to pay for the projects and whether the Reserve Fund could be a source of funds for some of the projects. Last year the BOS set a policy on how much should be maintained in the Reserve Fund, funded the schools budget request and then earmarked the remaining additional money in the Reserve Fund to various projects.
The Reserve Fund has continued to grow and exceeds the target level by over $4 million. Supervisor Buggs Peyton (Stanardsville) suggested reviewing what balance should be left in the Reserve Fund and then use any amount beyond that to help fund the capital projects that come back from all departments. Chairman Frydl questioned if the BOS wanted to modify the Reserve Fund policy that has already been set at 15% of the annual budget plus one month operating expenses. He suggested that the departmental requests for the next 5 years be compared to the excess Reserve Fund and if additional funds are required then the Board would have to consider a tax increase would be required to fund all projects.
Mr. Peyton said that the CIP is a wish list – “a Sears Catalogue” and he objected to additional taxes for capital projects but he would agree to pull down the Reserve Fund for the water and sewer project. Supervisor Davis Lamb (Ruckersville) expressed concern about drawing down the Reserve Fund to zero and wanted to avoid going back to borrowing funds to be able to pay ongoing obligations.
Chairman Frydl commented that the preliminary audit has indicated the Reserve Fund is now approximately 32% of the annual budget of $53.5 million or $17.1 million. This compares to a minimum balance of 15% of $53.5 million or $8.0 million plus one month’s budget of $4.5 million for a total of $12.5 million Reserve Fund target. Therefore the Reserve Fund has grown, based on preliminary audit, by approximately $4.6 million since the Reserve Fund was set last spring.
Supervisor Eddie Deane (At-Large) expressed concern that he did not want the county to have to borrow to fund their needs. Discussion followed as to whether all excess Reserve Funds should be allocated to projects or not. This lead to a discussion of the property tax rate, given that the property assessments are expected to decline.
Supervisor Peyton stated that he would not increase taxes but would cut spending to balance the budget, the decision is “easy for me”. When Mr. Peyton was asked for a clarification whether he meant he wouldn’t support raising the tax rate (generating less tax revenue) or raising total property taxes (equal to that of the prior year) that an equalization rate would provide, he indicated that he opposed an increase in the tax rate. He further explained that raising the tax rate to equalize tax revenue would cause some property taxes to increase and some to decrease and he didn’t believe that was fair.
Chairman Frydl summarized that the BOS needs the list of projects required to be done in the next 5 years. At that time, the BOS will be able to determine if there are enough funds for all projects by using the excess Reserve Fund. If more funds are required then the BOS will need to decide if additional tax revenue is required to fund all projects. He also noted that Albemarle County has acted to advertise an increase in their tax rate to equalize tax revenue since their property values have declined, similar to what Greene County is facing.
The key issue facing Greene County as it listens to each department’s budget request is that the current tax rate is generating revenue to provide funding for operating budgets and growth in the Reserve Fund which is being used as a source of capital fund.
If the property tax rate is not equalized then there will be less tax revenue coming into the county which will result in less funds flowing to the Reserve Fund. A decision will have to be made whether to maintain current levels of operating expenses by tapping into the reserve funds or use those funds for capital projects. There will not be enough revenue to do both.
Brent Wilson is the Greene County Field Officer for the Free Enterprise Forum a privately funded public policy organization.
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