Charlottesville resident Downing Smith was shocked when he heard just how many projects the city could have requested to get federal economic stimulus money for — 80, to be exact, with a total price tag of more than $215 million.
“When you hear something like that, it kind of jolts you,” Smith said.
The list ended up being narrowed significantly to include about $64 million worth of projects. But that doesn’t change the fact that both Charlottesville and Albemarle County have an ever-growing list of high-priced projects — including the regional water supply plan, expanded transit, Places29, school renovations, public housing redevelopment and water and sewer infrastructure repairs — that somehow need to be paid for despite the unprecedented fiscal crises that the localities are facing.
“There’s going to be [a] point when this stuff is going to have to be done,” Smith said.
As the localities get ready to debate whether taxes should be increased or services be cut, or both, several questions remain:
- How will these improvements be financed?
- How much of a tax burden is going to fall on area residents?
- Can they all even be completed?
Many of the projects are regional in scope and could have myriad financing sources, and therefore are not included in the city or county’s individual capital improvement programs. But officials recognize that spending creativity will have to come into play if these projects are to come to fruition.
“It’s going to vary project to project,” Charlottesville Mayor Dave Norris said. “Each project will require a different combination of funding sources.”
An array of financing tools
For the first time in years, Charlottesville was dealing with a revenue shortfall that would have been about $1.2 million in the current fiscal year, which ends June 30, had the City Council not allocated some surplus funds to offset the losses. The shortfall was a result of less local tax revenue, less state funding and last summer’s skyrocketing fuel and energy costs.
But city councilors and City Manager Gary O’Connell, who is responsible for proposing a balanced budget, have repeatedly said they are not interested in raising the 95-cent real estate tax rate in the fiscal 2010 budget, which was released by O’Connell last week.
Under next year’s spending plan, compared with the $141 million in this year’s budget, the city would spend $139.8 million. But on top of that amount, the city is also proposing a new, $2.8 million economic downturn fund to potentially offset revenue declines. The fund’s addition brings the budget total to about $142.5 million, a 1.11 percent increase.
“At this time, I don’t think it’s right to raise taxes,” Councilor Satyendra Huja said.
The budget proposal does not increase tax rates or fees. However, the real estate tax rate would need to be 92.8 cents for the same amount of taxes to be levied on residents as last year.
Huja added that “usually taxes do go up, and fees go up, unfortunately,” acknowledging that residents’ tax burdens are likely to increase in the future.
Norris maintained that increased taxation is not the inevitable course of action to pay for these projects.
“If we proceed in a long-term view of how to get these projects done, we’re not looking at substantial tax increases or fee increases for today’s residents,” Norris said. He added, “What we don’t want to do is to raise taxes and fees so high that we make Charlottesville even more of an unaffordable place for working families to live, for entrepreneurs to do business. We need to take a comprehensive look at all of these projects.”
The $16.1 million Capital Improvement Program proposed for fiscal 2010 is 45 percent less than what is in the current budget, and the shortfall for next year will likely worsen as the housing market continues to stagnate and unemployment edges upward.
Though local funding will play a large role in financing these projects, officials say federal and state funding, general obligation bonds, grants and public-private partnerships could also help ease the burden.
Albemarle Supervisor Kenneth C. Boyd said through proffers, businesses could be asked to help foot the bill for road expansions. The Hollymead Town Center, for example, forked over millions of dollars to increase the road lanes in front of the shopping center, and has since contributed millions of dollars more in tax revenue.
“Rather than raising taxes, let’s build our economy to the point where we can afford some of the things we want to do,” Boyd said.
However, at least in recent fiscal quarters, proffer cash has evaporated as developers have pulled back or halted plans. The result: less money for county coffers.
Charlottesville’s planned public housing redevelopment, where many of the existing 376 units will be overhauled into mixed-income, mixed-use areas, could capitalize on a similar idea, Norris said. The total cost could feasibly be tens of millions of dollars, but businesses could partner with the city to redevelop the properties into more dense residences. Because the Charlottesville Redevelopment and Housing Authority is also run by the Department of Housing and Urban Development, the federal government will also provide financing.
The ailing economy is not all bad news for large projects like these — lately, construction bids have been steadily coming in lower than expected. But county Supervisor Sally H. Thomas said this coupled with declining revenues can still put local governments in a frustrating situation, because the economy has driven construction costs down, yet revenue is depleted at a time when “we probably would give the taxpayers the most project for their money,” she said. Three county schools are currently being renovated and construction bids came in well under budget for each.
