Does Henrico Need a Meals Tax — or More Innovative Government?

Henrico supervisors -- following path of least resistance.
Henrico supervisors — old, tired, following path of least resistance.

From a column published in October edition of The Henrico Monthly:

by James A. Bacon

Before pulling the lever this November on the meals-tax referendum, Henrico citizens should ask themselves: Are they satisfied with county government that conducts business as usual, posing false choices between raising taxes or cutting services? Or would they prefer proactive government that adopts cutting-edge strategies to control costs, grow the tax base and improve the quality of services?

There’s no denying that Virginia local governments have seen better times. Revenues for most cities and counties have yet to recover to levels that prevailed before the Great Recession. Henrico County runs a tighter fiscal ship than most, as evidenced by its AAA bond rating, but its property-tax revenues have lagged, and big liabilities are looming.

The local-government share of the Virginia Retirement System’s unfunded pension liabilities amounts to $15.2 billion – Henrico’s portion is $507 million – and the state is compelling localities to accelerate payments into the system. The new rules could cost Henrico about $15 million next year, says Budget Director Barton Hinton. Also next year, state and federal stormwater regulations will go into effect that likely will force counties to spend millions more each year on mitigation. No one is sure what those costs will be for Henrico, but they could run into millions of dollars yearly – costs that, according to Hinton, aren’t included in the $100 million budget gap the county projects over the next five years.

Critics acknowledge that Henrico faces tough decisions. But the county’s position – “without new revenue, significant cuts may have to be made”– represents a bankruptcy of the imagination and an appeal to fear. Tax opponents have offered a litany of savings that county officials have waved off, from selling the county golf course to paring programming on the public access channel and charging insurance companies for county ambulance rides.

Contrary to the claims of county leaders, Henrico has not cut spending to the bone. “Over the past four years, Henrico has cut $115 million and 646 positions from its budget,” trumpets the Meals Tax website. But the numbers are hocus-pocus. In the county’s estimation, backtracking on budgeted spending increases or budgeted hires counts as a “cut.” Worse, the county counts $30 million in “utilization of one-time funds” to avoid school layoffs and pay for emergency vehicles as cuts.

Really? Spending “one-time” funds counts as a cut? Abracadabra! Now you see it, now you don’t.

What has Henrico County done to restructure and re-engineer the cost of government operations? Precious little. Most of its real cuts (as opposed to phantom cuts) were temporary – not filling vacant positions, cutting travel to conferences, deferring capital spending – and will bounce back as soon as money is available. The tally of permanent savings runs only $3 million – from telecommunications efficiency savings, vehicle-fleet downsizing and lower utility bills from energy savings. Three million dollars out of a $1.25 billion budget!

One can make a reasonable argument that the county needs a short-term revenue boost to get over the hump. Unfortunately, if voters approve the tax, which is expected to raise $18 million a year, it will run on autopilot long after the short-term budget crunch has passed. It will recede into the background and supervisors are not legally required to revisit it.

Voting “yes” on the meals tax takes the county’s leadership off the hook for enacting long-term reforms. Consider three broad strategies that no one is talking about.

First, experiment with Massively Open Online Courses (MOOCs) to reinvent Henrico’s school system. Look to the example of Richard Bland College in Petersburg, which is using MOOCs to teach foreign languages. Richard Bland is outsourcing its instruction to an outside vendor that specializes in online learning. The college promises a pupil-to-teacher ratio of ten-to-one, and it charges only $4,000 per year for a full course load. K12 Inc., based in nearby Herndon, is one of many companies that provides comparable services to school systems. Don’t tell me Henrico, which spends more than $9,200 per pupil, can’t find a way to save money and improve educational outcomes. Read more.

For a similar take on Chesterfield County, click here.

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10 responses to “Does Henrico Need a Meals Tax — or More Innovative Government?”

  1. kabuki dancing on both sides.

