by James A. Bacon
Henrico County isn’t the only Virginia jurisdiction where citizens will vote on a meals-tax referendum this fall. Chesterfield County leaders also are seeking a meals tax. But the approach taken by the two localities is very different, which may explain why Henrico residents are restive while their neighbors south of the James River are not.
Unlike Henrico, which proposes to implement the full 4% tax allowed by state law, Chesterfield seeks only a 2% increase. County leaders originally sought the full 4%, but after taking a closer look at county finances decided that they could live for now with a 2% tax yielding approximately $8 million in new revenue. (Henrico’s tax would net about $18 million.)
Chesterfield leaders also did a shrewder job of packaging. I got some insight into Chesterfield’s thinking from County Manager Jay Stegmaier, whom I interviewed Wednesday over the phone.
Henrico’s referendum asks citizens to approve a meals tax to raise $18 million for unspecified operational needs and capital projects of the county school system. The county does not say how the money will be spent. Instead, the county’s meals-tax advocacy website makes the disputable assertion that “without new revenue, Henrico will have to consider significant cuts to its public schools and other critical services.” Henrico officials do not say what they might cut, or by how much.
By contrast, Chesterfield will put three referenda before the people. The first will seek approval to issue $304 million in bonds to pay for extensive school renovations, while a second would issue $49 million in bonds to replace the county’s emergency communication system. The third referendum then asks voters to approve the meals tax “for the sole purposes of funding capital projects which further the public safety and public education needs” of the county. Chesterfield residents can review the list of 10 public schools, two of which were built before World War II, that will be rehabilitated thanks to the tax. Bottom line: Chesterfield residents will know exactly what the tax money will be spent on.
Chesterfield officials did another smart thing: They didn’t underestimate the intelligence of voters. While meals tax money might be dedicated to capital projects, notes Stegmaier, who’s to say that other money previously allocated to capital projects wouldn’t be pulled out and spent on something else — just like the state does with lottery profits supposedly dedicated to education? Another wrinkle: Even if the current board makes good on its promise, it cannot bind future boards to spending the money the same way.
Chesterfield took a two-tier approach to creating a lock box for the new tax revenue. First, the referendum specifically states that the tax is for “the sole purpose” of funding capital projects. Second, the annual cost of the capital projects is matched to the expected revenue stream from the sales tax, about $8 million. Once the county issues bonds, it will be committed to spending that money. The arrangement is not air tight, Stegmaier acknowledges, but there’s less room for hanky panky.
Henrico officials swear on the graves of their ancestors that the $18 million raised from the meals tax will be dedicated to public schools. But the statement is meaningless. The tax revenues will flow into the General Fund, from which the Board of Supervisors will allocate monies for the school system. Every year, the school allocation will come up for a vote. The current board may live up to its stated intention, but there is no guarantee that future boards will.
Finally, there is the issue of advocacy. Chesterfield officials have adopted a less strident tone in their official communications. The county website, Your Voice First Choice, explains the logic behind the meals tax but does not predict dire consequences, as Henrico’s website does, should voters reject the tax. Chesterfield notes simply that a negative vote would “draw away resources from other projects and county services.” Stegmaier does not appear in a video, as does his counterpart John Vithoulkas in the Henrico website, portraying the situation as a gun-to-the-head choice of raising the property tax or cutting services.
While Chesterfield’s approach seems far more taxpayer-friendly than Henrico’s, Stegmaier acknowledges that the county faces the same challenges as Henrico in dealing with swelling pension obligations and onerous Environmental Protection Agency regulations. The county’s pension liability could be $257 million and the Chesapeake Bay clean-up could cost another $200 million. “It could be $30 million a year for those two items,” he says.
Chesterfield has adopted a wait-and-see attitude before jacking up taxes to deal with those problems. As Stegmaier observes, the state has a plan to ramp up contributions, which could whittle down local liabilities. A post-Obama administration in Washington, D.C., could back off on the more onerous EPA regulations. And a revival of housing prices could bolster real-estate property tax revenues. Says Stegmaier: “We know the liabilities but there are still some unknowns out there.”
If I were a Chesterfield resident, I would make the same argument that I do about Henrico: The county should more aggressively apply online learning to K-12 education, adopt smart-city technologies and encourage more tax-efficient human settlement patterns as long-term strategies for driving down costs and bolstering the tax base. Don’t ask me to pay higher taxes until you have delved into those alternatives and found them lacking. That said, Chesterfield has handled the referendum issue far better than Henrico has. I’d still oppose the tax, but I wouldn’t be nearly as adamant about it.
Update: A modified version of this post has been published in Style Weekly.
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