Federal monetary relief
With a $787 billion stimulus package having been signed by President Barack Obama last week, officials remain somewhat hopeful that federal economic stimulus money will also help ease the burden of paying for their plans and get priority projects moving ahead. Albemarle’s wish list for economic stimulus money is $164 million, including $75 million worth of funding requests for urban infrastructure, $58 million for schools and $31 million for transportation.
A lack of transportation funds has been a focal point for discussion among area leaders, but Thomas said providing sound funding for education is also a must, “even if we have to cut back on some other things, because families that are going through tough times depend, all the more, on the schools. And the community depends all the more on having an educated citizenry.”
Charlottesville’s $64 million list includes $22 million for road projects, $5.4 million for bridges, $5 million for sewer line rehabilitation and $2.8 million for stormwater pipe repairs. The list also includes projects for schools, parks and recreation and workforce development.
If that funding does not come through, reliance on local funds will surely become heavier. Albemarle Supervisor Dennis S. Rooker said the funding reductions by the state government are already pushing more burdens on local governments. Not only are ratepayers likely to see an increase in costs for the region’s water supply and sewer infrastructure, he said, state funding for transportation has been dwindling more and more each year.
The state’s transportation revenue shortfall has come just as Albemarle is finalizing its Places29 plan, which could include more than $300 million in transportation projects on an 11-mile stretch of U.S. 29 from the U.S. 250 Bypass to the Greene County line.
“There are a lot of infrastructure issues [about which] I think politicians have put their heads in the sand and kicked the can down the road for someone else,” Rooker said. “At some point, it has to be handled, and it becomes somebody’s cost.”
Having already dealt with budget difficulties last year, county officials have begun experimenting with an increased tax rate for the upcoming budget.
Albemarle County Exec-utive Robert W. Tucker Jr. has created next fiscal year’s budget based on a 76.7-cent tax rate, 5.7 cents higher than the current tax rate, with 2.5 cents of the rate to be set aside in a rainy day fund in case the economy worsens. The adjusted rate would help offset revenue declines, but even with the higher rate in place, the county is still projecting about a $5.5 million shortfall for the current fiscal year. For real-estate taxes to remain the same for the average Albemarle homeowner, the county would need to institute a 74.2-cent rate.
Tucker’s fiscal 2010 budget plan is $307.7 million, $26 million smaller than the current budget.
Thomas, Supervisor Ann H. Mallek and board Chairman David L. Slutzky had previously asked that the budget recommendation be based on a tax rate of at least 79 cents.
A committee tasked with reviewing the county’s capital improvement projects has also recommended that officials spend $100 million less on long-term projects in the next five years than what was included in last year’s five-year plan.
What’s next
It is also possible that some of the big-ticket items may have to be put on the chopping block, or at least delayed until more financing becomes available. Officials concede that many of the projects may take years to move forward, or plans could change because many of them are in their conceptual stages.
Water and sewer infrastructure repairs, which in Charlottesville alone could easily exceed $40 million in costs, and the regional water supply plan have no choice but to move ahead, officials say. Funding for utility capital projects in the city’s proposed fiscal 2010 budget has been upped to nearly $9.2 million, an increase from this year, to address issues with the aging water and sewer pipes.
Councilor David Brown said, “That’s not something we can put off forever.”
Brown added that water-related projects would partly be paid for through user fees, which some still see as a tax. But the economy has derailed efforts to implement new fees, such as a stormwater utility, in the city to help pay for those improvements. In exchange, more money has been plugged into the city’s Capital Improvement Program to finance the stormwater pipe repairs.
Others note that delaying projects could be risky for local governments even beyond the cost element.
Michael Marshall, who chairs the Crozet Community Advisory Council, warned that delaying projects could create unwanted sprawl in the area. Albemarle officials long have wanted to turn Crozet into a more developed area, yet in the past several months officials have looked to further delay development of a library, parks and other major projects in the area.
Huja said he thinks expanded transit is an endeavor that is likely to get delayed. While Norris said public housing redevelopment is one of his most important goals, not all of his colleagues ranked the project as high of a priority, so it remains a question as to which projects will actually see progress in the coming months and years, and which may not.
“It’s seeing how much money is available and picking a priority,” Councilor Holly Edwards said. “Some things are going to have to wait.”
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