    1. Henrico County spends TOO MUCH money on …. what?

    2. Henrico County spend money on ____ that i should not.

    total up 1. and 2. and tell me what that number is.

    idea #2:

    totally dedicate the meals tax to one thing – pensions.

    enact the tax with a sunset provision which automatically requires a revisiting of the revenues and what they are spent on.

    I think there are a number of ways to compromise but the idea that only one outcome is acceptable – no meals tax – well…

    it sort of reminds me of the single-dimension approach to govt these days.

    I’ve not heard the claim that Henrico is an irresponsible govt. I’m not sure without evidence of that – that a claim that an additional (meals) tax is (in effect) – irresponsible – has substance.

    I’m not defending Henrico here. I suspect they are playing a little fan dance of sorts but I think the opponents are – also.

    If the opponents had cajoles… they’s make an explicit Prima facie argument instead of one that is long on innuendo and short on hard evidence, IMHO of course.

    This sort of characterizes the way we “debate” govt now days. I’d like to be able to look at a “con” argument without immediately figuring out which party it is coming from…. that’s it’s instead an argument with non-partisan merit but now days – even opinions about what govt should do – or not are issues.

    Why not have the anti-sales tax folks in Henrico put together a budget that shows that current revenues can pay for everything including the pensions?

    why not?

    to me that would be the most effective way to kill the meal tax. – we’re not broke and we don’t need it.

    1. Larry, you are trapped by the false choice of raising taxes or cutting services. As I made abundantly clear in my column (if you got that far), Henrico needs to leap to the next level:

      (1) Explore MOOCs and other online technologies to turbocharge education.
      (2) Adopt land-use strategies in which growth more than pays its own way.
      (3) Utilize “smart city” digital technologies to drive out costs and make the county more responsive to citizens.

      At present, no one is talking about these things. That’s where the conversation needs to go.

      1. well… I’m looking for precise empirical approaches to taxes and less generic ideological opposition.

        I think “trapped” also applies to those who see the unfunded liabilities that have to be paid for – but instead it is wrong/illegitimate to be satisfied by increased taxes or reduce services.

        why are the two connected?

        I see the 3 things suggested as certainly having merit – but why link them to other things?

        it’s sorta like you don’t care about these innovations unless they can head off tax increases. .. otherwise. …business as usual….

        it’s pretty clear – when you have pension obligations – you have two choices – 1. raise the incoming revenues to fund it

        or 2. – find some ways within current services to re-prioritize.

        the “innovation” are totally speculative.. they may or may not play out and the time it takes for them to “ripen” is totally independent form the time for responses to the pensions to “ripen”.

        you’re linking disparate things as if they are both going to progress at the same rate and scope… why would you think that?

        MOOC may well revolutionize education but it may well take 10-20 years longer than resolving the pension issue.. but you’re saying in effect “hurry up on the innovation” so we don’t have to prioritize.

  2. Peter Galuszka Avatar
    Peter Galuszka

    Gee, these stories are beginning to send out the fill-in-the-blanks template you’d get from the ALEC and the Koch Brothers..
    Don’t forget to check the following boxes:

    Unfunded pension liabilities (as if they haven;’t been around for years)

    Pushing MOOC and online education. As if Henrico runs its own college system

    Digital gizmos can save you (a little) bucks.

    No new taxes needed to pay for everything. It comes down form the sky, like manna from heaven if you are properly disciplined.

    1. ALEC and the Koch Brothers? Really?

      I recently read the ALEC report recommending model legislation in the states. Here’s what I didn’t find in there:

      (1) Nothing about smart-cities initiatives.
      (2) Nothing about land-use reform.
      (3) Nothing about MOOCs and K-12 education.

      Other than a strenuous objection to raising taxes, my agenda has no similarity whatsoever to ALEC’s.

      Be honest, Peter, you just have a gut suspicion of any government reform that does *not* entail spending more money and raising taxes! You can’t imagine any other way of doing things.

