Thursday, May 3, 2012

How to survive raising taxes


When City Manager Jack Tuttle proposed a budget two months ago that included increases in the real estate tax rate, personal property tax rate, cigarette tax and in EMS fees, I wrote that he'd "thrown the three incumbents up for re-election a live hand grenade."


Challenger Ginger Crapse, though in her own words "a rank amateur" as a politician, latched on to the tax increase issue with laser-like focus and showed message discipline worthy of Jim "No Car Tax" Gilmore or George "Liberal, Lenient, Parole System" Allen.

Crapse even got some odd "good luck" on the campaign's final weekend. She was out campaigning door to door when she saw a house on fire and ran into it to alert the residents. While Crapse may have dramatized her role in the incident a little -- some published reports had her "kicking in the door," which didn't happen, and the residents said they already knew there was a fire -- the fact remains that Crapse saw a burning building and ran into it to try to help people. She ran to the sound of the guns. A lot of people would not have done that.


And it wasn't really a surprise.

As the campaign played out, two things were obvious -- that Williamsburg didn't care too much about this election and that Crapse had failed to spark a tax revolt.



Why didn't her anti-tax message resonate more with Williamsburg voters?

Some of the reasons are peculiar to Williamsburg. The city has a very low 54 cents per $100 real estate tax rate. It's lower than either of the adjacent counties. That may be a situation that's unique in Virginia. The reason Williamsburg has such a low rate is that it relies much less on the real estate tax to fund government than other Virginia localities. For years, tourism-related taxes, principally the hotel room tax and the meals tax, have provided more than half of the city's budget. That percentage has fallen some during the Great Recession, but Williamsburg still depends less on the real estate tax than most localities.

A second uniquely Williamsburg factor is that city voters are spoiled. For their Yugo level of real estate taxes they've enjoyed a Cadillac level of government services over the years, with tourists footing the bill. They don't want to lose those services.


When the city cut back to one pickup a week two years ago, still with no fee and still without requiring residents to pull the cans to the street, many residents reacted as if the world would end. It didn't and the city saved about $800,000.

So, I think it's fair to note that Williamsburg voters are more predisposed to favor increased taxes to reduced services than most across the state.


1. Don't make a tax increase the first option - It certainly wasn't in Williamsburg, which last raised taxes more than 20 years ago. City Council has cut the budget in four of the past five years to deal with the recession. They've cut services. They've cut personnel. They've cut back on employee benefits. As a result the proposed Fiscal Year 2013 budget, even with the tax increase, is smaller than the FY 2009 budget.

2. Explain why it's necessary -- In Williamsburg a tax increase was needed because the city got hit with a perfect storm of forced expenditures and reduced revenues at the same time. State-mandated increases in VRS contributions from city employees and for school teachers hit the same year that the city's percentage of children in the Williamsburg-James City County school system went up for the first time in 20 years, likely because the recession left some folks who would have bought houses in one of the counties renting in the city. The city's costs for employee healthcare were also up. In addition the city's real estate revenues were off because of reduced assessments. And the room, sales and meals taxes, while recovering, have yet to regain pre-recession levels. The end result was a hole in the budget of about $900,000, which the tax increases and further cuts in expenditures would fill.

3. If you have to raise taxes make it as little as possible - Taking a page out of the General Assembly's book, the current Council asked Tuttle and Finance Director Phil Serra to come back with more optimistic projections for room and meals tax revenue, which would cut about $300,000 out of the hole to be filled. That's possible because, as Crapse rightly noted in the campaign, for years Tuttle and Serra have lowballed those revenue estimates. That's a conservative form of budgeting that has led to the city generally outperforming the budget and guaranteed that any end-of-the-fiscal-year surprises were good ones. Council may yet regret this decision.

4.  All taxes are not created equal - The proposed budget include a 3-cent increases in the real estate tax, a 50-cent hike in the personal property tax and a nickel increase in the current 25-cents per pack city cigarette tax. To the extent that any organized opposition has been raised to the increases, the jumps on the personal property tax and the cigarette tax have been most strongly opposed. Businesses in the city feel that the personal property tax hike hits them disproportionately because they pay the tax on more categories of property than private citizens. Freiling, at least, has publicly agreed with this and might favor a larger real estate increase and smaller personal property tax increase. One city convenience store has said the cigarette tax already put them at a competitive disadvantage to stores in the counties, which can't levy such a tax. They fear an increase would put them at a bigger disadvantage. As a smoker who spends a lot of time in the area, I'd be surprised if people are price shopping for cigarettes. Especially since it's almost impossible to remember exactly where the city stops and the counties start. Look at Williamsburg on a map some time; it's shaped like an amoeba.

