As demand for services increase, tax rates and service fees often increase. This results in a slower rate of new development and revenue growth. Discuss a local policy example where this principle applies.
ANSWER THE ABOVE QUESTION AND THEN REPLY TO MY CLASSMATE’S RESPONSE TO THE ABOVE QUESTION AND EXPLAIN WHY YOU AGREE? (A MINIMUM OF 125 WORDS or MORE EACH QUESTION)
In 2007, 70% of Pittsylvania County (VA) residents approved a $70 million bond referendum to renovate county schools. It had been 50 years since any major updates were completed at county schools and citizens were asking for improvements for their children. County residents were informed that approving the bond referendum would mean a significant real estate tax hike to pay for the bond debt. In Virginia counties, the most significant way to generate new revenue is through real estate taxes. In 2008, the recession hit and the county’s elected officials did not have the political fortitude to raise the tax rate to pay for the debt. Subsequently, the county’s board of supervisors decided to just make interest payments on the bond debt for years during the recession. With board and administration changes, significant strides have been made in the past 6 years to pay down that debt. However, the debt burden, which is between $5-$8 million annually in a total county budget of $180 million, stifles new development and revenue growth. The challenge has been not to dip into the county’s general fund to pay for growth. The county has moderately raised real estate tax as well as other fees over the years to help offset this new debt. The county has also worked to diversify revenues through a solid waste fee and contracting with outside entities to bring their trash to the county’s landfill. Funds collected from the solid waste fee go into an enterprise fund specifically for landfill operations. That has made landfill operations self-sufficient with no county funds used to subsidize that department. That has allowed county budget funds initially earmarked for landfill operations to go towards new development and the revenue gained from taking outside trash has allowed some revenue growth. Since Virginia is a Dillon Rule state, they have also lobbied local lawmakers and the state’s general assembly to allow the county to implement a 1 percent sales tax increase to help pay for additional school capital costs. The demand for additional services from citizens and the county’s lack of vision to raise taxes to offset the cost of those additional services ultimately had a cascading effect that impacted the ability of the county to grow new development and revenue. The impact of decisions made 13 years ago is still being felt.