This Is What a Fiscal Meltdown Looks Like

And you thought the dead-baby-in-a-Petersburg-garbage-truck story was bad! Photo credit: WTVR

And you thought the dead-baby-in-a-Petersburg-garbage-truck story was bad!  Photo credit: WTVR

by James A. Bacon

Here’s what happens when you run a city government like Petersburg into the ground: The regional waste management authority is threatening to suspend its trash removal and recycling services unless the city commits to a plan to repay the $632,000 it owes.

City residents and businesses have been paying their monthly fees to the city, but the city has fallen way behind in its remittances to the Central Virginia Waste Management Authority (CVWMA], which in turn contracts with a local vendor, Petersburg-based Container First Services.

“We have been paying that vendor and without receiving compensation from Petersburg, we won’t be able to sustain [the service] too much longer,” CVWMA Executive Director Kim Hynes, told the Richmond Times-Dispatch.

The unpaid bills are not trivial. CVWMA, which provides waste management services to 13 localities in Central Virginia, generated $13.4 million in operating revenues in Fiscal 2015, according to its 2015 comprehensive financial annual report.  Petersburg’s unpaid bills far outweighs the $48,000 operating surplus the authority generated that year and the $501,000 cash it reported on its balance sheet.

Years of fiscal mismanagement came to a head this summer. A recent state audit of Petersburg’s finances revealed that the city is facing a $12 million budget gap in the current fiscal year while also dealing with $19 million in unpaid bills.

Bacon’s bottom line: The cost of Petersburg’s fiscal ineptitude is not limited to Petersburg. The inability to pay $632,000 in back bills puts the waste authority in an untenable situation. Either it stops providing garbage and recycle pickup for the city, which creates a potential health hazard for Petersburg citizens who have dutifully paid their bills, or the authority puts its own finances in jeopardy. Petersburg’s inability to pay its bills could potentially force the other jurisdictions of the Richmond region to step in to support the authority financially.

The moral of the story: When local governments are tied together through various regional compacts, a financial meltdown of one locality can shock waves to its neighbors.

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23 responses to “This Is What a Fiscal Meltdown Looks Like

  1. Two things.

    The video of the dead baby is completely tasteless and off point.

    Why do you keep beating the drum about Petersburg? Ok, the city has had problems for years. We get the point. If you are trying to turn this one case into a sweeping, right-wing diatribe of government, you had better start doing a better job.

    • Peter, I focus on Petersburg’s woes because I don’t think it is a one-off. I think we’ll see more Petersburgs in Virginia — it is the so-called canary in the coal mine. As long as people like you are in denial about the deteriorating condition of government finances at the national, state and local level, more financial calamities are inevitable.

  2. jezuz Jim – No it’s not a one-off but it’s not the first and won’t be the last but in the bigger context of the 133 governing localities (500+ governing bodies) in Va – can you show a trend that backs up your “we’re all going to go broke” chicken little fairy-tale?

    if you can show a trend that more and more cities and towns are going broke – then let’s hear it.

    otherwise – just pointing out when one of them goes south and portraying it as the face of impending disaster is silly.

    • Blind Larry, I never said or implied that “we’re all going to go broke.” I said that more financial calamities are inevitable. Hopefully, pointing out Petersburg’s follies rather than ignoring them will encourage other localities to make more responsible financial decisions.

    • Richmond can’t file required state financial statements (they just delayed again earlier this week). There is, at least, a $10m deficit in Richmond.

      Buena Vista is being sued by ACA who wants to foreclose on Buena Vista’s city hall over a golf course debt.

      Petersburg has just discovered a very large deficit it didn’t know existed.

      Martinsville is facing a multi-million dollar budget shortfall as revenues are stagnant while costs rise.

      There are 95 counties and 38 independent cities in Virginia. Of the ten poorest counties and cities, seven are cities. http://www.onlyinyourstate.com/virginia/va-poorest-cities/

  3. The dead baby story is over the top. However, the Petersburg story is important. It’s especially important in Virginia where cities are not in counties. Anywhere else, the county would have to make an effort to work out the city’s problems because the city is part of the county. In Virginia, this needs to be between Petersburg and The Imperial Clown Show in Richmond I guess. Of course, as always, the clown show will find some way to soak all of us to make up for the incompetence in Petersburg and Richmond.

