Henrico eyeing $500M-$600M bond referendum in Nov. 2022

Henrico County finance officials are eyeing a November 2022 bond referendum that could involve infrastructure projects totaling as much as $600 million, they told the Henrico Board of Supervisors during the first day of its two-day retreat Jan. 15 at Richmond Raceway.

The county’s next referendum has just been a matter of time for several years now, as major project needs have piled up in transportation, education and elsewhere without any clear funding sources. The county recently sold the final bonds related to its $419.8-million referendum in 2016 (which will fund the construction of fire stations 20 and 23), allowing it to begin focusing on plans for the next one.

Officials have identified more than $3 billion in infrastructure needs during the next decade – more than $2 billion of which are public works projects related to transportation and mobility, Deputy County Manager for Community Services Brandon Hinton told the board.

Now, Finance Director Meghan Coates and her office will begin organizing and prioritizing various projects on that list, with the goal of finalizing a list of projects for the referendum that meet with the board’s approval by no later than early next year.

Voters then would determine the future of the proposal at the polls.

Recent bond referendums in Henrico have included projects for education, public safety, parks and recreation, roads and libraries. The next is likely to include each category except perhaps libraries, but it also appears certain to include significant funding for drainage and stormwater issues throughout the county – something that supervisors agreed is a critical need.

A list of potential bond projects and amounts presented by Coates to supervisors Friday showed between $50 million and $100 million for drainage projects as a possibility. The money could be used to restore creeks and streams countywide, acquire land to use for stormwater mitigation efforts and enhance drainage throughout the county.

“Drainage is the next constituent issue that is far-reaching across our county that folks just need help with,” Board Chair and Brookland Supervisor Dan Schmitt said, “and if we ignore it, shame on us decades from now, because it’s going to get worse. That is a far-reaching, over-arching issue across every corner of this county.”

School projects expected to be focal point
The lion’s share of funding proposed as part of the bond referendum is likely to be directed toward school projects, as is often the case in such referendums. School officials have identified nearly $363 million worth of projects that could fit, including $85.2 million for construction of a replacement for Quioccasin Middle School, $57.8 million for the renovation and partial replacement of Virginia Randolph, and $38.9 million each fo the replacements of Jackson Davis and Longan elementaries.

The list Coates showed supervisors of potential bond items by category also theorized that the referendum ultimately could include:

• $75 million to $100 million for road projects;
• $25 million to $45 million for fire projects;
• and $10 million to $40 million for recreation and parks projects.

Henrico typically separates its bond referendums so that voters can approve or deny projects within each category individually. A simple majority is all that’s needed to authorize each one. In 2016, each category earned overwhelming approval (between 75% and 86%).

The county annually compiles and prioritizes its infrastructure (or capital) needs in its capital improvement program, which is one component of its annual budget. Smaller capital projects, such as building renovations or enhancements, often are funded through the general operating funds, the county’s meals tax revenue or other sources.

But larger projects, such as new construction, typically require funding from a bond referendum, a process through which voters authorize the county to take on debt by selling bonds to raise the necessary money, which it must then pay back with interest over a period of time (usually 20 years). The process is akin to making a credit card purchase.

Coates told supervisors that a referendum next fall between $500 million and $600 million would represent the next logical step in the county’s economic growth and a level of debt that should be more than manageable.

In the coming fiscal year, which begins July 1, Henrico will have a total debt capacity (the amount it can realistically afford to pay off) of $800 million – about $600 million of which is already accounted for. But as existing bonds are paid down, and as the county’s economic base grows, its debt capacity will approach $1.1 billion by Fiscal Year 2030, with less than $250 million of that accounted for, Coates told supervisors.

That makes the timing right for another referendum, she said.

In the past 12 months, it has sold several batches of bonds at interest rates of 1.5% or 2%, she said, but the conservative models her team is using to determine how much debt is acceptable for the next referendum assume a 4% interest rate, just to be cautious.

