Front Royal Town Council poised to approve flat tax rates on March 29

By Roger Bianchini
Warren County Report

On Monday night, March 22nd the will of a minority, of both councilmen and public speakers, once again appeared to prevail as the Front Royal Town Council failed to approve a first reading of any real estate or personal property tax increases for the coming fiscal year. Those increases were being sought to help compensate for a now anticipated $700,000 revenue shortfall in the coming fiscal year.

It is the second consecutive year council has declined to do what many municipalities did last year, institute what is termed a “revenue neutral” increase to the personal property tax rate to compensate for lost revenue due to declining automobile values in the down-turned national economy. As for the real estate rate – like the personal property tax rate here, it hasn’t been raised in a decade.

With Shae Parker absent due to illness (this reporter verified Parker’s hospitalization with a flare-up of pancreaitis the day following the meeting), council was unable to gain a required 4-vote “super” majority required by the town charter to authorize tax increases. Tom Conkey’s amendment to approve a 1.5-cent real estate the 14-cent revenue neutral personal property tax hike was defeated by a 3-2 vote, with only Carson Lauder joining Conkey in support of the increases. Vice Mayor Bret Hrbek prefaced his no vote by stating he would support only a 1-cent increase to the real estate tax rate of 7 cents per $100 of assessed value.

But with only a 3-2 majority looming for the 1-cent and 14-cent increases, no effort was made to pursue a futile second vote of support of an increase to either tax rate. Had Hrbek joined Conkey and Lauder in support of those latter increases the vote would have mirrored the March 8, 3-2 vote in support of tax hikes. And like that earlier vote, it would have failed for lack of Mayor Eugene Tewalt’s necessary fourth “super majority” vote. By town code the mayor can only vote to break ties.

While he had opposed and blocked passage with an abstention of 3-cent and 14-cent increases to the tax rates on March 8th, Parker indicated in a conversation with this reporter that he would consider a vote in support of as much as 1.5 and 14 cents to the tax rates to help balance the budget this time around. In fact, Parker indicated he may have voted for the personal property hike on March 8 had the two increases been offered in separate motions. But alas, as the bell rolled and tolled toward 1 a.m. that evening no one picked up on any subtle signals the councilman may have been sending out.

With Parker’s potential fourth swing vote absent, Conkey capitulated to the council minority’s will, acknowledging no chance of passing an increase with only a 3-2 majority present and the mayor’s required fourth vote again held in limbo. Thomas Sayre’s original motion to approve the town’s decade-old, flat 7-cent real estate and 60-cent personal property tax rates then passed by a 5-0 vote. A required second vote of approval will be taken at a Special Meeting at 5 p.m. on March 29 at the Front Royal Town Hall. A tax rate must be approved by April 1st due to the town’s newly instituted twice-a-year tax billing.

La, la, la -I’m not listening

During council’s second public hearing on tax rates, a second majority, this time 9 of 17 speakers, once again asked council to do what it must to maintain governmental service levels. Five letters read into the meeting record also supported maintaining police and library services even if it meant a small tax increase after a decade of no real estate and personal property tax increases in Front Royal. The public hearing support of small, across the board tax increases deemed necessary mirrored, if less dramatically, a March 8th public comments turnout during which 33 of 41 speakers urged council to tax if it must to maintain levels of service, particularly by law enforcement and the public library.

On March 8th, 3-cent real estate and 14-cent personal property tax increases failed despite a 3-2 majority favoring the increases. At that time, appointed council member and tax hike opponent Parker had abstained, blocking Mayor Eugene Tewalt’s required 4th “super majority” vote to authorize the tax increases. But after six hours and 66 public speakers on two major issues impacting the town’s future direction – a balanced budget and east-side growth – as the March 8th meeting was adjourned at 1:10 a.m. council failed to re-set any tax rate as required annually by state code.

The decision to re-advertise the tax rate was made to allow additional citizen input on the hot-button political issue before a second attempt to raise the rates was made. However it appears that despite much talk about democracy and listening to the will of the people before making even the most fundamental common sense decisions (reference Riverton Dam), certain elements of council hear only those who agree with them on ideological issues such as taxes.

Among those March 22nd speakers who agreed with no-tax council hardliners Sayre and Chris Holloway were non-council candidate Matt Tederick and his political mentor and council candidate Joe Swiger. Tederick insisted the town could balance its budget by utilizing Enterprise Zone surpluses. While Town Finance Director Kim Gilkey-Breeden explained the town could, in fact, borrow against its own surpluses committed to specific areas such as utilities, she added that it was essentially a loan that must legally be repaid within a “reasonable” amount of time.

