County watches revenue carefully
By Greg Pearson STAFF WRITER

Page Dowdy/Chesterfield Observer Empty storefronts are becoming a more common sight in shopping centers on Midlothian Turnpike between the city line and Chesterfield Towne Center. The higher rate of vacancies translates into less sales tax revenue for the county.

The good news is Chesterfield tightened its budget for the FY09 budget (that started July 1). The bad news is it correctly predicted a longer and deeper slowdown than the state did, and it continues to keep its collective fingers crossed that more cuts are not necessary.

"Aside from the normal efforts to save money, there is nothing that we're contemplating right now that would be in the form of an across the board cut," said County Administrator Jay Stegmaier. Asked if a hiring freeze is anticipated, he responded, "Not at this time."

What concerns the county the most is the yet-to-be announced cuts in state funding. Last month, Gov. Tim Kaine asked for proposals of 5, 10 and 15 percent cuts to be prepared from state agencies, but which ones might have to reduce spending, what programs might be affected, and by how much is currently unknown.

Page Dowdy/Chesterfield Observer Trucks, SUVs and other vehicles are worth less these days as demand wanes for vehicles that use more gas.

During its budget preparation period for FY09, Chesterfield more accurately assessed the financial landscape, which Stegmaier called "the most difficult in the past 25-30 years."

"We were more on target than most prognosticators -- certainly more than the state," he commented. "I thought some analysts were talking very bravely about a turnaround by year's end. We didn't see that because we anticipated a longer downturn. We're seeing pretty much what we budgeted for."

Much higher gas prices is impacting the values of trucks and SUVs. Personal property taxes on vehicles hang in the balance because they are based on market value. Stegmaier acknowledged being concerned about that revenue stream. "That seems to be an area of vulnerability for us," he said.

Personal property taxes on vehicles is budgeted to generate $93.2 million during FY09, less than FY08 at $95.4 million. One economist has pointed out that a 2007 Dodge Ram pickup truck in excellent condition, selling at $25,000 then, is now worth $7,500, according to estimates from the National Automobile Dealers Association.

That example came from a forum held last month when five experts in the fields of the economy, banking, taxation, commercial real estate and development briefed county leaders.

County officials were advised the economic slump will likely continue through 2009, and gross domestic product growth will probably return to 3 to 3.5 percent in 2010 and 2011. One federal official suggested the housing market may have "bottomed out." There is also concern about inflation nationally, though the weak economy is hampering the Fed from controlling it.

State revenues for FY08 (ending June 30) came in $15.9 million (0.1 percent) above the forecast while the county was 0.4 percent above its projection. The state is now revising its "bullish" forecast for FY09 of a 4.9 percent increase in sales tax revenue while Chesterfield predicted just 2 percent higher.

Office and retail vacancies increased for 2007 in the Richmond metro, and the market expert at the forum wasn't expecting meaningful growth in those sectors until 2010. However, industrial vacancies - driven by a low dollar exchange rate and interest by foreign countries - has increased activity. Will Davis, Chesterfield's Economic Development Department director, is reporting the same in this county.

Since last month's high-level meeting, there is some positive news on the homebuilding front because of the government takeover of Freddie Mac and Fannie Mae. With Uncle Sam now standing behind many mortgages, that encourages financial institutions to get back to making home loans.

The Home Builders Association of Richmond is also touting eligibility for first-time homebuyers with a one-time tax credit of up to $7,500 toward the purchase of a new home. The credit is available for individuals making up to $75,000 annually and couples making twice that. Both the individual and couple can earn a partial credit if they earn slightly more than the limits. The credit has to be taken by June 30 and is repaid over 15 years, but the repayment doesn't have to be taken until two years after the credit is claimed.

The National Association of Home Builders has established www.federalhousingtaxcredit.com to fully explain the federal program.