Henrico’s current debt as a percentage of overall operating costs is less than 7.75%; other localities sometimes go as high as 12% to 15%, she said.

“Five-hundred million to $600 million keeps us in that comfort zone [of manageable debt],” she said.

This is the first time that Henrico finance officials have planned their capital improvement program on a 10-year basis instead of the 5-year basis they had used previously. They made the switch last year after realizing that the county’s needs far exceeded its ability to realistically address and pay for them all within a 5-year window.

Henrico's shifting approaches
The next referendum is likely to reflect some recent shifts in Henrico’s approach to infrastructure and operations costs.

The county is in the midst of at least four public-private partnership projects (Belmont Golf Course, the Frank J. Thornton YMCA Aquatic Center, another aquatics center at Regency Square, and its indoor arena and convocation center) for which it has or will funded the construction costs but then partnered with a third party to operate and manage the facility, thereby saving itself from ongoing expenses. That’s likely to continue when possible, Hinton said.

In addition, county officials foresee more renovation efforts rather than rebuilds whenever possible with county facilities, he said, and they’re aiming to make them more energy efficient, too. (Plans coming before the board shortly will request funding to add solar panels to additional county buildings, he said.)

Some help for transportation projects is expected – to the tune of $20 million to $30 million annual this year and into the future – thanks to the newly formed Central Virginia Transportation Authority, which is raising money for nine Central Virginia localities through a new gas tax and fractional sales tax in each one.

As for the drainage and water runoff issues facing the county, officials agreed that the way they communicate the need for money to address them will determine whether the issues pass or fail.

“The key to this is always being on the same page as the community,” Coates said.

Bond proposals typically include roughly an equal amount of funding for projects in each of the county’s five magisterial districts, lest residents of one district vote against proposals that they think don’t help them.

“I know drainage isn’t sexy,” Schmitt said. “I get it. And new fire houses are and public safety is, and educating our kids is, but this is a quality of life issue for a ton of residents. It has to be part of pour plan of infrastructure going forward because it’s not getting better, and we really have to answer our residents’ concerns.”

Said Varina District Supervisor Tyrone Nelson: “Telling the drainage story, I actually don’t think it’s going to be that hard, especially my folks in Sandston [where a number of homes lie in floodplains] who have been struggling forever.”

During the retreat, Public Works Director Terrell Hughes told supervisors that his department is planning two pilot program efforts to rehabilitate private bodies of water in the county – including Hoehns Lake in the West End – in the hope that doing so reduces sediment runoff farther downstream.

“The premise is if we do not make some sort of improvement, you are going to have additional and more significant costs downstream,” Hughes said.

There are dozens upon dozens of other lakes, ponds and streams in the county that could use similar help, and Hughes and his staff are working to rank them in order of which impact the most people. Henrico County Manager John Vithoulkas told supervisors that his intent is to include a dedicated funding source for such projects in annual budgets going forward, with the believe that they’ll save the county money in the long run.

Increasing the urgency that officials feel to address the issue: two of the three wettest years in Henrico during the 130 or so years such records have been kept occurred in 2018 and 2020. Last year, several spots in Henrico measured more than 60 inches of precipitation, spread fairly evenly throughout the year, Hughes said.

Deputy County Manager for Community Operations Steve Yob told supervisors that there are nearly 8,000 residences in Henrico with drainage problems and about 1,000 that sit in floodplains (low-lying areas that are known to flood).

“I think this is something our citizens do need, and we do need money because it’s very difficult to fix something like a lake without having a good deal of resources,” Yob said.

He described Lake Overton, a private lake owned by the Three Fountains North homeowners association north of Three Lakes Park, as another water body in need of urgent help. Its 19-foot dam was built in the 1960s, and residents and county officials are worried it could burst during a major rain event. But repairing it could cost almost $2 million.

“This is a major, major project,” he said.

The homeowners association, though, couldn’t fund such an expense itself, but if the dam does fail, it could impact nearby Three Lakes Park and other residences.