CURRENT TRENDS IN REAL ESTATE AND THE RICHMOND REGIONA PUBLICATION OF THE RICHMOND ASSOCIATION OF REALTORS®

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IN THIS ISSUE:

• WHAT IS THE MEALS TAX? WHY IS IT PROPOSED?

• WHO WILL IT BENEFIT? • WHY DOES IT MATTER TO

REALTORS® AND HOMEOWNERS? WeAreTheR.com

InterpreteRHousingOCTOBER 2013

A D V O C AT Efor EDUCATION

REALTORS®

Special Edition

What is the Meals Tax?Why is it Proposed?

Due to the recession’s negative effect on real estate values—and thus real estate tax revenue—as well as the General Assembly’s decision to obligate local governments to pay into the Virginia Retirement System (VRS) for teachers, the counties of Henrico and Chesterfield have been forced to make substantial cuts to budgets and personnel.

Henrico’s budget now faces a substantial shortfall. The County has considered further school budget cuts, a 4 percent meals tax on prepared foods, and an increase in real estate taxes. Any further cuts will affect the quality of services delivered to Henrico’s citizens, particularly its children’s educational experience. An increase in real estate taxes would single out property owners exclusively and place a comparably much larger burden on them (the proposed increase amount would equate to an additional $150 annually on a $250,000 home.)

The 4 percent meals tax, however, would equate to a fraction of a dollar on most casual fare and a few dollars on fancier, special occasion meals

with a bill totaling about $100. The meals tax proposed by Chesterfield County is even smaller—at 2 percent.

Unlike a real estate tax, the meals tax proposed is an optional tax (if a person choses to eat out, they will pay the tax.) It is also projected that over 40 percent of meals tax revenues would be paid by non-Henrico County residents—those visiting from out of town and dining out during their stay. If the proposed real estate tax increase is enacted, a family living in a $250,00 home would have to spend $3,750 on dining out each year to pay the same amount in meals taxes that they would pay on their homes. An increase in Henrico real estate taxes has been determined to be far more threatening to the County’s economic development prospects than a meals tax; at 87 cents per $100 of value, Henrico’s tax rate is the lowest of the fifteen largest localities in Virginia.

Additionally, 209 jurisdictions across Virginia—including the City of Richmond—already collect a meals tax. Despite this tax, the City of Richmond has seen phenomenal growth in the restaurant industry and an increase in taxable sales.

Facebook.com/yes4henricoskids

{ “For individuals, the meals tax means the morning coffee or the evening fast food meal costs a few cents more; but collectively, those pennies add up to $8 million annually that will be invested directly and solely in a new public safety communications system and revitalized schools.”

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A “Letter to the Editor,” (originally published in the Chesterfield Observer)

But excellence requires investments of time, attention, and eventually, money. For individuals, the meals tax means the morning coffee or the evening fast food meal costs a few cents more; but collectively, those pennies add up to $8 million annually that will be invested directly and solely in a new public safety communications system and revitalized schools. Chesterfield has been named the “17th Best Place to Live in America” and “one of the 100 Best Communities for Young People in America.” That’s a legacy to be proud of and build upon. If Chesterfield residents want their future to mirror their past, they should vote “yes” in November.

The real issue before Chesterfield voters in November is simply whether they will continue to invest in their future by adopting a two cents on the dollar meals tax to help pay the costs associated with a new public safety communications system and the revitalization of aging schools. When citizens call 911, they should be able to expect rapid, coordinated responses to their pleas for help. And the children of Chesterfield deserve to attend schools in which the roofs don’t leak and the plumbing and AC works.

The elementary schools slated for replacement or revitalization are 62 years old on average, the middle schools 47. Over thirty years ago, I attended two of the schools on the list; they could have used some sprucing up back then, so I have no doubt about the need for extensive renovations now. An excellent educational system is a magnet for businesses and jobs. Companies will not locate in a jurisdiction that is unable to supply capable workers as well as educate the children of its employees. Individuals and families do not buy a home until they have first bought into a community’s quality of life; and without a doubt, excellence in education is an essential component of an attractive, competitive, flourishing community.

by Laura Lafayette,Chief Executive Officer, Richmond Association of REALTORS®

In September’s “In Their Words” column, Nancy Thomas argued that passage of a meals tax will place Chesterfield restauranteurs at an “economic disadvantage.” That’s not the case. In fact, there’s plenty of evidence to indicate that a meals tax and a thriving restaurant industry can co-exist quite nicely. Two hundred localities in Virginia impose a meals tax. Many of these jurisdictions have flourishing restaurant scenes; the City of Richmond is a prime example: a 6% meals tax and an 11% growth in restaurant sales.