5. Play your cards close to the vest - Although all three incumbents made it clear they "weren't necessarily opposed to a tax increase," none of them exactly jumped out in front and led the parade for it. Haulman at one point said, "This isn't our budget, it's the city manager's budget." All three said it was "too early to tell" about the tax increase because of lingering uncertainty about the state budget and the school system's budget. Freiling probably came the closest to advocating the tax increase when he said the hole in the budget was so large that he couldn't see how the city could fill it "without some increases in revenue."
The bottom line was that the three incumbents knew the election was on May 1 and they didn't have to go on the record voting for a tax increase until May 10.

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Monday, January 9, 2012

Is there a Senate deal that would help both sides?

With the opening of the Virginia General Assembly upon us in two days and with chaos threatening to reign in the Senate, is there a quasi-power sharing agreement that would satisfy by both sides and avoid a lot of aggravation?

There very well might be.

Democrats are claiming that Lt. Gov. Bill Bolling can't vote on organizing the Senate. Republicans claim that vote gives them the majority. Ironically, the two parties are taking the opposite positions that they took the last time the Senate was deadlocked 20-20, in 1996. At that time the lieutenant governor was a Democrat, Don Beyer.

A judge refused to grant an injunction against Bolling casting the tie-breaking vote because the issue was not "ripe," since he hadn't yet done so. The lawsuit filed by Democratic Caucus Chairman Sen. Donald McEachin is still in front of the court. If, really when, Bolling casts his tie-breaking vote, the Democrats could go back to court. Of course, that would require them to walk off the floor, denying a quorum in the Senate until the issue could be resolved. And that's complicated by the fact that Bolling, like the governor or a member of the legislature can't be compelled to answer to a civil suit during the General Assembly session.

So chaos could ensue.

But it's not necessary. Because there could be a deal that gives both sides part of what they want.

Bolling put out a well-reasoned memo dealing with what issues he believes he can cast a tie-breaking vote on and which he cannot. He believes that he can vote on organization, but not on issuing debt, constitutional amendments or final passage of the state budget. I think his analysis is right.

Which could cause problems for Republicans, as well as Democrats. They now need consensus with Democrats on the budget and they are unlikely to get it if Democrats feel that Republicans are trying to grab power they didn't win at the polls.

But there would seem to be a deal out there.

In recognition of their victory at the polls and Bolling's tie-breaking vote, Republicans would be recognized as the majority and control the floor. Sen. Tommy Norment would be the Majority Leader and Republicans would chair every committee.

But, reflecting what each side earned in November, instead of the 10-6 majorities Norment has talked about on committees, each side would have an equal number of seats on committees. This would allow Democrats to kill some bad social issues bills coming over from the House in committee, which probably wouldn't really make Norment, Bolling or Gov. Bob McDonnell -- who could avoid having to sign nutty social issues legislation while auditioning for the vice presidential nomination -- unhappy either.

Democrats would probably also want a pledge that Norment will not, as he's threatened, "revisit" last year's legislative redistricting. From a good public policy perspective, that's a good thing. Redistricting shouldn't be on the line in every election, to be engaged in whenever the majority changes.

In return, Democrats could probably agree to pass the incumbent protection Congressional redistricting plan that all the incumbent representatives signed off on last year. True some think that would lock in the current 8-3 Republican edge. I don't, because that edge isn't natural anyway. Virginia's not a 75% Republican state so there's no way the GOP will hold that kind of advantage long term. In the incumbent protection plan the 2nd District and, to a lesser extent, the 5th would remain "swingy." The 10th would also probably become a swing district once Rep. Frank Wolf retires. The Democrats could probably get a better deal out of the federal courts. They might still have that opportunity. Just because the "incumbent protection" plan passes the legislature doesn't mean it will clear the Obama Justice Department, which could very well prefer the Democratic plan which offered the possibility of electing another African-American to the U.S. House.
This is a deal that could satisfy both sides. Nobody gets everything they want. Nobody gives up everything. That's sort of the point of a "power sharing" agreement. And it's the best both sides can probably get and still get on with the people's business. Democrats will have to recognize that they have lost the majority. And Republicans will have to recognize that 20 seats in a 40-member body don't justify 63% of the committee seats.

Both sides will have to recognize that they will have to compromise and cooperate to handle the range of complex issues, from the budget to uranium mining to highway funding to support for public and higher education that constitute the real work of the 2012 legislative session.

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