Residents of both Henrico and Chesterfield counties will have the dubious pleasure of voting on a meals tax referendum this fall. In the run-up to the election, voters of both jurisdictions will hear some of the same arguments. Other large, urbanized counties in Virginia have meals taxes, we will be told in an appeal to the idea that misery loves company. Also, we'll hear, a big chunk of the tax revenues will come from people who dine in Henrico and Chesterfield but don't live there. After all, taxes always go down smoother when someone else is paying them.
Otherwise, the approaches taken by the two localities are very different. The most obvious difference is that Henrico proposes to implement the full 4 percent tax allowed by state law, expecting to net about $18 million. Chesterfield seeks only a 2 percent increase, yielding approximately $8 million. Chesterfield leaders not only are asking for less, but also have done a shrewder job of packaging.
Henrico's referendum will ask residents to raise funds for unspecified operational needs and capital projects of the county school system. The county's meals-tax advocacy website says vaguely that, "without new revenue, Henrico will have to consider significant cuts to its public schools and other critical services." Henrico officials don't say what they might cut, or by how much, so Henrico residents can't visualize what they're getting for the tax.
Henrico officials swear the $18 million generated by the meals tax will be dedicated to public schools. But the vow is meaningless. The tax revenues will flow into the general fund, from which the Board of Supervisors allocates 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's no guarantee that future boards will.
By contrast, Chesterfield will put three referendums before voters. The first seeks approval to issue $304 million in bonds to pay for extensive school renovations. A second asks for $49 million to replace the county's emergency communication system. The third asks voters to approve the meals tax to fund the capital projects. Chesterfield residents can peruse a list of 10 antiquated public school buildings that the tax will rehabilitate. In other words, voters will know exactly where the tax money will go.
Chesterfield officials did another smart thing: They didn't underestimate the intelligence of voters. Voters are smart enough to figure out that, while meals tax money might be allocated to schools and public safety, money previously steered to schools and public safety could be pulled out and spent elsewhere — just like the state does with lottery profits dedicated to education. And, again, current boards can't bind future boards to spending money the same way.
Chesterfield took a two-tier approach to creating a lockbox 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 roughly pegged 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. It isn't an airtight arrangement, but there's less room for hanky-panky.
Finally, there's the issue of local-government advocacy, which state law forbids. Chesterfield officials have adopted a less strident tone. The county website, Your Voice First Choice, explains the logic behind the meals tax but doesn't predict dire consequences should voters reject the tax, unlike the site Henrico Meals Tax Facts. Chesterfield notes simply that a negative vote would "draw away resources from other projects and county services." Chesterfield County Manager Jay Stegmaier doesn't portray the situation as a gun-to-the-head choice of raising the property tax or cutting services, as does his Henrico counterpart, John Vithoulkas.
While Chesterfield's approach seems more taxpayer-friendly than Henrico's, the county faces the same challenges as Henrico in dealing with swelling pension obligations and onerous Environmental Protection Agency regulations. Chesterfield's pension liability could be $257 million and the Chesapeake Bay cleanup could cost another $200 million. Stegmaier estimates that those two items could cost the county $30 million a year.
Chesterfield has adopted a wait-and-see attitude before jacking up taxes to deal with those problems. The state has a plan to ramp up contributions, which could shrink local liabilities. A post-Obama administration in Washington could ease the more onerous environmental regulations. And a revival of housing prices could bolster real-estate tax revenues. As Stegmaier tells me, "There are still some unknowns out there."
If I were a Chesterfield resident, I'd make the same argument that I do about Henrico: The county should more aggressively apply online learning to education, adopt smart-city technologies and encourage land uses that yield a better ratio of tax revenue to cost as long-term strategies for driving down expenses and bolstering the tax base. Don't ask me to pay higher taxes until you've delved into those alternatives and found them lacking. That said, Chesterfield has handled the referendum issue far better than Henrico. I'd still oppose the tax, but I wouldn't be nearly as adamant about it.
Henrico County resident James A. Bacon is publisher of the Bacon's Rebellion blog at baconsrebellion.com.
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