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”For the purpose of funding the operational and capital projects of the Henrico County Public Schools (“HCPS”), shall the County of Henrico, Virginia, be authorized, pursuant to Section 58.1-3833 of the Code of Virginia of 1950, as amended, to levy a tax on prepared food and beverage, otherwise known as a meals tax, in the County of Henrico, Virginia, equal to four percent (4%) of the amount charged for the prepared food and beverages.”

WHO WILL BENEFIT

FROM THE MEALS TAX?

In other words, the additional revenue would be entirely dedicated to Henrico County Public Schools.

The meals tax would help prevent:

• An increase in real estate taxes, falling completely on Henrico families and businesses

• Further budget cuts, resulting in a severe reduction in the level of service currently provided by HCPS (increased class sizes, reduction of school bus routes, elimination of middle school sports, and school closures)

• The loss of these counties’ competitive edge in attracting businesses and capable workers

Although county residents willbenefit from the revenue, 40%of the tax will be paid by non-county residents.

WHO WILL BENEFIT

FROM THE MEALS TAX?

Henrico County Board of Supervisors

Henrico County School Board

Henrico Business Council

Eastern Henrico Business Association

Henrico Business Leaders

Richmond Association of REALTORS®

Henrico Education Association

Virginia Apartment Management Association

Campaign Co-Chair Virgil Hazelett, Henrico County Manager, 1992-2013

Campaign Co-Chair Carol Jackson, Vice President, Henrico County Council of PTAs

Campaign Treasurer Jim Donati, Supervisor, Varina, 1992-2012

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NOTED SUPPORTERS

There is a choice confronting Henrico county voters in November: whether to approve a 4% tax on prepared food and beverages (commonly known as a “meals” tax). For those who, like I, have an aversion to numbers, this column contains a bunch of them. I tried to navigate around them, but could not. Please bear with me; because what’s at stake is not a spreadsheet that only an accountant could love, but rather the quality of our children’s education. Recently, a local blogger used the resurgence of the housing market to argue against passage of the meals tax. He contended that because home sale prices in Henrico were up 11.8% through May of this year over 2012, “the county should generate $17.8 million more [in real estate tax revenue] than forecast.” Actually, updated numbers through July put the increase in average sale price at 7.7% compared to 2012. That increase is a commentary only on houses recently for sale, not a blanket statement about housing values throughout the county. For the most part, an increase in sale prices reflects a stabilization in property values—a far better circumstance than the decline most of us suffered in the last five years. Eventually, we will see an increase in property values. Eventually, higher property values will lead to increased assessments which will equal greater equity for home owners and increased tax revenue for the county—eventually, not overnight.

Sale price increases do not automatically translate into more real estate tax revenue for a number of reasons. Location and inventory affect prices. Some areas of Henrico are experiencing

low supply and high demand; thus Economics 101, the sale price increases. But little supply and great demand is not the case in every Henrico neighborhood. Moreover, even in areas experiencing higher home values, a lag exists between what the market will bear and when the property is reassessed. County coffers do not benefit until the reassessment occurs. Bottom line: a resurgent housing market is good news for us all, but it’s no magic elixir for the County.

In fact, there exists no easy fix for Henrico. The choices are a 4% meals tax, an increase in the real estate tax (the rate would need to increase by six cents per $100 of value to equal the meals tax revenue), or a cut in educational personnel and programs. Why education? Because that’s where the bulk of the County’s budget is spent.

In the last four years, Henrico government has eliminated almost 650 positions and cut $115 million in expenditures. For most of us in Henrico, these cuts have gone unnoticed. County leaders deserve praise for strategic reductions that undoubtedly put internal pressure on them, but appeared invisible to the residents. But the days of cuts that fail to affect us have come and gone. If sufficient revenue is not generated to close the budget gap, the looming programmatic cuts will harm us all—whether we have children in the schools or not. Increasing classroom sizes, reducing bus routes, lessening our commitment to special needs as well as gifted learners—all of these potential cuts and more will diminish our children’s educational experience. If our children are to compete successfully in a global economy, our schools must work harder and more effectively than ever before.

The Meals Tax Numbers Add Up to a YesAn Op-Ed Piece by Laura Lafayette,CEO, Richmond Association of REALTORS®

(originally publishedin the RichmondTimes-Dispatch)

And for Henrico residents who have no children in the school system—and that’s a majority of the County’s households—you have just as much at stake. An excellent educational system is a magnet for businesses and jobs. Companies will not locate in a jurisdiction that is unable to supply capable workers as well as educate the children of its employees. Individuals and families do not buy a home until they have first bought into a community’s quality of life; and without a doubt, excellence in education is an essential component of an attractive, competitive, flourishing community. Finally, there exists a direct correlation between property values and school performance.