    Working true to form, the GOP wing of the clown show immediately popped up with some stupid statements …

    http://wtop.com/virginia/2016/08/lawmakers-say-state-bailout-of-petersburg-unlikely/

    I am not sure what these geniuses in the GOP think WILL happen. Petersburg has 32,000 people. At best, I’d guess 10,000 are wage earners making enough money to absorb some level of higher taxes. That’s $1,750 per person per year (I assume it’s a recurring problem).

    Of course, once you start socking it to the wage earners they move. The whole city is just 22 sq mi. How hard can it be to move to Chesterfield or Colonial Heights?

    Once the higher wage earners leave to avoid the rising taxes the real estate values will fall and collections from real estate taxes will fall.

    Petersburg already has relatively high tax rates – $1.35 per $100 of assessed value for residential real estate for example. Fairfax County is $1.13 per $100.

    These undersized communities taking on the overhead of being an independent city with no ability to annex adjacent land as it urbanizes is a formula for disaster in my mind. I am going to guess that Jim Bacon is right and Petersburg will be the first but not the last small, independent Virginia city to struggle financially.

    My message to the clown show is pretty simple – you created this hopelessly flawed governance structure, you need to fix it.

  4. This is so true – “These undersized communities taking on the overhead of being an independent city with no ability to annex adjacent land as it urbanizes is a formula for disaster in my mind. I am going to guess that Jim Bacon is right and Petersburg will be the first but not the last small, independent Virginia city to struggle financially.” Petersburg has no room to grow. Amazon is in Dinwiddie, Walmart – Dinwiddie, Aldo- Dinwiddie, Food Lion – Prince George and the list goes on and on in Prince George and Chesterfield as well.

  5. re: dead baby – I guess Jim has to get a little “flair” going in BR, eh?

    re: flawed independent city idea

    Don sometimes confuses me

    I thought he LIKE independent cities and hated Dillon and wanted MORE home rule!!!

    but also – look at the rest of the country.. Detroit, Flint, and a few other places… not the Virginia model of cities but still a load of trouble but still not the “all govt is doomed” pablum meme we are treated to every few days..

    I swear you can tell when Jim has been getting into that right wing catnip these days.

  6. I’m with DonR and KSM on this — but not Larry’s slap at DonR and JB on the Dillon Rule. The DR is part of the problem, for sure. When the ONLY way a community can gain real home rule is to form an “independent city” it skews the decision toward separating from the surrounding County in spite of the financial and political inefficiencies created by tiny “city” entities. A proper fix must provide more County home rule generally, not just ad hoc exceptions to the DR for Arlington and Henrico. The issue is not government per se, but what structure of government.

    • Exactly right on that.

    • nice try Acbar – but look at the history of cities and towns in Va.

      It’s not exactly a recent trend.

      Our friend Bosun along with some docs posted here showed how these places came about originally and the long and short of it – is that Counties did not originally provide urban services – they were primarily agents of the State to enforce state laws and standards.

      If someone wanted services -they had to form a district with a separate taxing authority. It became clear that multiple different single-purpose districts for each service were not as good as forming a single entity that would provide all those services under one authority – and use primarily property taxes to fund those services.

      This is still the case with these towns and cities – what has changed is that in some locations – counties have become providers of urban services also – and duplicating what the adjacent cities and towns have been already providing for longer periods of time.

      out in the rural hinterlands – the counties still don’t offer urban services and the towns and cities in those location still provide higher levels of services that the counties do not provide.

      how you end up categorizing this as as a “hopelessly flawed governance” structure is … not understanding the why and how of cities and towns to begin with.

      It’s true that today – some cities and towns should consider consolidating with adjacent counties – but in other places those cities and towns STILL offer services that the counties do not offer.

