by James A. Bacon
The financial travails of the City of Petersburg has prompted some readers to wonder if other Virginia localities are fiscal time bombs waiting to go off. There are many causes of fiscal dysfunction but one sure sign of trouble is a heavy burden of long-term debt.
One way to measure that burden is to express debt as a percentage of the tax base, in particular as a percentage of the true value of property. Local governments have many revenue sources, but the property tax is the one major source which city councils and boards of supervisors can control. Therefore, the value of taxable property is a good proxy for a locality’s tax base, and the ratio of debt to the tax base is a good indicator of fiscal health.
To get a sense of which localities might be over-extended, Jim Weigand, a regular reader and concerned citizen of Lynchburg, calculated net debt as a percentage of true value of property (TVOP) for fiscal 2015. The ten most leveraged localities appear in the table above, with Accomack County heading the list at a fear-inducing 22.8%. The state average is 3.4%, and the least leveraged locality in Virginia, Mecklenburg County, is three-tenths of one percent.
Petersburg ranks fairly high on this list, 19th in the state, with a ratio of 6.8%. Buena Vista, another fiscal basket case we have written about on Bacon’s Rebellion, cracks the Top 10 with a ratio of 10.1%. The City of Richmond, whose inept fiscal management we have highlighted, does not appear on the list… because it could not comply with the data reporting requirements!
If I were a citizen of Norfolk, Portsmouth or any of the other localities atop the list, I would regard this ratio as a warning flag. This one metric along is not sufficient to declare a locality to be in poor fiscal shape. Many factors go into calculating a locality’s health. But a high debt-to-tax base ratio is undeniably a worrisome sign. Conversely, an exceedingly low ratio raises questions as well. Is Mecklenburg County spending enough money on utilities, school buildings, public safety buildings and the like?
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