Henrico officials slash proposed budget, implement hiring and spending freezes

Henrico County will slash its proposed Fiscal Year 2020-21 budget by tens of millions of dollars – to a level $5 million below the current year’s fiscal plan – pause all planned but unfunded capital projects and implement a hiring freeze in an attempt to combat an anticipated free-fall in tax revenues resulting from the COVID-19 outbreak and associated shutdowns.

Just last week, the county’s Board of Supervisors was meeting to review in detail County Manager John Vithoulkas’s proposed $1.4-billion budget. Tuesday night, supervisors heard from Vithoulkas and Deputy Finance Director Meghan Coates the grim details of everything that has changed since then.

“Last week we were working on a budget. Since last Monday and Tuesday, the world has changed,” Vithoulkas said. “The budget that was presented to you is no longer sustainable based on the revenue assumptions that were put forward – in one week.”

Though officials did not present a detailed revision of the budget proposal, they outlined three priorities that it would address:

• providing relief for the county’s small businesses;
• ensuring stability for the county’s 11,000 employees;
• insulating the county from future instability, as best as possible.

The revised budget will be “more conservative that you’ve probably ever seen from Henrico County,” Coates told supervisors – a sobering statement considering Henrico prides itself upon its conservative budgeting approach and has for decades. “This is going to be a year unlike any we have seen in the past here.”

The budget essentially would mirror the current fiscal year budget but with additional cutbacks. It would include no funding for new staffing or new programs, Coates said, with the exception of $1.8 million in staffing costs for new Fire Station 20, which will open in the new fiscal year.

It also would not fund any new capital projects – which likely will delay the construction of a new elementary school in the River Mill area and the expansion of Hungary Creek Middle School. Those are two critical needs identified by the School Board, which hoped both would be fast-tracked and completed by fall of 2022.

Vithoulkas has directed all county agencies to freeze all non-essential spending until further notice. While the county has been shifting employees to various other roles to cover open jobs and will continue to do so, Coates said its intention is to continuing paying all of its employees their full salaries through their contracted terms.

Even as it braces for much lower tax revenues than projected, Henrico has willingly delayed other tax revenue. Last week, it announced that it would extend the next due date for meals and hotel lodging taxes until Aug. 20 and do so with zero interest – a move designed to help struggling restaurants and hotels. The impact was significant, Vithoulkas said.

“That action may have saved thousands of jobs, because right now hotels are making the decision to pay a local tax or to pay employees,” Vithoulkas said.

Local hotel magnate Neil Amin of Shamin Hotels told Vithoulkas that in discussions with other hoteliers statewide and nationally the day Henrico announced its decision, he concluded that Henrico may have been the first locality in the nation to take such action.

During last night’s meeting, supervisors also agreed to delay until early August the collection of a number of other residential and business taxes – including real estate, personal property, machinery and tools, and vehicle license taxes.

Vithoulkas and Coates told supervisors that finance officials would be monitoring the county’s March tax revenues very closely to better assess just how significant a financial hit the county might need to expect in coming months.

“This is not like a tornado or hurricane where we can go out and survey damage and price out what it’s going to cost to rebuild,” Coates said. “It’s hard to [know how it will] play out until we have a little experience.”

They’ll also consider adjusting the budget every 90 days and possibly re-implementing some of the projects whose funding initially will be cut, depending upon how revenue collections progress, Coates said.

“Let’s put everything on pause and take it 90 days at a time,” Vithoulkas advised the board.