BUDGET CRISIS 2018 How Did We Get Here? First let us dispel some - PowerPoint PPT Presentation

BUDGET CRISIS 2018

How Did We Get Here?

First let us dispel some myths.

Myth #1 Debt on the Bluestone…

Myth #2 Paying for shell building at the Bluestone…

 Shell Building at Bluestone: VCEDA Loan funded 100%  No loan payments are due until we have a tenant. Then our payments to VCEDA equal our tenant's rent payments to us.

Myth #3 Building the football field at Graham …

Football field at Graham: The football field is being built by the Town of Bluefield. The County is not paying for the new stadium.

So Where Did the Money Go?

So Where Did the Money Go? Didn’t we have $2M at the end of fiscal 2017?

So Where Did the Money Go?  We did, but it was spoken for.  The $2M was a balance on a specific date.  That $2M was included in this year’s budget.  Expenses for summer and fall of 2017 had to come from that money, because we do not receive our tax revenues until November and December.

So Where Did the Money Go? The fundamental answer is that this problem has been coming for several years. Due to the sharp decline in the coal economy, our revenues have declined faster than expenses for several years.

So Why Is the Gap so Big This Year?

So Why Is the Gap so Big This Year? Actually, the gap was $3M last year. The projected revenues and projected expenses for fiscal 2018 were $3M apart.

So Why Is the Gap so Big This Year?  In fiscal 2018 the board spent reserves in capital projects accounts and the landfill account to fund $3M in expenses, many of which recur.  Those funds now are exhausted.  That constitutes $3M of the gap for this year.

Why did they do that?

Why did they do that?  The Board did not want to raise taxes when the economy was bad.  The Board did not want to cut education.  The Board expected the economy to improve.  Unfortunately both the national and state economies improved more slowly than anyone thought.  The sequester of defense spending hurt Virginia’s economy, resulting in less state funding.  The sharp decline in the coal economy actually accelerated from 2015-2016.  Keep in mind there is a delay between events in the economy and revenue impacts on local governments.

So, what did they do for education?

So, what did they do for education?  The Board dedicated themselves to funding education at 125% or more of the state requirement.  We have been able to do that for several years despite the decline in the economy.  In fact, the Board essentially spent all of its reserves to support continued increases in education spending.

So, what did they do for education? The proposed budget would fund the school system at 121% of the state requirement if you include the anticipated end balances for the school system.

So Why Is the Gap so Big This Year? Other factors made things worse...

Other Factors Made Things Worse… The ending balance at the start of FY18 actually was I. $750,000.00 less than expected. This means we actually started the year with an even larger deficit than we expected. We had to purchase $200,000.00 worth of new voting II. machines due to hacking fears. III. The general reassessment reflected a decrease in property values. This means real property tax revenues for FY19 will be approximately$500,000.00 less than in FY18 if the tax rate stays the same.

So, what did they do about it?

So, what did they do about it? In 2014 the County refinanced the Courthouse Bonds and other debt to decrease payments and lower rates.

So, what did they do about it? In 2015 The County eliminated the Assistant County Administrator position, the Public Safety and Information Technology position and other County positions to save on payroll expenses.

So, what did they do about it? In 2016 the County switched to self funded health insurance to minimize the impact of changes to the healthcare system and maintain lower premiums.

So, what did they do about it?  In 2017 the County hired a firm to manage the landfill for less than we were paying to operate it.  From 2015-2018 the county deferred spending on many capital projects.  Yet , these steps were not enough to stem the tide.

So, What Happens Now?

So, What Happens Now? We can either cut spending, raise taxes, or both.

So, What Happens Now? How much taxing can we afford?

Here is Where We Are… Tazewell County’s real property tax rate is well below the state median.

Here is Where We Are… BUT Tazewell County’s median household income is well below the state average.

Here is Where We Are… Tazewell County is also losing population, falling behind in the value of housing and has a population that is older than most counties in Virginia.

