Concrete discussions

On Tuesday, March 12, an occurrence rare as hen’s teeth among Virginia local governments, took place. The Board of Supervisors and members of the School Board sat down together for a cordial, yet hard conversation. The importance of the congenial relationship between the supervisors and school board cannot be over emphasized.

Collaboration between the Supervisors and School Board enables constructive discussions.

This environment, said School Superintendent DR. Jeremy Raley, “allows us to unpack our thinking and have a difficult discussion about a whole bunch of money in an amiable way.”

The topic was the county capital improvement plan (CIP), which includes estimated costs for long-lived items, including buildings, systems, and equipment, that cannot be fully funded in one budget cycle, and establishes a schedule to purchase or build and pay for them.

In 2017 Goochland crafted a 25-year CIP, an almost unheard-of task, used to create a capital impact model tool for evaluating land use decisions. As part of the annual budget process, a more detailed five-year CIP is approved.

A big part of 25-year CIP is the needs of the school division, which completed its own long-term CIP that included three enrollment projections based on high, moderate, and low growth rates. The out-year numbers were based on best guesses. The 2017 projected cost for a new Goochland Elementary School (GES), planned for FY2023, was based on moderate growth. District 2 School Board member Kevin Hazzard said attendance boundary adjustments will be made to take pressure off of Randolph and Byrd elementary schools until they too are replaced. Hazzzard also observed that using a four-season school year, which is NOT under consideration, could reduce school capacity to 75 percent.

When attendance projections were updated this year, it became clear, according to Raley, that actual growth is far more robust. (Note to supervisors, remember this during residential rezoning decisions). Instead of a 500 student GES, the March 12 proposed schools’ CIP included a 650-student school. Raley contended that enrollment at the 500 student GES would exceed capacity on opening day. The price tag for the larger school was estimated at $31.9 million versus the $24 million used in 2017. Raley predicted that enrollment will increase for each of the next ten years at every grade level; capacity is a division-wide issue.

"Education cottages" at Randolph Elementary School

Also included in the county long-term CIP for approximately the same time frame, the 2023 fiscal year, is a new $25 million combined courts building. The venerable Goochland Circuit Court building has been in use since 1827—Thomas Jefferson died in 1826—and is long overdue for replacement. A county space study conducted last year found that the existing court buildings will soon become inadequate for daily operation. At its March 5 meeting, the Board approved $620,000 to build a security screening addition for the Circuit Court building providing a bit of time flexibility on the court project.

District 5 Supervisor Ken Peterson quipped that the schools get points for the courage to ask for a $12 million CIP increase, and the supervisors get points for not covering their ears at the request.  “Courthouse security is a big issue, and schools have a greater need than they did only a few years ago. It’s helpful to go through the numbers to know how we got here,” said Peterson.

Adding up a more expensive than anticipated school, the courthouse, and other crucial items, the county will need a lot of money in the next five years. This will require borrowing. No decisions on the CIP have been made yet. It will be discussed at the current round of Town Hall meetings; a public hearing on April 2, and, perhaps before the board votes to adopt the budget and CIP on April 16. As the 53 cent per $100 of valuation has been advertised, the tax RATE will not increase for calendar year 2019.

The cost of the courts building, and new GES alone is roughly equal to the FY2020 general fund revenues for the entire county.

Last year was good for county revenues, which rose about nine percent due to higher property assessments, new construction, bank stock taxes, and earning a bit of interest on county money. Long term projections use a more conservative three per cent annual growth rate.

Stewardship of public funds and land use decisions are the most important duties of the supervisors. The ill-conceived Tuckahoe Creek service District, which almost swamped Goochland, is a cautionary tale, one these supervisors will not repeat.

Unlike their predecessors, who lacked the financial sophistication to understand the risk that borrowing a huge sum of money based on unsubstantial projections of seven percent annual growth forever, this board worries about what is over the economic horizon. Taking office when Goochland property values were declining—something virtually unknown for decades—this board understands what happens when there is too little revenue to fund core services. That is why funds are allocated every year to a “rainy day” account to smooth out the bumps of the next economic downturn.

The Commonwealth of Virginia does not restrict the amount of debt a locality can issue, so bad local financial decisions can lead to big money problems solved with higher taxes. To further protect the county coffers, this board adopted a policy limiting the amount of debt the county can incur relative to its general fund expenditures to a target of 10 percent with ceiling of 12 percent.  Current conditions fall well below the target. (See http://goochlandva.us/DocumentCenter/View/4422/Goochland-Financial-Management-Policies-Effective-May-1-2018 for the entire policy.)

According to the county capital impact study, “Cash proffers are a small part of an overall funding strategy and should not be regarded as a total solution for infrastructure financing needs. Therefore, other strategies and revenue sources are needed to offset the impact to infrastructure from new growth.”

This board wants to wait until existing debt other than the TCSD is retired before taking on more. They are committed to keeping the real estate tax RATE steady at 53 cents per $100 of assessed valuation. Note, burgeoning real estate valuations last year resulted in a tax increase, because the flat rate generates more revenue. (The more of the one hundred dollars you have, the more 53 cents you pay.)

For the past several years, the county budget has included CIP appropriations for the new GES and Courthouse. In essence, saving up for a down payment to reduce the amount borrowed, which in turn, reduces the debt service.

Finding balance between “we need it now” and let’s not get too deeply into debt is a tricky maneuver. County Administrator John Budesky suggested options, which include delaying the courthouse project a few years

Other factors are in play. Budesky observed that borrowing for this CIP will occur in about three years, when another board will be in place. Understanding how money works and the consequences of taking on debt is a vital skill for anyone seeking elected office this year. Sadly, few candidates bother to attend these sessions and listen to substantive discussions on the subject.

Why not just float a large bond issue to fund all the things in the CIP at once? The east end of the county is growing like a weed increasing real estate tax revenues to service the debt. Goochland has two high bond ratings to help get better interest rates, so what’s the problem?

The good times will not roll forever. If the county incurs more debt than it can comfortably handle tax rates will rise, for everyone.  If we use the reserves as a larger down payment, the county’s metaphorical cupboard could be left bare in case of another economic downturn, or a “Black Swan” event that comes out of the blue, like the 2011 earthquake that destroyed two schools in Louisa.