If the meals tax passes, 40% of those paying the tax will be non-residents; e.g., all those out-of-town soccer, softball, and baseball teams who flood our restaurants most weekends. But a real estate tax falls solely on the backs of residents. If the meal tax passes, it’s not the restaurants that will pay (they just collect the tax) it’s those of us who choose to eat out. So that $5 fast food lunch will now cost $5.20. The candlelit anniversary dinner that once ran $100 will now cost $104. Most days, my husband is worth the extra four bucks. Always, I will opt to invest a few dollars more to ensure our children’s educational future, invest in our community’s quality of life, and protect our property values.

A small investment, a huge return; I urge my fellow Henrico citizens to vote yes in November.

For more information:Yes4HenricosKids.com

henrico.us/mealstax/

Facebook.com/yes4henricoskids

YourVoiceFirstChoice.com

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Click the arrow above to stream a video about the significance of the meals tax referendum and its implications.

Chesterfield will seek a meals tax of 2 percent to fund these public education and public safety capital projects.

The schools selected for revitalization serve Chesterfield County’s aging neighborhoods most in need of revitalization. The average age of elementary schools included in the bond referendum is 62 years, and the average age of middle schools included is 47 years. Monacan, at 34 years of age, is the only high school included.

The meals tax will ensure that the County has the necessary revenue to carry out the revitalization plan outlined within its Comprehensive Plan. A direct correlation exists between school performance and property values, so the County must place a premium on efforts that will maintain, and where necessary, revitalize these areas. Improving the County’s aging schools will improve the surrounding neighborhoods and ensure that these neighborhoods remain vibrant and attractive for current and future homeowners.

The emergency communications system in Chesterfield is the primary tool for coordinating and dispatching public safety responders—police, fire, and emergency medical services, and sheriff’s deputies—and needs to be replaced to provide ongoing reliability. If a citizen experiences the need to dial 911, a prompt response is extremely important and a reliable communications system is necessary in order to promptly deliver a response.

Finally, if a meals tax is not passed to address these needs, a disproportionate real estate tax could be instated as an alternative—singling out homeowners and adding weight to the responsibility of property taxes, which they already bear.

The meals tax referendum will help maintain a strong, competitive school system that is the cornerstone of a flourishing County. Individuals and families will not buy a house, until they have first bought into a community’s quality; schools are an essential element in that quality of life.

Henrico has a reputation for being a well managed county, with excellent jobs and amenities, a high quality transportation system and a nationally regarded public education system. If REALTORS® want Henrico to retain its competitive advantages—a low tax environment that attracts businesses and residents to the County—then they should support the meals tax this November.

Chesterfield County faces the issues of dated public school facilities—posing potential health and safety hazards or class disruptions to attending children; school overcrowding—pushing some classrooms and administrative offices into trailer spaces; and an emergency communication system so dated that by 2017 the manufacturer will no longer provide technical support or supply replacement parts.

Chesterfield voters will decide on two bond referendums and a meals tax referendum. The questions focus on issuing debt of $304 million in school projects—revitalizations of and renovations to ten schools and the construction of one new school to ease overcrowding at Watkins and Bettie Weaver elementary schools; and issuing debt of $49 million to replace the near-obsolete communications system used by police, fire, and sherrif emergency personnel.

Why Does the Meals Tax Matterto REALTORS®and Homeowners?

Richmond REALTOR® Community Leader Linda Terry Speaks Out on the Meals Tax(The following is a transcription of remarks Linda Terry, 2013 President of the Richmond Association of REALTORS®, gave at a recent press conference on the Meals Tax proposal)

Businesses do not locate in a community and individuals, as well as families, do not buy homes in a community until they have first bought into a community’s quality of life. Without a doubt, an excellent public school system is essential, if a community is to thrive and its residents flourish.

Ask any REALTOR® and they will tell you that one of the first questions prospective buyers ask is: “How are the schools?” Even buyers without children understand how critically important the schools are. An excellent educational system acts as a magnet for businesses seeking to relocate, which brings jobs and economic growth to the region. It is no secret that property values everywhere—especially here in Henrico—are inherently linked to the strength of the public school system. The quality of Henrico County Public Schools has a huge impact on our property values because the quality of our schools goes hand in hand with the strength of our community.

The “yes” vote in November for the meals tax referendum is an investment in the future of Henrico County; it’s an investment in maintaining strong property values. The Richmond Association of REALTORS® is proud to endorse the meals tax and urges home owners throughout Henrico to vote “yes” in November.

{ “It is no secret that property values everywhere—especially here in Henrico—are inherently linked to the strength of the public school system. The quality of Henrico County Public Schools has a huge impact on our property values, because the quality of our schools goes hand in hand with the strength of our community.”

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