Local governments across the region are progressing through their annual budget adoption season, with several spending plans already in the books aimed at supporting business and economic development.
In Chesterfield County, more businesses will be off the hook come July for the Business, Professional and Occupational License tax.
When the Chesterfield Board of Supervisors recently OK’d the county’s fiscal year 2022 budget, supervisors also endorsed an increase in the county’s BPOL tax exemption threshold, raising it from $300,000 to $400,000 in annual revenue effective July 1 — the start of the fiscal year.
The change will make more than 6,400 Chesterfield businesses, or two-thirds of county businesses, fully exempt from the tax, according to the county.
“This budget also proposes targeted business tax relief — not only to attract business investment and diversify our business base, but also to recognize that many of our smaller local businesses face ongoing challenges in their economic recovery,” County Administrator Joseph Casey wrote in his budget proposal.
Henrico County has a $500,000 annual per-business revenue threshold for BPOL taxes. Richmond’s BPOL threshold is $100,000. Hanover County doesn’t collect BPOL taxes on most types of businesses, though it does collect BPOL taxes on contractors with $100,000 or more in gross receipts. Ashland has a flat BPOL fee of $30 for non-manufacturing businesses with gross receipts of less than $1 million. After $1 million, the town has several gross-receipt brackets subject to varying numbers of cents per $100 of value.
Chesterfield’s $1.6 billion budget is based on a real estate tax rate that’s unchanged at 95 cents per $100 of assessed value. Other county tax rates remain similarly level.
The budget features an $807 million general fund, which is an 11.7 percent increase compared to the adopted FY21 budget, and 7.1 percent more than the FY21 amended budget. Alongside other revenue sources, general property tax revenue is expected to generate $530.6 million (a 9.9 percent year-over-year increase) to power the general fund.
The budget tees up a November 2022 bond referendum that’s planned to provide $300 million for middle school expansions and renovations, as well as $150 million for new and renovated county facilities. County facility projects include $40 million to replace or renovate four fire stations, $32 million to build four new police stations, and $52 million to replace or renovate four libraries.
The budget also includes $36 million for pay increases for public safety workers and teachers. General government employees receive a 2 percent mid-year raise. As part of the county’ capital improvement plan, the county plans to spend $19 million on sidewalks over the next five years.
Henrico County reaches its BPOL threshold goal
Henrico County, which has spent the past several budget cycles increasing its BPOL tax exemption threshold in $100,000 increments, is calling an end to that process after reaching its goal of a $500,000 threshold in the current fiscal year budget.
“We had a long-term goal of getting to $500,000, and we got there in the current year budget,” said Brandon Hinton, Henrico’s deputy county manager for administration. The final increase was expected to exempt nearly 15,000 businesses, or more than 78 percent of all licensable businesses in the county, from paying the tax.
While a further BPOL adjustment is not in the $1.4 billion FY22 budget that Henrico supervisors approved April 13, it does include several other initiatives aimed at supporting and promoting businesses in the county and economic development.
Primary among them is Henrico’s maintained real estate tax rate, held steady at 87 cents per $100 of assessed value — the 43rd year that the rate has not increased. The rate is supported with a projected $383 million in real estate tax revenues, reflecting a year-over-year increase of $21.5 million.
That increase is fueled by a $1.5 billion net increase in the county’s total real estate tax base, including new construction and reassessments. Hinton noted as an example that the FY22 budget reflects for the first time a portion of revenues from Facebook’s massive data center at White Oak Technology Park.
In his proposal to Henrico supervisors, County Manager John Vithoulkas said new commercial and residential construction in 2020 added $658 million to the real estate tax base. Residential reassessments increased 4.7 percent this fiscal year, while commercial reassessments had a net decrease of 2.7 percent, due in large part to hotel valuations being cut in half due to COVID-19. Valuations of strip retail developments also decreased 7.7 percent.
“While there is still potential for weaknesses to appear in the office space categories as businesses determine what role teleworking plays in their long-term business model,” Vithoulkas said in his manager’s message, “Henrico’s real estate market seems to have weathered the worst of this economic storm.”
The budget’s general fund, at $983.9 million, emphasizes compensation adjustments for all county employees, with $57.6 million allocated for raises ranging from 4.4 percent for general government employees and 6.9 percent for county school teachers to more than 14 percent for employees eligible for market adjustments and longevity pay.
