Henrico budget plan includes tax rate reductions, $50M for water upgrades

Henrico supervisors and administrators discuss the proposed FY26 budget at a work session Tuesday. (Jonathan Spiers photos)

Henrico County is proposing a fiscal year budget that looks to address last month’s regional water outage and provide more tax relief to residents and businesses recently hit with higher property assessments.

County administrators on Tuesday presented a preview of the budget that would include a 2-cent reduction to its real estate tax rate and $50 million allotted for water service improvements.

They plan to officially propose the budget March 11 for the 2025-26 fiscal year, which starts July 1.

That schedule is two weeks earlier than usual, in part to provide the Board of Supervisors more time to workshop it amid discussions underway with the City of Richmond about potential paths forward from the water outage that extended from the city to eastern Henrico and parts of Hanover County.

The timing also comes soon after Henrico property owners received their latest real estate assessments, which increased 8% on average across the county.

John Vithoulkas

At a press briefing Tuesday morning, County Manager John Vithoulkas acknowledged the statistic in presenting proposed reductions to real estate and personal property tax rates that he said would amount to the largest collective tax reductions provided by Henrico in nearly four decades.

“Henrico County is not immune to the national housing crisis, so our assessments are going up because the supply of housing is not what it needs to be,” Vithoulkas said at the briefing at Fairfield Area Library. “Our Board of Supervisors wanted to come out ahead and provide some stability and let folks know that tax relief is on the way.”

The budget also would set aside $50 million for improvements to the county’s water system in the eastern part of the county, which is currently partly served by the Richmond water plant that shut down for several days in January. Vithoulkas said the county and the city are currently discussing potential long-term solutions to avoid a repeat scenario, but that the $50 million allotment would be budgeted regardless to improve Henrico’s resiliency in providing water service.

At a work session with the board Tuesday afternoon, Vithoulkas said: “If the water crisis showed us anything, it’s that we need to increase our water resiliency in the east. That’s what this money is doing.”

County Manager John Vithoulkas previewed the budget plan at a press briefing at Fairfield Area Library.

With a general fund totaling $1.35 billion, an increase of 8% over the current spending plan, the proposed budget would be based on a real estate tax rate of 83 cents per $100 of assessed value – a 2-cent reduction of the current 85-cent rate. The county last reduced the rate in 2022, also by 2 cents.

The proposal also would decrease the personal property tax rate to $3.35 per $100 of assessed value for both vehicles and business personal property, which are currently taxed at a rate of $3.40 and $3.50, respectively.

The adjustments are projected to provide $18.3 million in new tax relief, including additional relief for older or disabled residents participating in the county’s Real Estate Advantage Program and Real Estate Cap program.

The relief would be offset in part by $13.6 million in revenue expected from a planned increase to the county’s personal property tax rate for data centers, on items such as computers and other equipment used at data centers. Those items have been taxed at a rate of $0.40 per $100 of assessed value since FY18, when the rate was created and set low to help draw data centers to Henrico.

The proposed budget would increase that data center rate to $2.60 per $100, which Vithoulkas said would keep Henrico below the state average of $3.09 per $100 and at least $1 less than the rates of localities in Northern Virginia that Henrico competes with for data centers. Before Henrico established its 40-cent rate in FY18, data centers in the county had been charged $3.50 per $100 based on the regular business property tax rate.

Henrico currently uses real estate tax revenues from data centers to fund the housing trust fund it established last year to address the growing housing affordability gap across the region. Revenues for the trust fund would not be impacted by the proposed business property tax adjustment, the county said.

Vithoulkas said the adjustments worked into the proposed budget would provide tax relief for 115,000 homeowners in the county, 320,000 vehicle owners and – with the 15-cent reduction in the business personal property tax rate – 20,000 businesses.

The budget also would include a 6% raise for all county government and school employees. Schools and public safety make up 82% of the proposed spending plan for the budget’s general fund, which makes up the bulk of the overall budget. The full budget amount, including state and federal pass-through funding, is not yet finalized, officials said.

The general fund would also continue the county’s Henrico Cares youth mental health initiative for a second year, pay for new tech for police, fund 13 new firefighter positions and support the newly opened Bungalow City Firehouse 23.

It also would fund projects from the 2022 bond referendum including a renovation of Johnson Elementary School, a new elementary school in the Fairfield District, a new animal adoption center, a replacement for Firehouse 1, and improvements to the Deep Bottom Park boat ramps.

The full budget plan is expected to be posted on the county’s website March 4, ahead of the formal presentation at the board’s March 11 meeting. Budget workshops are scheduled March 17-21, and a public hearing is scheduled to be held at 5 p.m. at the board’s March 25 meeting. The board would vote on the budget at its April 8 meeting.