James City County Administrator Bryan Hill delivered a simple message to the county’s board of supervisors during a Saturday briefing on what he has heard from citizens and staff since beginning work in September: The future is expensive.
The supervisors spent much of the briefing listening to issues Hill has identified in the county, which included ensuring adequate access to drinking water, managing runoff from precipitation and how to maintain the county’s sterling bond ratings.
The three issues combined are an expensive challenge for the supervisors to handle in the coming years. Supervisor Jim Kennedy (Stonehouse) asked Hill to come up with a presentation showing what various tax increases could do to address the problems.
“I’m the last one who wants to look at those things,” Kennedy said. “I think we’re at the point now where we must look at some things. It’s either that, or we look at scuttling some things, and right now I don’t think there’s anything out there that our community wants us to scuttle.”
He also suggested looking at how much money is sent to Williamsburg-James City Public Schools. He said there is a surplus of funds each year the schools must give back to the county, and those funds could potentially be used to help address the problems the county faces.
Supervisor Mary Jones (Berkeley) echoed Kennedy’s remarks about the schools and asked Hill to make sure there were no other areas to look for funds to shore up the problems.
Hill said the chief problem he has identified is water, which the county’s residents currently pay less than any other Hampton Roads municipality to buy. But that will soon change, as state regulators from the Department of Environmental Quality seek to reduce the amount of water the James City Service Authority can withdraw from underground aquifers.
Those aquifers are the county’s only source of water. JCSA’s current permit allows for up to 8.8 million gallons per day to be withdrawn — the county currently uses about 5.4 million gallons per day — but current indications from DEQ suggest it wants a 3.8 million to 4 million gallons per day limit for the county.
The only current option for water the county has other than the aquifers is Newport News Waterworks. Under a 2008 deal struck with that utility, about $25 million has already been paid for up to 2 million gallons of water per day, though none has yet been purchased. The deal leaves room for an additional inflation-adjusted $33 million fee to the utility for another 3 million gallons per day.
Factoring in costs for infrastructure, should DEQ get its way and the county goes with the Newport News deal as it is currently configured, the county would be on the hook for about $50 million in additional spending in the coming years.
That figure did not sit well with the supervisors.
Supervisor John McGlennon (Roberts) said those figures were negotiated when Newport News Waterworks needed to build a new reservoir, something it no longer needs to do. He said the county should look to renegotiate the deal, a point supervisors Kennedy and Kevin Onizuk (Jamestown) echoed.
“For $50 million, I would think we could find a way to source our own water,” Onizuk said.
JCSA General Manager Doug Powell said the utility has hired an engineering firm to investigate other sources of water for the county.
The county is also trying to manage its bond ratings. Those ratings factor into the interest rates the county gets when it takes out debt to pay for infrastructure costs, and also serve as a general indicator of the fiscal health of the county.
A presentation from Davenport & Company — a financial services firm hired by the county to analyze its finances — shows a declining balance in a fund designated to pay down debts associated with debt from infrastructure costs could harm the county’s current ratings. Two of the three ratings firms give the county the top-flight AAA, while the third is the second highest at Aa1.
In the past, that debt fund was kept level with existing revenue going to the county. But in the wake of the recession, the revenues are not able to keep up, and the fund balance has declined since 2012. That decline could be a red flag to the ratings agencies.
Estimates presented Saturday suggest correcting that issue could cost an additional 3 to 4 cents per $100 of assessed value on the county’s real estate tax rate, its primary generator of revenue. Continuing to spend against the fund balance could cause one of the agencies to lower the county’s bond rating, making the interest payments for debt accrued to pay for costs like schools and buildings cost many millions more.
Onizuk said the issue of the bond ratings was the “scariest” for him. He said the county’s revenues are flat, so it is time to either make something work with current funding levels or a tax increase.
Kennedy suggested exploring a potential deal that would tie any tax increases to the assessed value of real estate. So if real estate assessments rose following a tax rate increase, thereby generating more revenue, taxes would decrease to ease the strain on citizens.
Another issue facing the county is the runoff of water from precipitation, known as stormwater. The county’s General Services Department manages stormwater at present, but without a dedicated drainage system, some neighborhoods and developments experience flooding issues.
During Saturday’s retreat, James City County General Services Department Director John Horne presented information about the creation of a possible stormwater utility. Creating the utility would represent a new cost to be paid for either with bills to landowners or a tax rate increase.
The utility would manage a drainage program and conduct projects around the county like stream restorations.
Saturday’s retreat was part of the county’s process for setting up its annual budget. The county plans its budgets in two-year cycles, and the latest budget represents year two. The planned budget called for $178,519,600 of spending.
Director of Financial & Management Services Sue Mellen said revenue projections that fueled that projection are about at target, with slight decreases in sales, lodging, business license and recordation taxes offset by slight increases in building permit fees and meals taxes.
A proposed budget from Hill for the upcoming fiscal year — which runs from July 1 through June 2016 — will be released toward the end of March. A specific date has not yet been set.
Another retreat has been tentatively scheduled for Feb. 21 to continue the discussion of how to address the issues Hill presented.
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