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Henrico submits framework for revised budget for fiscal 2020-21

Reduces $99 million in spending while preserving tax rates, services, positions

Henrico officials have prepared a framework for a $1.3 billion proposed budget for fiscal 2020-21, eliminating more than $99 million in planned expenses due to the COVID-19 pandemic.

The revised proposal incorporates various cost-cutting strategies to offset anticipated losses in revenue while protecting priorities of the Board of Supervisors and School Board. Among the most significant changes and their associated savings are:

  • A delay of capital projects scheduled to be funded with cash, generating a savings of $22.7 million
  • A 5% across-the-board reduction for department operations, $9.2 million
  • Additional targeted departmental cuts, nearly $3 million
  • Holding open all vacant positions, excluding public safety, $5.7 million
  • Reductions in general fund dollars for solid waste programs, $2 million
  • Eliminating non-departmental contributions, except for human services, $899,600

“Like millions of businesses and families, Henrico is only beginning to understand the severe impact that the COVID-19 crisis will have on our finances,” County Manager John A. Vithoulkas said. “While our situation will remain fluid for many months, we have worked closely with our Board of Supervisors, School Board and partners in Henrico County Public Schools to prepare a roadmap that is financially sustainable and extremely conservative.”

The plan keeps the county’s tax rates unchanged, prioritizes funding for education and public safety and preserves all general government and Henrico County Public Schools (HCPS) positions without a salary reduction. Officials plan to offer a retirement incentive program for those eligible to leave the county’s workforce.

In addition, the plan retains an original recommendation to increase the exemption threshold for BPOL (business, professional and occupational license) taxes. As proposed, businesses would not pay BPOL taxes on revenues up to $500,000, an increase from $400,000.

By holding its real estate tax rate at 87 cents, Henrico will avoid increasing its rate for a 42nd consecutive year. The budget plan also eliminates a recommended 5% increase in water and sewer rates to further help residents and other customers manage the economic downturn.

“Our revised budget proposal satisfies several key goals or ‘untouchables’ articulated by members of the Board of Supervisors when we began this process,” Vithoulkas said. “They insisted on no new financial burdens on our residents, many of whom are suddenly out of work. They also wanted relief for small businesses to help in their recovery and full protection of the county’s workforce, which provides excellent service to our community every day.”

Overall, the plan includes an $899.1 million general fund budget for operations. HCPS would receive $509.9 million, or 57%, with the remaining $389.2 million, or 43%, supporting general government operations. The schools budget represents an all-time high on a percentage basis, just above the 56% allotted this year. Similarly, public safety would receive 22%, about the same as this year.

Henrico officials began working on a revised plan soon after presenting a proposed budget to the Board of Supervisors on March 10. The county established an employee work group to explore cost-cutting strategies and has received hundreds of ideas at budgetfeedback@henrico.us. With the work group continuing, officials plan to re-evaluate the budget throughout the year and request appropriations quarterly.

Henrico has already seen sharp drops in consumer-driven tax receipts, particularly from sales, occupancy and meals taxes, as a result of stay-at-home orders as well as business reductions and closures. For example, occupancy tax receipts in March totaled $414,000, about 45% less than in February. Likewise, meals tax filings were $1.35 million, down 33% from the previous month. Henrico residents filed more than 21,599 initial claims for unemployment benefits in the seven weeks ending April 25.

Given the immediate impacts of COVID-19, officials have lowered their initial projections across all revenue categories for fiscal 2020-21, including:

  • Occupancy taxes, a decrease of 49%, to $11.5 million
  • Meals taxes, a decrease of 32%, to $19 million
  • Sales taxes, a decrease of 24%, to $55 million
  • Personal property taxes, a decrease of 7%, to $124.1 million

“Because the impacts of COVID-19 are so unclear, our revenue projections are ultraconservative and represent a worst-case scenario,” Vithoulkas said. “This next fiscal year will truly be unlike any other. Our staff will continue to monitor our revenues month to month and will be prepared to make adjustments to the budget as warranted.”

The Board of Supervisors is scheduled to vote on the budget May 12. The School Board will vote on its plan May 14.

 
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