Vithoulkas's $1.43B budget proposal would nearly restore Henrico to anticipated spending level

Three hundred sixty-four days ago, Henrico County Manager John Vithoulkas presented the county’s Board of Supervisors with a budget proposal that became obsolete just days after he verbalized it, thanks to the arrival of COVID-19.

Weeks later, he announced a drastically slimmer version of the proposal – one slashed by $99 million to account for a worst-case financial scenario as the county entered uncertain times.

But today, though COVID continues to disrupt life in significant ways, Henrico’s financial recovery from the virus appears nearly complete.

Vithoulkas Tuesday night will present to supervisors a budget proposal for Fiscal Year 2022 (which begins July 1) that nearly returns the county to the spending level at which it likely would have been even in a world without COVID.

The $1.43-billion proposed operating budget is a 2.2% increase from the original budget that Vithoulkas proposed last March 10 – just before the pandemic hit. (In a typical year, the county’s budget increases by about 5.5% or so.)

The highlight of the budget is what county officials have termed a “generational” set of pay increases for county employees, particularly educators and public safety officials, as part of $57.6 million in targeted funds beginning in the current fiscal year and continuing into the next one.

The bump will increase the pay of all eligible employees (those who received satisfactory performance reviews) by at least 4.4% – and by as much as 17% for the longest-tenured educators, rewarding employees for their commitment during the past year. (A proposed 3% pay raise for employees last year was eliminated as part of the $99-million budget cut.)

When the pandemic hit, “our employees were told to get busy . . . and they did just that,” Henrico Finance Director Meghan Coates said. “They operated with $100 million less than they thought they would have.”

The new budget also will unfreeze most of the 450 or so frozen vacancies within the county, perhaps about 150 or so of which will be filled in the coming months, according to Deputy County Manager for Administration Brandon Hinton.

In addition, the proposed budget will fund the creation of 104.5 new full-time equivalent positions – most of them (91.5) in education, and the lion’s share of those associated with the doubling of Holladay Elementary School and new editions of Highland Springs and Tucker high schools, which will open in the fall.

For the 43rd consecutive year, the county’s real estate tax rate would not increase; the proposal would keep it at 87 cents per $100 of assessed value.

The budget also would restore funding for capital projects in a major way – to the tune of $224 million. Among that amount:

• $54 million for the expansion and renovation of the county’s two Advanced Career Education centers at Hermitage and Highland Springs high schools;

• an estimated $22.5 million in funding from the new Central Virginia Transportation Authority, money that will come in addition to regular state funding for transportation projects (the actual amount could approach $30 million, Hinton suggested);

• $9 million for the construction of a recovery center that will provide immediate support for people facing substance-use problems;

• $12.7 million for two firehouse projects, including construction of Nine Mile Road station No. 23.

The county has been able to weather the pandemic financially in much better shape than the worst-case levels of tax revenue officials planned for last spring.

That’s due in part to a $1.5-billion increase in property valuation (mostly driven by residential property values pushing 4.7% higher, to counteract a 2.7% slide in the value of commercial properties) and higher-than-anticipated sales tax revenues (expected to total about $70 million during the current fiscal year, which ends June 30, according to Henrico Budget Director Justin Crawford).

The overall operating budget consists of six parts, with the general fund ($983.9 million) composing the majority of it. About 57% of the general fund will be allocated to Henrico County Public Schools.

County officials last year opted to allocate the current year’s budget in quarterly increments, following quarterly budget reviews, to keep a close watch on the county’s tax revenue. They liked the approach so much that they intend to continue those quarterly reviews in the coming fiscal year, Crawford said.

“We think that’s really been key to helping us have a handle on the current environment,” he said.

Officials are hoping that the hospitality sector will rebound in a better-than-anticipated way in the coming fiscal year, which would drive more meals tax, hotels tax and sales tax revenue. (They anticipate raising about $19 million in meals tax funds by the end of the current fiscal year – a drop of more than $11 million from recent years.)