  3. Les Schreiber Avatar
    Les Schreiber

    You need to look at two questions with on line learning.What does the research show with kids learning basic skills as in pre-k through middle school and how to convert the current teaching staff to effectively use these tools. As I have written before “eduland” is not a place that works with its staff to make change or innovate

    1. re: … eduland… Les.. how do you innovate and make changes in “eduland”?

  4. Breckinridge Avatar

    The one valid argument for the meals tax is to diversify the revenue stream, to reduce reliance on property taxes — if indeed that is the outcome. It could be if that is what the county wants. If the referendum question were, should we impose a 4 percent meals tax and cut the RE tax rate 2 cents at the same time, I’d vote yes. I understand the value of pulling more out of the pockets of people in the county but not of the county.

    Except I don’t live there, so this is just dicta.

    1. agree. the problem is the conservatives do not “trust” the county not to end up using that as an ADDITIONAL tax and not a offsetting tax – EVEN THOUGH Henrico appears to be one of the more fiscally conservative counties in Va with AAA credit, one of the lowest per capita school funding and in general a lean budget.

      one way to “innovate” budget-wise might be to for one side or both to propose and overall tax cap limit -percent or per capita

      The Comparative Reports for Local Govt generated by the Auditor of Public Account is a step in that direction.

      In prior years – they’d generate an average for each metric – like tax rate or schools costs.. etc so you could see if your own county was “scoring” average or higher or lower for a given expenditure or tax.

      the problem with the GOP is – they really don’t have a bottom line on what taxes ought to be (or not).. or expenditures. It’s always some subjective approach that assumes from the get go that more can be cut no matter what and it can be done without affecting services.

      they don’t come right out and put it in those words – but that’s essentially what they are saying … they really do not deal in specifics except to point to some part of govt – like in this case – PR – and say it’s an exampled of an unneeded expenditure and because it exists there are probably more and if all of them were de-funded there would be no need for more/additional/other taxes.

      For me – I’d rather see a concise, comprehensive alternative budget approach but that would require much, much more than most citizens groups would be wiling to do and so it becomes basically a political game – one in which there are never any quantitative or qualitative answers – just advocacies… for philosophical “approaches” to governance.

      It is often said the govt that is closest to the people is the government that best reflects the wishes of the people.

      The opportunity is there but in the 21st century there are few citizens who are really willing to do real budget analysis… so we end up in these partisan pushing/shoving contests…

  5. Justine Avatar

    Your ideas are not completely without merit, but I would make a few points.

    1. Advocating to move to a massive online courseload for public school students is not going to help attract large employers here. Right now, they come because they believe the educational experience here is unique and excellent. Make it one that students could get anywhere in the county and you lose that edge. Good luck getting it back.

    2. No problem with using more digital technologies to cut costs, but I seriously doubt that turning the lights off a little quicker is going to save $18 million a year, every year. The school system already has implemented a number of green technologies that do save a lot of energy and use some of the strategies you touched upon, and while they have resulted in cost-savings, it’s not nearly enough to close the funding gap.

    3. How should the county “encourage” this type of growth beyond what it’s already done? West Broad Village, Rocketts Landing, the rezoning for Innsbrook – those are three pretty strong examples of urban mixed use developments that either already exist or are about to take shape. The county cannot force developers to build this kind of project, and the county can’t exactly go out and rezone existing land to mixed-use designation unless it owns the land in question.

    The bottom line is that Henrico believes its advantage lies in its quality of education and low real estate taxes. Take those two things away or alter them, and you begin to lose the elements that have attracted businesses to locate here.

    And whether you agree with it or not, the argument that half the money collected by a meals tax would come from non-Henrico residents is a pretty strong one to me. I don’t want my real estate tax to increase, but if I choose to eat at a restaurant a few times a week and pay an extra 50 cents every time I do, that’s my choice and one that won’t affect my bottom line in any significant way.

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