POWHATAN – The Powhatan County Board of Supervisors recently made a unanimous decision to lower the county’s real estate tax rate to 79 cents starting with the November 2021 tax bills.
During the board’s meeting on Monday, March 29, the supervisors were originally talking about deciding on the tax rate they wanted to advertise for the short fiscal year (FY) making up the second half of 2021 and the calendar year 2022. There was also the possibility they could have voted to advertise the FY 2022 budget they wanted to advertise.
But in a surprise move at the end of the meeting, the four sitting members voted 4-0 in favor of passing the tax rate that they want to have start with the November 2021 billing cycle, stay in effect 18 months by this vote, and hopefully become the county’s fixed real estate rate.
Tom Berry, the newly appointed District 2 supervisor, was in attendance at the meeting in the audience but was not sworn in until Friday, April 2.
The supervisors didn’t actually have to advertise the rate since they wanted to lower it from the current rate of 85 cents.
The supervisors also didn’t dive into a full budget discussion at the March 29 meeting, but it was discussed at the budget workshop they added for April 2. At that point, the board decided to move ahead and advertise the budget county administrator Ned Smither suggested, including the school board’s portion of the budget. Smither said the county’s budget will be advertised at $100,170,484, which includes all funds.
The board will hold a public hearing on the FY 2022 operating budget at its May 3 meeting and has discussed adopting it on May 10. The county’s budget does not have to be approved until the end of June, but the school board’s budget must be adopted by May 15, at which point the school division can work on employee contracts for the coming year.
One aspect of the budget discussed at both meetings was the school funding that comes from the county. At a joint meeting between the school board and board of supervisors on March 16, Smither presented a budget that saw the school division receiving $214,139 less in local funds because of an increase in state funds.
At the March 29 meeting, Smither suggested the county make up some of the difference in the two figures. If the board agreed, which they appeared to at the April 2 workshop, that means Smither’s recommendation for local funds to the schools would increase by $111,339. That still leaves the school division $102,800 to adjust for over the budget that the school board approved on March 23.
Although it was not solved at the April 2 workshop, Smither’s suggestion sparked discussion about the need to have a more formal policy in place regarding how the county and school board divide funds.
June 2021 tax rate
At the board’s March 19 budget workshop, the members had actually stated their desire to lower the tax rate right away, starting with the June 2021 tax bill. However they gave Smither over the weekend to think about whether he felt confident in the county’s ability to safely operate with a 79-cent rate both right away and in the long term.
Smither explained in a separate interview why the idea to lower the tax rate to 79 cents right away didn’t happen. He said that on Monday, March 22, the board accepted Smither’s recommendation that keeping the tax rate at 85 cents for the June 2021 tax bill was the best route forward for the county.
There were two main drivers in that decision – the impact on county staff to make such a change and the extra financial burden it would put on the long-term plans the supervisors are trying to build for the county, he said.
The brunt of the work resulting from changing the tax rate so close to when the bills are going to be sent out would have fallen on the treasurer’s office and the commissioner of the revenue’s office. Smither praised the work they do and said they probably could have powered through and gotten it done, but it would have been a heavy burden on the constitutional officers and their employees.
“The logistics of getting a tax rate for June lowered were significant, and I am sure the commissioner (of the revenue) and the treasurer could have done a good job of trying to make all those pieces come together, but it would have been a challenge,” he said. “Just setting the rate is one thing, but then you would have a series of refunds back for people who have paid their taxes in advance. A lot of people pay both halves at one time.”
Additionally, in the board’s efforts to get the lowest real estate possible for the next decade, they want to lower the rate to 79 cents and keep it there for the foreseeable future. They had to weigh the victory of lowering the tax rate for one extra tax bill against accomplishing their long-term plans, Smither said.
The six-cent difference between lowering the real estate tax from 85 cents to any lower amount represents an estimated $371,000 per penny on the tax rate. By keeping the higher rate and putting those funds toward the board’s long-term goals, they have more cushion moving forward if unforeseen circumstances bring unplanned expenses, Smither said.
The 79-cent real estate tax rate that the board approved on March 29 will go into effect for the short fiscal year that begins July 1, 2021, and is accounted for in the November 2021 tax bill. It will then continue to be in effect in the calendar year 2022 that follows. The board made the decision earlier this year to take the county back from a fiscal year billing cycle to a calendar year billing cycle.
According to current county ordinance, the supervisors adopt a tax rate in the spring that will be effective for the November bill of that year and the June bill of the following year, Charla Schubert, director of finance, had previously explained. The county made the decision to move to fiscal year billing in 2014 and is one of only five localities in the state that operates this way.
The board is expected to adopt an ordinance change in April or May moving Powhatan back to a calendar year billing cycle, which means the supervisors will vote on a rate each spring that will be effective for the June and November of that calendar year, Schubert said.