$20, $30 a year – too much!?

Rather than ask town citizens to equally share the burden of governmental services – in on the table amounts of $7 per year per $5,000 of assessed automobile value or $10 per year per $100,000 of assessed real estate value – candidate Swiger rose to call on councilmen to sacrifice their approximately $6,000 in net annual salaries to conduct town business and donate their personal assets, as he claimed to have done in the past, to prop up the town budget.

Conkey was critical of Tederick’s suggestion of using or borrowing against town cash surpluses, in order to balance budgets. He, as Hrbek has, pointed to negative economic consequences that could eventually cost citizens more than the minimal tax increases being sought.

As Conkey commented on difficulties the Town of Leesburg had in maintaining its general fund in the face of lost litigation surrounding its own water-sewer rates, Tederick began talking back from his seat in the Warren County Government Center meeting room – “apples and oranges, apples and oranges,” Tederick said to Conkey.

“We’re not going to have this debate now,” Conkey said of Tederick’s interruption of his response to some of Tederick’s earlier remarks. Conkey continued to elaborate on some of the recent unexpected town expenses, including several hundred thousand dollars in snow removal that the town must cover out of its uncommitted fund surpluses.

Carson Lauder pointed to other potential costly and unanticipated expenses, such as broken utility lines running into the north corridor. “What would that cost to repair – a quarter million dollars, more?” Lauder asked. “You need extra money in your accounts for these unanticipated expenses,” Lauder said.

Replying to some anti-tax citizen comments, Lauder also said, “And we don’t always raise taxes in Front Royal – that’s the problem,” he insisted of the town’s uncommitted general fund surplus of about $1.1 million. Lauder pointed out that nearby Strasburg, a town perhaps a third the size of Front Royal’s, has a 16-cent real estate tax rate. Some have suggested localities raise their tax a half cent annually just to cover rising costs.

On the bright side, Gilkey-Breeden informed council that the state would fund about $380,000 in so-called 599 local police funding to the town this year. Initially it was feared that all $410,000 of 599 funding would be eliminated from this year’s state budget. That state money reduces the anticipated deficit from flat funding levels, from $1.2 million to around $650,000 to $700,000.

According to the town’s finance director, each penny of real estate tax would generate $130,000 of revenue and the 14-cent personal property tax hike would have generated $120,000 of revenue. By those numbers had the proposed increases been approved, the town would still be facing a $400,000 revenue shortfall.

Responding to a question about the use of Enterprise Funds, Gilkey-Breeden pointed out the town had borrowed on its Enterprise Fund in recent years to renovate the Adelphia building her finance office now occupies along with the town’s cable TV provider across the street from town hall.

Show me the money!

Staff has explained that of an existing $6 million General Fund balance, $4.9 million is committed to various expenditures, $2.9 million is committed to a 90-day emergency cash reserve, and only $1.1 million remains uncommitted. Of the much-ballyhooed (by Tederick and Swiger) $8 million in electric Enterprise Fund surplus, staff has explained essentially that, that money may only be used to support the specific utility whose fund it is in. However, as she pointed out at the March 22 meeting, Gilkey-Breeden said the town could borrow against its own Enterprise Fund balances, but is required to take on payments as with any loan “within a reasonable” amount of time.

Well there are the easy (political) answers – go into debt to yourself, put additional competitive disadvantages on your already struggling in-town businesses, stop advertising the town as a tourist draw, and drain your available surpluses till their gone … why didn’t the council majority, mayor and staff think of that???

What me worry?

Following the vote to maintain flat tax rates Sayre assured those present cuts to either the police department or the library were not on the table (surely pennies from heaven are about to fall the town’s way from somewhere).

It now appears those pennies will come from some combination of operational expense cuts, so-called luxury taxes like meals, lodging and cigarettes, and possible fund balance shifts to make up the approximate $700,000 revenue shortfall.

According to staff, a 10-cent cigarette tax would provide $250,000 of revenue (if people keep buying their cigarettes in town); each penny of meals tax, $300,000 (if town restaurants don’t lose business or go under, under the added weight of additional town costs to their product), and each penny of lodging tax $50,000 of revenue.

Among operational costs mentioned for potential cuts by council is the advertising budget for the Visitor’s Center. However staff has pointed to the potential negative impact to town and town businesses’ revenues from tourism as another consequence of such budget balancing methods (there goes the already problematic lodging and meals tax revenues).