Emmett's Virginian Voice
From the Office of Senator Emmett Hanger   October 2017
In this Issue
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"Local Fiscal Stress" is a hot topic issue in Virginia right now. Last year Petersburg made news and that took the issue to another level, one that called for immediate legislative action. This past session I offered budget language to formalize a "Joint Subcommittee to Study Local Fiscal Stress" to further efforts that were ongoing to try to address the financial situation in Petersburg and benefit other localities in the Commonwealth. Our work includes an on-going Auditor of Public Accounts workgroup to develop an early warning system and the necessary mechanics for state assistance and/or intervention of fiscally distressed localities. We need to examine the issue and better define the state's role in assisting fiscally distressed localities, and establish procedures to better identify and prevent occurrences of fiscal distress. This will also afford us opportunities to dive deeper and look at overall tax reform and promote regionalism in Virginia to insure we better partner with our local governments, and in turn, improve the overall economic health of our entire Commonwealth.
I have had the opportunity to speak to various groups and organizations on this topic this year and am pleased about the ongoing dialogues and work resulting from the subcommittee's efforts. How can local governments help? I encourage them to c ommunicate any concerns or issues through their  representatives to the legislature, such as VML and VACO, or to their specific legislators in the General Assembly, or to me or another member of the subcommittee. The feedback to date has been well-received and this "open-lines of communication" will help facilitate the discussion and offer a better understanding of issues from the local perspective.    
UPCOMING on Emmett's Calendar:
Highlights in October:  
Some Specifics on the Joint Subcommittee to Study Local Fiscal Stress: (as outlined by subcommittee staff)
  • Budget Item 1, Paragraph U.1
  • Membership: 5 members from the Senate Finance Committee, and 6 members total from the House money committees (Appropriations and House Finance)
  • Senator Hanger is the Chairman of the Subcommittee
  Subcommittee Goals and Objectives:
  • Savings opportunities from increased regional cooperation and consolidation of services;
  • Local responsibility for service delivery of state mandated or high priority items;
  • Causes of fiscal stress among local governments;
  • Potential financial incentives and other governmental reforms to encourage increased regional cooperation; 
  • Different taxing authorities of cities and counties.
  • $500,000 General Fund (GF) dollars are included in the budget for intervention and remediation efforts for previously identified instances of local fiscal distress. Additionally $500,000 GF of unspent aid-to-locality funding that would otherwise revert to the general fund may be re-appropriated by the Governor for the purpose of providing technical assistance to fiscally distressed localities, as needed.
Broad Examination Issues: 
To  better understand the root causes and what efforts can be made by both the state and localities to improve local governments' ability to improve fiscal strength, reviews will include: 
  • The state and local fiscal partnership - what share of mandated services are paid for by the state/localities. These services include, but are not limited to, certain high priority items such as education, public safety, public health and mental health services.  In addition, examining the basis for the distribution of funding to localities to meet those mandated obligations (such as the local composite index (k-12 education), HB599 (police dept. funding), etc.).
  • Disparity in Local Taxing Authority - examine the disparity in taxing authority between cities and counties, and what could be done to equalize this authority. Currently, cities and towns have the authority to impose taxes without limitation, so long as not prohibited by law, but Counties need enabling legislation to enact taxes.  (e.g. disparity in local authority between cities and counties for the meals tax, lodging tax, cigarette and tobacco tax, admissions tax, etc.)
  • What are the key tax related issues that impact local governments and what opportunities are there to positively impact local governments' fiscal health? - For example, are there opportunities to modify the BPOL and Machinery & Tools taxes? What is the cost to localities and the state if transitioned from a gross receipts basis to a net profit basis for BPOL, and if the state were to subsidize localities for this change and/or make it revenue neutral? Car Tax - Capped at $950 million in 2006 (at 70% of vehicle tax abatement), growth in the volume of vehicles has left localities with an unfunded mandate that costs the state nearly $1 billion per year, and there's uneven and inequitable distribution of funding (based on changes in population growth).  However, localities do have the option to raise local vehicle tax rates on the value in excess of $20K to make up for the erosion in value of the fixed PPTRA payment.  
  • Examine Locally Generated Sources of Revenue - On average, local revenues consist of 63% from locally derived sources, mainly from real property taxes (66% for counties, 55% for cities), 31% in state aid to localities (the majority for K-12 education), and 6% from the federal government. What is the best way to diversify the local revenue base to make it less dependent on real property tax revenue? Are there ways to change/improve the allocation of state aid to localities to be more equitable and better reflect need?
  • Ways to Encourage Increased Regional Cooperation and Consolidation of Services - Examine opportunities to provide financial and other incentives, and other policy options to promote increased cooperation and consolidation of services where appropriate to both enhance service delivery and reduce cost.  
  • Communicate with Stakeholders to Identify and Address Root Causes of Local Fiscal Distress - Through the examination of data and other information provided by a variety of stakeholders, including subject matter experts at the state level, as well as local government leaders and their representatives at VML/VACO, get a better understanding of the root causes and primary concerns of local governments, and solicit suggestions/recommendations. 

In Memoriam: Delegate Lacey E. Putney (I-Bedford) passed away Aug 26. In honor of his 52 years of public service in the VA House of Delegates many turned out to pay respects and view his flag-draped casket lying in state Sept 6. His widow Carmela Bills Putney kisses the casket below the Houdon statue of George Washington in the State Capitol Rotunda. Putney rightly earned the name, "The Lion of Bedford" for his strong, independent streak as he served his constituency.         

(Photo Credit: Bob Brown, RTD) 

In Closing:

You can access the  VIRGINIA GENERAL ASSEMBLY WEBSITE for the latest on legislation, committee action, and contact information. This is a very user-friendly resource for day-to-day updates on what is going on during Session and in the interim.  Or go straight to our  LEGISLATIVE INFORMATION SYSTEM  for bill and budget information.  
In addition, our Legislative Information and Constituent Services (LINCS)  staff can provide you with legislation updates, research information, copies of votes, and some educational materials. You can reach that office toll-free at 1.888.892.6948.
Please feel free to contact my Senior Legislative Director, Holly Herman, or me with any concerns or suggestions you may have regarding state matters in the future. My RICHMOND OFFICE staffed during Session will be located in Room E507 of the Pocahontas Building. My Session phone is 804.698.7524 and my mailing address is P.O. Box 396 Richmond, VA 23218. During the interim you can reach me by phoning 540.885.6898 or at P.O. Box 2 Mount Solon, VA 22843. At any time, I can be reached at district24@senate.virginia.gov.

Sincerely ,
Emmett Hanger Signature

Emmett W. Hanger, Jr. 

24th Senatorial District 

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