County Administrator Tim Hemstreet has warned Loudoun supervisors that they will face “the most challenging budget” of their term—and County Chairwoman Phyllis J. Randall (D-At Large) has signaled it may mean an end to yearly tax cuts.
The county’s finances are under pressure from several directions. The operational budget, which covers the day-to-day expenses of the county government, grows every year as a natural result of pay raises, growing staffing numbers, and growing county departments as the population increases at a rate of more than 30 residents per day. But the board is also working to update the county’s job descriptions and pay scales to be more competitive in the workforce market. Hemstreet said the cost of implementing that classification and compensation study’s recommendations could be as much as all new spending approved in recent budget years.
Members of the board’s finance committee have said that study is their top priority, but Randall said that may mean an end to tax cuts.
The cash crunch will come during an election year when all nine board seats will be on the ballot.
“The classification and compensation study this year will take up almost the full amount of money that we have to work with, and if we’re going to keep the services at the level we are today because of county growth, it would be very challenging to go below the equalized tax rate and keep those services as they are today,” Randall said.
Director of Management and Budget Erin McLellan said at the county’s current and equalized tax rate—the tax rate, usually lower, at which the dollar amount paid on the average Loudoun home remains the same despite fluctuating home values—the county will have needs “that we will not likely be able to meet.”
The capital projects side of the budget is also feeling a squeeze. That budget, which deals major debt-funded construction projects like new roads and schools, is under pressure from climbing construction costs. With the school board expected to ask supervisors to accelerate construction of schools in south Loudoun’s high-growth area, supervisors may have to delay some other projects.
Changing the real estate tax rate is the most direct tool supervisors use to adjust county revenues from one years to the next. Since 2011, supervisors have cut the tax rate every year except for 2017, when it bumped up by one cent. This year’s tax rate of $1.085 per $100 of assessed value is the lowest since 2007, the last time the tax rates was below a dollar. But despite fluctuations in the tax rate between a low of $0.89 in 2007 and a high of $1.30 in 2011, the only time county tax revenues have declined was fiscal year 2010, in the teeth of the last recession. Supervisors Matthew F. Letourneau (R-Dulles), who chairs the finance committee, said the steady tax cuts—unique among neighboring Northern Virginia jurisdictions—are “a testament to strong financial management, and the strong economic development that have had in this county.”
“I know the discussion on the capital improvement program, in particular, is not what everybody wants to hear in an election year,” Letourneau said.
Supervisors directed the county budget staff to give them options at this year’s estimated equalized tax rate, $1.065 per $100 of assessed value, and to increase or cut the budget by two cents of real estate tax. Letourneau said that was to give supervisors “maximum flexibility.”
“On the county side, our employees—as we knew they were—were being paid significantly less than their counterparts in the area, and we have to fix that,” Randall said. “While fixing that I hope to not cut services.”
Supervisors’ budget deliberations will wrap up with a vote in early April.