by James A. Bacon
So, Laura Lafayette, CEO of the Richmond Association of Realtors, has responded to my recent column in the Times-Dispatch regarding the Henrico County meals tax. Much of the column consists of boilerplate pro-tax talking points that you can find on the Henrico County’s supposedly non-advocacy “informational” meals-tax website. But she does raise a couple of points, one legitimate and one totally bogus, that must be addressed.
Fiscal prestidigitation. First, the bogus point. Lafayette argues that Henrico cannot cut costs without sacrificing the quality of education and public services. “In the past four years, ” she writes, “Henrico government has eliminated almost 650 positions and cut $115 million in expenditures.”
As I blogged previously, those numbers are illusory. Henrico has not cut “spending” by $115 million. Most of those supposed cuts consist of backtracking on budgeted spending increases. Actual spending peaked at $790.7 million in Fiscal 2009. Actual spending in Fiscal 2012 fell to $768.9 million — a real-world cut of only $21.8 million. As for those 650 positions it supposedly has eliminated, Henrico has a no-layoff policy! In the real world, the county reduced its workforce by about one-fifth of that number through attrition.
Lafayette may count wished-for job and spending increases as actual spending but I don’t. And I don’t think most Henrico citizens do either. There’s only one way to describe the numbers used by Henrico’s numbers, which Lafayette repeats uncritically: deceptive.
A temporary cash flow issue. But Lafayette does raise a legitimate point. In my column, I had argued that housing sales prices in Henrico had increased 11.8% and that rising assessments would raise roughly $18 million in new revenue — the same amount expected from the meals tax. Updated numbers, she writes, indicate that average sales prices have increased only 7.7%. She’s the expert; I’ll take her word for that.
She then argues that higher housing prices will not lead to an immediate surge in tax revenue.
Eventually, we will see an increase in property values. Eventually, higher property values will lead to increased assessments which will equal greater equity for homeowners and increased tax revenue for the county — eventually, not overnight.
Fair enough. The next property reassessment may not bring in as much revenue as I had expected, based on May 2013 numbers, and it may take longer for the higher housing-sales numbers to work their way through the system in the form of higher tax revenue.
How, then, should the Henrico County Board of Supervisors deal with a temporary cash flow problem? Institute a permanent 4% meals tax that that likely never will be revisited and never will be repealed? Or enact a temporary increase in the real estate property tax that can be revisited as assessments rise, and readjust the tax rate downward when tax revenues do come in? The board has lowered the tax rate before, and it can do so again. Evidently, Lafayette prefers a permanent tax increase.
False choice. One last point: Lafayette frames the entire tax issue in Business As Usual terms, proffering the false choice of higher taxes or reduced services. Here’s how I frame the choice: Henrico can continue doing business as usual, or it can get serious about prioritizing spending, reinventing K-12 education, deploying smart-city technologies and fostering more tax-efficient human settlement patterns.
Approving the meals tax will signal county official officials that the status quo is just fine and that nothing fundamental needs to change. A vote for the meals tax is a vote for lethargy and stasis.
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