A report from Chesterfield’s budget and finance department last week was optimistic, but their optimism is for a timeline stretching for years. Preparing for adoption of the 2013 budget cycle that begins in July, the budget and audit committees reviewed the revenue portion of a budget that will more than likely be approved on March 28.
The Budget and Finance Department has typically made conservative projections according to County Administrator James J. L. Stegmaier and errs on the side of constraint.
“We’re always wrong on projections,” Stegmaier said. “But we’re always wrong in the right way.”
Senior Budget Analyst C. Matt Harris took the budget and audit committee through revenue projections for the upcoming budget cycle and years beyond. His presentation was a preview of what the Board of Supervisors and the public will see this week at the board’s meeting.
Starting at the Federal level, Harris said we are seeing “modest but steady growth nationally in the 2.5 - 3 percent range.” It’s a little underwhelming but it’s a start, he told the committee.
There are pretty broad based gains across the state of Virginia and the center of the state is even better, according to the report.
“Although things are looking up this does not necessarily mean it’s the same in Chesterfield,” Harris said. “As we know real estate markets are not quite up to speed.” As far as housing values are concerned, Harris said that the department feels that 2011 was the low point and this year the decline will moderate a bit.
The budget and finance report, as Harris read it, stated that Chesterfield is looking at about a 3.5 percent decline in property values for 2012. And another small decline for the tax year 2013. But the county is starting to work back to zero and through the housing inventory. Harris said foreclosures are down almost 20 percent.
For the 2014 tax year, beginning in July of 2014, Chesterfield will see the overall property portfolio come back into the black and starting to show a little overall growth.
Commercial and construction values saw the better growth in January 2012 than in the last two years. New construction almost a 10 percent increase over prior year. Harris said Amazon and Stonebridge and some other projects in the pipeline are going to fuel the commercial side going forward. Those components will help to offset our modest housing values over the next few years.
Dan Gecker, chairman of the Board of Supervisors, said he was concerned that the commercial numbers also included multi-family residences or apartments. He said those two components should be separate. According to one source there are no vacancies in the local apartment community.
Will Chesterfield ever return to the glory days when the housing market was booming and property tax rate began to drop?
Jim Holland, Dale district supervisor and a member of the budget and audit committee looked for some agreement.
“So in 2014 we may get back to some normalcy? Holland asked. “Although I don’t think we’ll ever see what we knew as normalcy with growth rates of seven to eight percent in commercial and [residential] real estate [before the recession.]”
Harris responded that “you can take everything from the last ten years and throw it out the window,” he said. “It’s relatively useless to use that as your benchmark, for any revenue we need a longer perspective to decide what is normal.” The economy sort of overheated over the last decade and that’s not a way for use to judge where we are now,” Harris added.
“One good thing for personal property [revenue] is the average value of a car today, which is almost 11 years old, is going to start to turn over as folks are going to have to go out and replace those vehicles,” Harris said. “We’re going to see a natural refresh of our portfolio for personal property, and used car values are at all-time highs.”
Automobile registrations are up almost 10 percent. That personal property increase is a counter balance to increased gas prices, which is a cost to the county.
The revenue side of balancing the county’s budget also relates to property taxes. According to Alan Carmody, director of the budget and finance department, the Board of Supervisors will have to set a tax rate. At this week’s meeting the board will have to decide on what to advertise as a proposed tax rate. What the board approves will have to be less than what they advertise.
The current property tax rate is 95 cents to every $100 over property value. Carmody told the committee that the state defines what rate is revenue neutral, that is, the rate that holds revenue at its current rate. He said the revenue neutral rate will be $1.00 per $100 of property value. On average, property values dropped in Chesterfield by five percent in 2011.