Business and Taxes

Culpeper Star Exponent

Business Monday

April 28, 2014

Jim Charapich

The Culpeper Town Council met last Thursday on the Third Floor of Town Hall for a 2015 Budget work session. The session was entertaining considering that the Town budget will have increased over 30% during four years with no change in sight if approved (including the proposed 2015 Budget).

Early in the session, the Town Council agreed on a need to hire a consultant for $26,000 to help develop a strategic plan. The need was self-evident when hearing the economic impact of the policies from which the Town Manager is being asked to construct the 2015 Budget.

On the issue of BPOL - Thank you to former Town Manager / current Councilman Tom Huggard for proposing that BPOL be reduced by 33%. This is significant considering that this is a well-educated proposal. In like fashion, both Councilman Lochridge and Vice Mayor Michael Olinger recommended that the unfair BPOL tax be reduced by 20%,  a respectable reduction. Others suggested a 10% , 5%, or a meager 3% reduction amounting to less than $100,000 net against a more than $13 million budget. One candidate councilman proposed that the issue be studied. Why was this not done two years ago? Another comment was that we need to wait and see what the General Assembly will do to change the tax method. Where are the letters and digital communications to our General Assembly representatives asking for the issue to be resolved?

The Assistant Town Manager cited figures suggesting that the Town meals tax produces approximately $3 million in meals tax revenue. The boundary line adjusted (BLA) area produced approximately $1.2 million in revenues ($900,000 - meals tax) with a cost of services at approximately $400,000. This netted the Town over $800,000 in net revenue from the BLA. By Town Council actions, the Town appears to be divided into three commercial areas, the windfall revenue area of the BLA, the CRI footprint, and the areas south / west  of the CRI footprint. Given that the BLA area produces over $900,000 in meals tax revenue, and that there are likely another $600,000 in revenues from the areas south / west of the CRI footprint, that means that at least half of the meals are purchased from outside of the CRI downtown footprint.

It is perplexing that the Town Council could have a windfall of over $800,000 from the Boundary Line Adjustment and be very willing to invest $50,000 more (now potentially totaling $150,000) in the CRI footprint promotional efforts, with seemingly no regard to the competitive advantage that this creates against the South / West and BLA commercial parts of the Town. Is the Town using the windfall tax dollars from the BLA to promote business in other areas of the Town?

Finally, with the recognized $800,000 windfall from the BLA area, a reduction of 5% or 10% of the BPOL tax is less than $100,000. This is welcome, but hardly a significant reduction considering the $800,000 net windfall. When discussed by the Council in the work session, Department Heads in the Town did not offer budget concessions from their proposed increases for 2015.  The Town Manager was noted as the only department to offer some savings from his 2015 budget while some of the Town Council chuckled.

Unfortunately, this is not funny. The economy is not at a level that supports a continuation of policies leading to a 30% increase in the Town budget over four years (including 2015). Reduced Federal spending is impacting disposable income. Sequestration is impacting defense spending and thus defense contractor revenue. According to figures by Chmura Economics & Analytics, employment in Northern Virginia has slowed. This is significant considering that approximately 50% of the workforce in Culpeper are commuters.

Do we have a spending issue? Do we have a Town Council Issue? Perhaps Act Two will be better.