Service District SuperTax – A Tax By Any Other Name

By. Neil Williamson, President

A-rose-by

Increasingly a number of Central Virginia localities are finding that so called ‘Service Districts’ may provide a new revenue generation mechanism that is less politically repugnant than simple property taxes.  While both options are based on property value, 2017 may be the year of the Service District due to several interesting new taxation possibilities and complexities – please let me explain.

Albemarle County has been rather transparent in their pursuit of new service districts dating as far back to the discussion of a regional transit authority in the early 2000s.  The Free Enterprise Forum was a little surprised to find a suggestion of a service district buried deep in Greene County Administrator John Barkley’s December report:

Initiatives on the Horizon for 2017 – As the new year approaches, staff will continue working to improve the County’s financial reporting capabilities . . .  New initiatives will include addressing blight and the process and legalities associated with blight abatement, consideration of special assessment districts aimed at targeted infrastructure improvements, and conducting a full structural assessment of County facilities. Emphasis Added – nw

In their December 7th “Balanced Two Year Fiscal Plan” discussion the Albemarle Board of Supervisors were provided an illustration of the SuperTax Service Districts:

Eastern Ave – Phase 1 – Rt. 250 to Westhall, including Lickinghole Creek Bridge (Crozet)

This is a conceptual illustration of a specific project in Master Plan/CNA

Assumptions:

Project cost, $10.5 M (2022 $s for assumed year of construction–ends in 20 years)

Service District boundary = Crozet Development Area boundary

project funded with 60% state funds, 40% service district generated funding

Scenario 1 Crozet “Service District” provides 100% of Local Contribution – Annual cost to an increase of 2.8 cents on tax rate beginning in 2022

Scenario 2 County contributes $2M Crozet “Service District” provides remainder of Local Contribution – Annual cost equivalent to an increase of 1.6 cents on tax rate starting in 2022

Illustration: For a house assessed at $350,000, an increase of 2.8 cents on the tax rate would equate to an annual increase of $98.00; a 1.6 cent increase on the tax rate would equate to an annual increase of $56.00.

Logically this specific example raised a number of concerns.  Supervisor Ann Mallek mentioned her belief that this Eastern Connector had been promised to Crozet as a part of the concurrency of infrastructure that was the County’s responsibility under the Neighborhood Model.

This failure was identified as early as 2006 when the neighborhood model was still in it’s infancy.  In an October 4, 2006 staff report, when the Neighborhood Model was still in its infancy and the great recession had not yet hit) staff highlighted the hypocrisy of demanding developer infrastructure improvements while not holding up Albemarle’s end of the bargain:

The Comprehensive Plan has also established what public facilities are necessary at what locations to support development of the Development Areas and has anticipated developer provision of facilities along with VDOT and the County’s CIP.  However, the ability of developer and VDOT funding and the County’s CIP to adequately pay for the cost of public infrastructure to support the Development Areas as the priority areas for new development, public services and public infrastructure has become increasingly difficult.  Because this investment in infrastructure is critical to achieving the quality of life necessary to make Development Areas what is envisioned in the Neighborhood Model, the timing of infrastructure development associated with the rezoning of property within the Development Areas may need further consideration.

The Neighborhood Model has redefined how the Development Areas should develop to provide an active, vibrant urban place that will be perceived as a more desirable place to live than the Rural Areas.  It puts a greater reliance on public facilities and urban services in the Development Areas to achieve the urban form. It continues to anticipate developer provision of facilities along with VDOT and the County’s CIP providing a greater emphasis on concurrency with development.  It emphasizes Master Planning of areas within the Development Areas to best define how the Neighborhood Model can be achieved in these areas. . .

. . .Without the infrastructure needed to address the impact of the up-zoned property, concerns regarding the quality of life in the Development Areas will need to be considered.

Emphasis added-nw

Albemarle staff also presented the concept of using the Service District Supertax to fund sidewalks in the urban areas, small area planning, as well as city/county cooperative ventures.

Interestingly, the staff did not mention one VERY attractive part of Service District SuperTax funding – Local government gets all the money – unlike a tax increase where by Board policy Albemarle splits increased revenue 60%/40% with the schools this would be all local government money.  To get the same level of funding for capital projects the tax increase would need to be 60% higher than the Service District SuperTax.

While we appreciate and understand the demands placed on localities to fund the needed infrastructure, the Free Enterprise Forum believes the Service District SuperTax is a flawed model that may create a balkanization of any locality utilizing it.  Further we have significant issues with an existing Board of Supervisors sitting in 2016 approving a Service District SuperTax that does not go into effect until 2022.  While this may be legal, it does not seem right.

Concurrent funding of infrastructure to support locality’s comprehensive plan is the locality responsibility.  If there is a problem with the Board policy of sharing new revenue with the schools, change that policy rather than creating a new Service District SuperTax to work your way around it.

Respectfully Submitted,

Neil Williamson, President

——————————————–

Neil Williamson is the President of The Free Enterprise Forum, a public policy organization covering the City of Charlottesville as well as Albemarle, Greene, Fluvanna, Louisa  and Nelson County.  For more information visit the website www.freeenterpriseforum.org

Photo Credit: www.planetofquotes.com

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