Henrico’s $6 Million Surprise

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Photo credit: Times-Dispatch

When last we heard from Henrico County officials about the parlous state of the county budget, we were told that it was necessary to impose a 4% meals tax because there was no other way to balance the budget without raising taxes or gutting the school budget. Tax foes argued that the county would not need the $18 million in meals tax revenue if it cut expenses instead. One of the strategies mentioned we mentioned was selling excess county real estate.

County officials disputed our arguments and got their meals tax referendum past the voters, but look what’s happening now! The county has announced its intention to sell the old Best Products Co. headquarters site, which it had purchased in 2011 for $6.2 million with an eye to turning it into a county-government facility. After some study, according to the Times-Dispatch, county officials concluded that the cost of configuring the facility as a county building wasn’t worth the cost.

It turns out that the complex has been costing the county about $150,000 a year to maintain. The county has been foregoing about $70,000 a year in tax revenue by taking the property off the tax rolls. Voila! Selling the property will yield an instant $220,000-a-year budget gain! Oh, yes, the county also expects the property will sell for as much or more than it paid.

And there’s more savings where that came from. According to the T-D:

As his recent State of Henrico County address, County Manager John A. Vithoulkas outlined a commitment to minimizing the county’s stock of unused buildings. He pointed to a former library and a former fire station, currently on a lease-to-own program with groups in the community.

“If we have assets, as a county, that are not in use, that are fallow, if you will, we are (going to put) them into use,” he said.

Questions that Henrico citizens should ask. On the one hand, it’s good to see that the county administration is making efforts to reduce the cost structure of county government. On the other, this incident does not inspire citizens to trust that government. Why did the county wait until three months after the election to release this information?

One cannot help but wonder if county officials sat on the information for political reasons — it would have undermined their case that Henrico had no alternative but the meals tax to raising property taxes or cutting school spending. It’s not absolutely clear from the T-D story when a decision was made to dispose of the property, but it appears to have been some time ago. States the T-D: “The county awarded a $400,000 contract for a study of its space needs and of how to use the Best building. It quickly became clear that it wouldn’t be cost-effective to renovate the building, so county officials shut down the study.” (My emphasis.)

Questions: When did the county shut down the study? When did the county put the property back on the market? What other magic tricks will county administrators pull out of their hats? Stay tuned…

8 Responses to Henrico’s $6 Million Surprise

  1. I see what you are saying to an extent, but the county said it needed like $20M a year for each of the next 5 years — not $6.2M once. So while your premise is not lacking some merit, unless Henrico has $100M worth of properties that it is secretly planning to sell in the next five years, I’d say this is not really a big deal.

    Also, I Googled this, and it looks like the Henrico Citizen wrote about this two months ago: http://www.henricocitizen.com/index.php/news/article/county_proposes_sale_of_best_plaza1210#.UubFsvYo4lI

  2. Jason, no one pretends that this one strategy — selling surplus real estate — would close the funding gap. It is only one of many strategies that could be pursued. I just wish we’d known about it when we were fighting the meals tax.

  3. if the “funding gap” is an annual expenditure.. selling stuff won’t fix it.

  4. Selling the property would improve cash flow by $220,000 a year. That’s 1/35th of what we need. True, it’s only a small part of the solution. But small changes have a way of adding up to big changes.

  5. agree.. but it’s a special case.. how many county properties are there that can be sold to reduce costs?

    at some point – you basically have a revenues vs expenditures quandary.

    although, I will admit.. that if someone has a sharp pencil.. you probably can (and should) whittle it down…

    Our BOS has basically said that they’ll give schools whatever increases tax revenues bring in.. and they are a tea party leaning BOS.

  6. One of the problems… is that we’re not using benchmarks or standards for comparability and the perception is on a statewide basis that Henrico looks like a pretty lean operation virtually any operation can find more savings.

    The best buy thing looks like a nit in that given the current economy.. I’d not
    be surprised to see a much lower price for it… anyhow…

    but, we do have a tool that we can use. It’s the Auditor of Virginia financials for counties… that, I think, could offer some useful insight… if we look at the per capita costs… and a fair measure would be the top 10-20 counties in the state to capture the counties that have become more urbanized and provide more services.

    I’m betting that Henrico is going to have the lowest per capita costs in some categories.

    If Henrico is, in fact, one of the leaner govts in Virginia.. then the advocacy we’re seeing could be fairly categorized as in the “anti-tax” camp…i.e. no matter how lean the county is – taxes are still evil.

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