In May 2014, the Prince William County Finance Department reported to the Board of County Supervisors that they anticipated an approximate $5 million shortfall of Fiscal 2014 tax revenues. In its fourth quarter report to the Board on August 5, 2014, the Finance Department confirmed an actual tax revenue shortfall of $5.9 million on the $824.4 million budget (adopted in April of 2013) – a 99.3% accuracy on prediction of final revenues.
The $5.9 million shortfall was mostly from a reduction in real estate tax revenue, which the staff report showed was down by $3.5 million. The bulk of that shortfall – $2.8 million – came as the result of tax breaks, or exonerations, given to disabled veterans under the state-mandated Tax Relief for Disabled Veterans Program and to other elderly or disabled individuals under the Tax Relief for the Elderly and Disabled Program.
The Disabled Veterans Program, which started in 2011, provides 100 percent tax relief for certain veterans who are also disabled. Prince William County’s population of households participating in the program grew from 211 in year 2011 to 355 in year 2014, a 68-percent increase. The U.S. Department of Veteran Affairs reported that Virginia experienced a 6.7-percent increase statewide in its disabled veteran population, the largest increase in the nation, between 2000 and 2014.
Other tax revenues were also lower than anticipated. Personal property tax revenues were down $438,959 from the Fiscal 2014 adopted budget estimate, largely as a result of the county extending the tax due date during the federal government shutdown. Sales tax revenues were down by $948,456. According to the staff report, an unusually harsh winter, irregular growth in the economy and the government shutdown contributed, in part, to a decrease in retail sales.
The federal government continues to hold interest rates between zero and 0.25 percent, which served to cap the County’s investment income. A revenue shortfall of $865,184 in investment income was reported for Fiscal 2014.
Consumer utility tax revenues and Business Professional Occupational License (BPOL) tax revenues were both up. An increase in new residential housing and commercial units contributed to a $173,927 increase in consumer utility tax revenues, and BPOL was up by $208,169 due to a general overall improvement to the economy, according to the report.
On the housing front, the report showed that home sales were relatively stable (688 homes sold in Fiscal 2014 compared to 696 in Fiscal 2013). However, the average sales price has increased with an average sale price of $365,839; which is the highest it has been since September 2007.
Prince William County Budget Director, Michelle Casciato, also presented at the board meeting, and noted that the county’s audited share of the revenue shortfall would come from the Revenue Stabilization fund. Casciato said it’s the Board’s practice to keep the Unassigned Fund Balance at 7.5 percent of the county’s general fund.
“This is something that we do annually to insure that the audit reflects our fund balances appropriately and keeps us in compliance with our principles of sound financial management. The bond rating agencies know that the Board’s commitment to conservative fiscal management is sincere since we continue to adhere to our self-imposed financial constraints. That commitment is the cornerstone of the County’s three AAA ratings.”