Here is Where We Are… What do these numbers mean? Our residents are older, we have fewer children in schools, our property values are lower, and our residents incomes are less. This means we receive less funding from the state for schools, we have less revenue from real property taxes, and our population cannot afford higher tax rates. How to we go forward?

So, What Happens Now? Cutting spending

Cutting Spending  Where to cut?  Law Enforcement?  Fire and Rescue?  Education?  Court System?  Solid Waste disposal?  Water and sewer?  What can we live with less of?

So, what is the Solution?

So, what is the Solution? The Board proposes $3.2M in cuts and $800k in new revenues.

So, what are the cuts?  The Board of Supervisors propose the following cuts: Sheriff’s Office $150,000.00 Fire Department - Capital $50,000.00 PSA (Fire Hydrant Fees) $150,000.00 PSA (General Subsidy) $200,000.00 Tazewell County IDA $100,000.00 Road Maintenance $25,000.00 Other Constitutional Officers $110,000.00 Tazewell County Public Library $94,000.00 Charities, Museums, Non-Profits $74,500.00 Administrative Departments $740,000.00 Tazewell County Public Schools $1.58M TOTAL: $3.2M

So, What are the Cuts?  Here are those cuts in terms of each agency’s total budget including all other funding from other sources: Tazewell County Public Schools 3% Tazewell County Sheriff’s Office 6% Constitutional Offices 5% Fire Department – Capital 50% Tazewell County Public Service 4% Authority Road Maintenance 33% Tazewell County IDA 66% Tazewell County Public Library 10% Charities, Museums, Non-Profits 10%

So, what about raising taxes?

So, what about raising taxes?  Each cent on the real property tax rate generates about $275,000.00 in revenues.  We would need to raise taxes $0.14 per $100.00 in value on real property to pay for all of the $3.7M gap without cuts.  We would need to raise taxes by $0.05 just to return to our 2016 revenues.  The proposed budget would raise taxes $0.02 on real property. That keeps us well below the state median. However, we still have less revenue than just three years ago.

Estimated Tax Increase Collections $25,905,907.53 Estimated Tax Collections $26,000,000.00 $25,736,710.97 $25,422,038.97 $25,500,000.00 $25,150,241.38 $24,878,443.78 $24,801,363.56 $25,000,000.00 $24,606,646.18 $24,334,848.58 $24,500,000.00 $24,000,000.00 $23,500,000.00 2016 Estimated 2017 Estimated 2018 Estimated 2019 Estimated 2019 Estimated 2019 Estimated 2019 Estimated 2019 Estimated Tax Tax Tax Tax @ $.55 Tax @ $.56 Tax @ $.57 Tax @ $.58 Tax @ $.59

So, what do these numbers mean?  If you own a house and lot valued at $100,000.00 a $0.01 tax increase raises your taxes by $10.00 per year.  So, the proposed tax increase in the FY19 budget would raise your taxes by $20.00 per year. You may pay another $10.00 for the vehicle license, if you do not live in Town.  This could be a total tax increase of $30.00 per year.  If your home and property were worth $200,000.00, the budgeted increase would cost you $40.00 per year.  Or if you have a $200,000.00 home and two vehicles, $50.00 per year total.

Recent developments

Recent developments  On May 11 th the Treasurer’s Office, Sheriff’s Office, and County Attorney’s Office sold mining equipment which had been seized for delinquent taxes.  The proceeds of the sale were $620,000.00.  The Board is considering adding $500,000.00 to local funding for the school system and spreading the remainder among other agencies.  This is a one time revenue event and cannot be used to fund recurring expenses.

Recent developments  If the Board allocates the additional $500,000.00 to the school system, the Board would be funding them 126% of the state requirement.  To reach that number virtually all other cuts and the proposed tax increases will remain in place.

Recent developments  With the additional $500,000.00 and the school boards carry over the county’s ranking in funding of local schools should be consistent with the county’s ranking in median family income.  This means our school funding is consistent with what we can afford.

What about the future?