Proposed Henrico budget would cut key tax rates, raise data center tax, provide 6% pay raise for employees

Henrico County officials are planning to cut several key tax rates in the coming fiscal year, raise one that applies to data centers, give county employees a 6% pay raise and allocate money for future water resiliency countywide.

County Manager John Vithoulkas made the announcements during a late morning press conference Feb. 25 at the Fairfield Area Library, joined by key agency heads and the county’s board of supervisors.

His budget plan calls for a 6% pay raise for all eligible employees and an additional pay bump for more than 1,000 support staff employees in the public school system that could allow some of them to see raises totaling between 13.8% and 19%, according to Henrico Schools Superintendent Amy Cashwell.

"This is a significant step in ensuring fair and competitive wages for those who keep our schools running smoothly each and every day," she said. Among the positions eligible for the extra wage adjustment: instructional assistants, custodial workers and maintenance assistants.

The budget also would reduce – from 85 cents to 83 cents – the county’s real estate tax rate per $100 of value and would streamline Henrico’s personal property and business personal property tax rates at $3.35 (with the former proposed to decrease 5 cents, from $3.40, and the latter 15 cents, from $3.50).

Those moves, when compared with no changes, would result in lower taxes for about 115,000 property owners, about 320,000 vehicle owners and about 20,000 businesses in Henrico, Vithoulkas said – a total tax relief of about $18.3 million. Many property owners, however, still will see higher property taxes than they did last year, as the result of rising assessments.

“What you’re about to see – real estate tax reduction and reductions in personal property [taxes] – you’d have to go all the way back to 1987 to match up what is in essence the largest tax decrease for our residents and businesses since that time,” Vithoulkas said.

To help cover some of those tax cuts, the county would increase its the data center tax rate from $0.40 per $100 of assessed value to $2.60, Vithoulkas said – a move that would generate about $13.6 million in new revenue from data centers, which the county continues to attract.

Henrico had slashed its data center tax rate from $3.50 to $0.40 in 2017 – shortly before Facebook announced plans to build a massive data center in the county’s White Oak Technology Park – as a way to help attract the facilities, which economic development officials like because they produce significant tax revenue without requiring significant infrastructure enhancements, such as roads or schools.

Vithoulkas and other county officials told the Citizen Tuesday that they didn't anticipate pushback from the companies with data centers here already, since even the higher tax rate still would be about $1.50 lower than those in Loudoun and Fairfax counties in Northern Virginia, where hundreds of data centers are located.

Vithoulkas spoke Monday with officials from one of the county’s large data centers and Tuesday with another, he said.

“I expect the [Henrico] EDA may get some calls from some of the smaller data center companies,” he said.

But, he noted that the county’s location and access to sufficient supplies of power and water, as well as the presence at the QTS data center at White Oak of the Richmond Network Access Point (the only point in the world at which four subsea cables, terrestrial networks and data center management intersect) means the county will continue to be attractive to the industry.

Funding proposed for water system upgrades

The proposed budget also would begin to fund water resiliency upgrades expected to cost about $328 million that will allow Henrico to upgrade its own water system so that it will be able to supply water to all of its customers countywide.

The capital budget will include $50 million in the coming fiscal year and the same amount in subsequent annual budgets until the entire project has been funded, Vithoulkas told the Citizen.

The plan was one of five outlined as options in a consultant’s report presented to the board of supervisors earlier this month.

It would involve the installation of about 70,000 linear feet (about 13 miles) of 48-inch water transmission main pipe that could provide about 21 million gallons of water per day in the county's Greater Eubank zone, which serves Eastern Henrico. That plan would take about 5 to 7 years to implement but provide about three times as much water as that region currently uses each day. Most of the land needed for the pipes already is owned by the county or in existing right-of-way land along roads and highways.

The move was hastened by January’s water crisis, during which more than 24,000 water customers in Eastern and Northern Henrico lost water for several days after the City of Richmond’s water treatment plant (which serves those regions) lost power following a winter storm.

Though the county has a contract with the city that requires it to purchase an average of about 12 million gallons of water from the city every day until July 1, 2040, Vithoulkas and other officials are in talks with Richmond Mayor Danny Avula and city officials about what the future of water distribution could look like regionally. Vithoulkas told the Citizen he will meet again with Avula next week to continue those talks, which officials have suggested could involve the possible creation of a regional water authority, among other potential outcomes.

“We’re hoping that there’s a solution that benefits all but doesn’t cost any ratepayer any more,” Vithoulkas said.

Henrico's board of supervisors will discuss the budget proposal in greater detail during a Tuesday work session and could see a detailed line item version of it as soon as March 4, Vithoulkas said – earlier than in most years, by design. County supervisors will review the budget in greater detail later in March during a weeklong series of meetings with each county agency director.