      Now for those places – if the people that live there – if they would rather give up those services in exchange for lower taxes – then they should certainly vote the way they want to go…

      but again – not recognizing the purpose of cities and towns with respect to higher levels of urban services is just misguided in my view

      • Gee Larry – Virginia sure is unique. God knows that the same thing didn’t happen in the other 49 states. Yet every one of those other 49 states have their cities in counties. There are 41 independent cities in the US, 38 in Virginia. I guess all those states, those 300 million or so people can’t recognize the purpose of cities and towns. No, only in Virginia can people like you and the members of the Imperial Clown Show in Virginia peer through the fog pf stupidity that pervades all the other states. Only you and the clown show members can see your own dazzling brilliance. To everyone else this is just a screwed up, backwards bizzare way of doing things. But to you …. genius, pure genius!

  7. here’s that excellent paper that gives the history of Virginia cities and towns:

    http://www.via.vt.edu/fall99/county.html

    ” The respective original purposes of towns and counties are important and color the present relationship between them. Counties were–and still are–designed to serve as the government of the commonwealth at the local level and to provide those services that are the due of every Virginian, such as education, criminal justice, welfare, and electoral functions. Under legislative authority granted by the General Assembly, some counties also have assumed and provide many urban functions and powers associated with a thickly settled community. These functions include police, utility service, water, recreation, and land-use regulation.

    These seminal differences lead to different perspectives that constitute an important factor in improving town- county relations.

    While the role of towns has not changed, the General Assembly has significantly altered the role of counties over the past 50 years to offer urban citizens an alternative to living in cities and towns. This alteration has exerted an unintended and dramatic influence on the commonwealth’s towns. The General Assembly has enabled counties to offer competent urban services to the residents of the unincorporated counties that in the past had been the privilege and prerogative of town residents who paid for those urban services through town taxes.

    The legislature’s grant of urban service powers has opened up all areas outside towns to urban development, with the result that large areas outside towns are now urban in character and development patterns. The counties that perform such municipal services fulfill two roles: the traditional county role and the emerging municipal role. In essence, the county, to the extent that it provides municipal services, is performing a town function, but without the territorial limitation and reference to a community inherent in every town.

    • What a complete crock of manure. Every night I pray to the General Assembly and thank them for enabling counties to offer competent urban services. And this is all possible because we have a uniquely brilliant General Assembly and cities that are not in counties. You can tell that because only in Virginia do counties offer competent urban services. That doesn’t happen in Cook County, IL, Westchester County, NY, DeKalb County, GA, Montgomery County, MD.

      The fact that urbanized counties offer urban services has nothing whatsoever to do with the Virginia General Assembly or the fact that Virginia keeps cities out of counties. Absolutely nothing.

      The fact that cities are not within counties in Virginia has absolutely nothing to do with the way cities and counties developed. Cities and counties developed the same way all across America.

      No, it just another way the sons and daughters of bitches in the General Assembly fracture the localities in the hope of consolidating power for themselves.

      • Don – none of what you say, changes the fact that cities and towns are historically the way that urban services were provided in Virginia before the General Assembly allowed counties to do it.

        And this is no inherent reason why a county would do it “better” or more fiscally resposibily – either.

        Urban services in Virginia are ALSO offered by other entities like authorities and tax districts… as well as private providers like those in gated communities.

        one point you make : ” The fact that cities are not within counties in Virginia has absolutely nothing to do with the way cities and counties developed. Cities and counties developed the same way all across America.”

        that’s not the way the history reads. Cities and Towns in Virginia began as service districts with separate authorities than the counties.

        it even works that way right now with jail, water and sewer, library, and transit authorities that are separate and independent from the counties – administratively – even as their facilities are within those counties – even span across several counties.

        I don’t know how other places work but I’ll point you to one that you might know – the “Port Authority” in New York/New Jersey which are _not_ “independent cities.

        ” The Port Authority of New York and New Jersey (PANYNJ) is a joint venture between the U.S. states of New York and New Jersey, established in 1921 through an interstate compact authorized by the United States Congress. The Port Authority oversees much of the regional transportation infrastructure, including bridges, tunnels, airports, and seaports, within the geographical jurisdiction of the Port of New York and New Jersey.

