Joint Subcommittee on Local Government Fiscal Stress meets

June 16, 2017

The Joint Subcommittee on Local Government Fiscal Stress held its inaugural meeting on June 15.  The joint subcommittee, created by language in the 2017 Appropriations Act that was modeled on SJ 278 (Hanger), is tasked with a broad examination of local government fiscal stress, including disparity in taxing authority between cities and counties and local responsibility for delivery of state-mandated services.  The subcommittee is also to examine potential incentives to encourage regional cooperation and possible savings obtained from such efforts.

The joint subcommittee received a presentation from Secretary of Finance Richard D. Brown and Robert C. Bobb, President and CEO of The Robert Bobb Group, on efforts to address the financial situation of the City of Petersburg.  These efforts have concentrated on stabilizing the city’s finances in the short term and working to improve its cash reserves and financial practices in the long term.  Language in the budget passed by the 2017 General Assembly authorizes the Secretary of Finance to provide up to $500,000 in FY 2017 to assist a locality in fiscal distress; the city has submitted a request for funding, which is currently under review.

Language in the state budget also directs the Auditor of Public Accounts to convene a working group to establish an “early warning system” to identify localities in fiscal distress.  As discussed in an earlier article in County Connections, this group met in April to review information provided by the Pew Charitable Trusts about other states’ indicators of financial trouble and is expected to meet again in the coming months to review sample models.

The joint subcommittee also received an overview of local government fiscal stress as measured by the Commission on Local Government.  This metric, created by the Joint Legislative Audit and Review Commission in 1986, measures revenue capacity, revenue effort, and median household income and is used to calculate need in several funding formulae, such as the distribution of funding for equipment for constitutional officers.  David Conmy, Local Government Policy Administrator at the Commission on Local Government, also provided information on existing opportunities for localities to cooperate, such as revenue-sharing agreements and agreements for joint service delivery.  He also discussed several studies regarding consolidation of localities, including a current study on annexation that will conclude in 2018.

Lisa Wallmeyer, Senior Attorney at the Division of Legislative Services, presented an overview of local government taxing authority, pointing out the increasing reliance of localities on local resources, in particular real property taxes.  Senator Hanger, the joint subcommittee’s chairman, noted that he had been reluctant in the past to support authorizing all counties to levy cigarette taxes in the absence of a comprehensive review of taxing authority in general and stated that this subcommittee might provide an opportunity for such a thorough consideration.  Senator Dance noted that although the problems in Petersburg had attracted attention, local fiscal stress is a problem broader than one city.  The joint subcommittee expects to meet again later in the summer.

VACo Contact: Katie Boyle

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