Sports tourism remains a priority, with over $585,000 budgeted to create a Henrico sports authority that would guide the county’s efforts in that area and oversee its various sports sites and venues, including the planned indoor sports and event center at the redeveloping Virginia Center Commons.
Richmond budget plan under review
The Richmond City Council is in the midst of reviewing Mayor Levar Stoney’s proposed budget for FY22, which starts July 1. The $770.3 million proposal includes no increases in real estate, personal property or other general tax rates.
The city budget does include a proposed utility rate increase of $5.27 a month for the average customer. The increase would fund more than $3 million in infrastructure improvements to address flooding in Southside and other parts of the city, administrators have said.
In his proposal to the council, Stoney noted that the city reduced projected revenue in the current fiscal year budget by nearly $40 million in anticipation of COVID-19’s economic impacts, and the proposed budget anticipates a further decline of nearly $11 million in reduced revenue.
“We are optimistic that we will see a return to pre-COVID consumer behaviors; however, we are not projecting that to fully occur until (FY23),” Stoney said in his budget message.
The proposed budget also reflects COVID-fueled declines in revenues from the city’s admissions, meals and lodging taxes. Those shortfalls offset some of the growth the city has seen in real estate tax revenues. Total general fund revenues are projected to total $770.2 million, a 3.5 percent increase compared to the current fiscal year budget, largely fueled by a projected 6.5 percent increase in taxable real property in FY22.
The budget would fund a second phase of a city employee compensation and classification study, which got underway in 2019. The second phase would be targeted at increasing salaries for employees close to the mid-point of their respective job classes. The budget also raises the minimum wage toward achieving a $15-an-hour level in coming fiscal years.
The proposal also calls for setting aside $28 million for the planned Enslaved African Heritage Campus in Shockoe Bottom. That funding would be included in the city’s FY22-26 Capital Improvement Plan.
Councilmembers continue to hold workshops on the budget, and a second hearing is scheduled to be held May 10, ahead of a vote to adopt by the end of that month.
Hanover approves $513M budget
The Hanover County Board of Supervisors OK’d a $513.2 million budget that features a $289.9 million general fund for fiscal year 2022. The budget’s general fund is an 8.7 percent increase compared to FY21.
Thanks largely to higher assessments on real and personal property, general fund local revenues are expected to increase by $15.3 million. County tax rates remain flat.
The real estate tax rate remains level at 81 cents per $100 of assessed value. Supervisor W. Canova Peterson argued that local businesses could use a tax break in light of the pandemic and ultimately voted against the budget, casting the sole nay vote on the motion to adopt it with the unchanged tax rate on April 14.
“We have been through a terrible pandemic and we are still going through a pandemic, and the private sector has suffered much more than the public sector has in terms of the impacts of that,” said Peterson, who advocated for a 2-cent cut to the rate.
The adopted budget earmarks $1 million in local funding to support broadband expansion, as well as $310,000 to fund a scheduled update to the county’s comprehensive plan.
The first year of the five-year capital improvement plan includes more than $10 million for road improvements and $9.7 million for public safety capital projects, which includes $4.6 million for courthouse renovations and $1.4 million for a fire station in Mechanicsville.
County and school employees get a 2.5 percent raise, along with additional targeted raises for school and public safety employees. The budget also adds about 15 new positions to the county workforce, about 10 of those in public safety agencies.
Note: The City of Richmond section of this story has been reworded to clarify that the proposed budget does not include adjustments to existing tax rates. An earlier version misstated “taxes” for “tax rates.”
BizSense reporter Jonathan Spiers contributed to this report.
“The [City of Richmond’s] $770.3 million proposal includes no increases in real estate, personal property or other general taxes.”
This should read: “no increase in . . . tax rates.” Real estate values are increasing sharply, thus taxes will rise as well, unless the rate is lowered. The real estate tax rate in Richmond should be lowered.
So true. The article should simply say no increase in tax rates. Most taxes have two parts, value (of the good, service, or business) and the rate. Value goes up 20%, your taxes do increase. Heck the only time you real estate taxes have gone down in this city if the last decade is probably because the improvements on the site were demolished.
Side note most Council members do NOT believe the Mayor’s budget projects and have said so publicly. The new city budget is, as noted, based on lower meals and lodging taxes. It actually keeps the same revenue as we saw in the last fiscal year with no real increase in revenues. Admission maybe stay low and but lodging should pick up and meal taxes rate should also show some improvement as this budget reflects out income through July 2022.