        ” The Port Authority is jointly controlled by the governors of New York and New Jersey, who appoint the members of the agency’s Board of Commissioners and retain the right to veto the actions of the Commissioners from his or her own state”

        so these folks are separate and independent from the other governance of the cities perhaps not that different from METRO!

        • You are wrong, pure and simple. Your paper could have just as easily been called, “Cities and Towns in America”.

          The way it should have worked was to have cities within counties. The area called city was urbanized and provided a different level of services to its citizens. Therefore, it needed additional governmental capabilities beyond those that the county needed. Over time, areas of the county near the city urbanized. They too needed new governance structures to manage this urbanization. The answer was for the city to annex parts of the county as it urbanized. This maintained a proper balance between county and city.

          One reason this approach worked in the other 49 states is that the county could lie with the city annexing its land since the city was still in the tax base of the county – to some extent. In Virginia, cities are not in counties. So, when the city tried to annex the urbanizing parts of the county it was a pure win – lose, the city won and the county lost. So the Virginia counties balked on annexation and the Imperial Clown Show in Richmond adopted a 32 year long moratorium on annexations while they “thought about this matter”.

          The net effect is that the development of true cities in Virginia was stunted by this idiotic, unique and bizarre approach to governance.

          Virginia has the 12th most people of any state and the 14th highest population density. Yet 24 states have cities which are larger than Virginia’s largest city. And, if you eliminate counties that were renamed cities (like Virginia Beach) the number jumps up to 32.

          Read all the mumbo-jumbo papers you’d like LarrytheG. At the end of the day Virginia’s cities have been stunted. There’s a reason for that. The reason is that the General Assembly has long been controlled by rural factions who manipulated all kinds of processes to maintain its own power. They sold the state out LarrytheG and refusing to put cities into counties was just one of the ways they sold us out.

  8. As a city resident, I do not mind paying extra for the extra services that a city provides. Paved streets, curbs & gutters, fire protection, streetlights, trash removal, police instead of sheriff etc.
    What galls my butt is the extra taxes I pay because of the social welfare and higher public education costs because the lower class folks that require those expenditures live in the urban centers. Until there is a true way to equalize the fiscal stress of the cost of education for example, urban centers are and will be at a disadvantage.

    • well.. you’re saying the extra, more comprehensive services , attracts… free loaders?

      Don likes the idea of home rule and independence but how do you keep people you don’t want – out?

      that sounds pretty bad HCJ… totally counter to the idea of people being able to live where they choose…

      how would you keep folks out?

  9. You can live anywhere you want as long as you pay to ride. Sorry, unlike you, I am not a socialist.

    • I’m only a socialist in your addled mind… sorry.

      I no more like entitlement takers than you but advocating finding a way to keep them from being where you live – as a “solution” is something that has a really bad smell to it – much worse than socialism.

  10. Wow! It’s brutal in this conversation.
    There is no way to unscramble the egg of independent cities; there’s not enough political will or power. Believe me, I have done enough issue papers on the subject. So, we have to live with things as they are.
    City-initiated annexation is dead. The General Assembly is being nice by keeping the law on the books and passing [since 1983 or so], “temporary” moratoria on that and the incorporation of new cities, which is smart since they don’t want to add to the problem. Cities collectively do not have the power to do anything about it. Besides why would a predominantly R legislature want to do anything to help predominantly D cities? Statesmanship left the white building on top of Goat Hill a long time ago.
    Cities are stuck with what they got and will have to do their best with the resources they have in the face of unfunded mandates [confronted by all local governments], aging infrastructure and concentrated populations with great social needs.
    Sorry to be such a downer, but I do not see much hope for Virginia’s historic cities. Some are better off than others, like Mr. Hill City’s large economic driver called Liberty U. Others, like Petersburg, have only local, state, and federal governments to provide employment. Bosun

  11. Tip: If you want to get an idea about one part of the economy of your or any county or city, check out the tables in the back of their most recent audit or comprehensive annual fiscal report [CAFR]. There will likely be a table entitled Principal Property Taxpayers and Principal Private Employers. [There are also some other tasty tables, the number of which depend on the sophistication of the locality.] I think that most localities post their CAFR on line. Bosun

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