Hampton Approved Budget Sees 8-cent Tax Rate Reduction

May 10, 2007

The Hampton City Council has approved the City's budget for Fiscal Year 2008 totaling $435,653,046, a 7.6 percent increase over Fiscal Year 2007.

The budget protects existing city services while funding many critical enhancements, including the construction of two new pre-K-through-8 public schools. It also reduces the real estate tax rate a full 8 cents, to $1.06 per $100 in assessed value. Since 2004, the property tax rate in Hampton has been lowered 21 cents.

To minimize the impact on tax payers, Hampton City Council last year established a financial guideline on the amount of revenues the City would typically generate from real estate taxes. The financial guideline limits growth in current real estate taxes, net of new construction, to the greater of resident income growth or the consumer price index for urban dwellers.

When the assessed values of properties in Hampton came in 2.6 percent higher than the original 15 percent increase in the City Manager's recommended budget, City Council chose to lower the tax rate another 2 cents - to a total cut of 8 cents. The remaining $485,545 from the new assessed property values will be used to provide real estate tax relief for the elderly and to lower personal property taxes for veterans who are 100 percent disabled.

The FY08 budget is based on an improvement in city revenues overall including personal property, meals, lodging, recording fees and interest income, to name a few. In addition, a number of internal measures -- most notably the use of the city's fund balance to support the capital budget and other one-time expenses, and the deferral of some capital projects -- have also been a factor.

Construction of the two new schools will be an important component for Hampton. Research indicates that the PreK-8 concept makes the transition from elementary to middle school easier for students, with the potential to result in improved student achievement. The plans call for the schools to be built on the sites of the old Sentara Hampton General Hospital on Victoria Blvd., and adjacent to Bethel High School, in 2009.

The cost for the new schools is $116 million. An additional $2.9 million per year - above and beyond traditional School maintenance costs - is also planned for other existing school enhancements.

Construction of the two new schools had a 3-cent impact on the city's ability to fully adhere to the property tax funding formula this year. This potential impact was identified in 2004 when the Schools Investment Panel, comprised of citizens, elected officials, and City and Schools staff, determined that a rate impact of between 2 to 4 cents would be required to support the new schools.

Along with $4 million from the city's fund balance that was dedicated, the resulting revenues from the 3-cent impact will be placed in a debt reserve account. This account will be used to mitigate debt service obligations in subsequent years. Hampton City Schools will also contribute $2 million annually to help pay the debt service.

The city's local contribution to Schools this year totals $66.6 million. When state and federal funding are included, the Hampton City Schools budget is $205.1 million, a 1.98 percent increase. The relatively small increase in the School System's budget is the result of a major decline in state sales tax revenues (a statewide problem) and other state funds associated with declining student enrollment. However, the City's contribution to the Schools increased by $3,803,283, or 6.2 percent.

The FY08 budget re-benchmarks the elderly and disabled tax relief program to assure that the city's most financially vulnerable residents have even more tax relief opportunities. The new budget increases the income limits for tax exemptions as follows:

• 100 percent relief from the current level of $21,000 to $25,000
• 75 percent relief from the current maximum level of $24,0000 to $27,000
• 50 percent relief from the current maximum level of $27,000 to $29,000
• 25 percent relief from the current maximum level of $30,000 to $31,000

Further, under the recommended budget, the city increases the exemption asset level from $100,000 to $200,000 and the freeze asset level from $175,000 to $200,000.

Veterans who are 100 percent disabled will be eligible for a lower personal property tax rate -- $1 per $100 valuation instead of $4.25 per $100 - for one vehicle provided they have appropriate Department of Veterans Services verification of their disability.

Other city service enhancements included in the FY08 budget include the addition of 5 new police officers, 9 new firefighters, 2 new 911 dispatchers, additional maintenance crews for public right of ways and schools, enhanced neighborhood street lighting, and funding to support the behavioral management component of the School System's new alternative for students with disciplinary issues.

City employees will receive a merit salary increase and see a proportional share of health insurance premium costs to be covered by the city.

After much discussion, City Council decided not to levy a boat tax in this budget cycle. (A boat tax was not part of the City Manager's recommendation). City Council directed the City Manager to embark on a study to assess the social and economic impacts that may, or may not, have resulted from the removal of the boat tax in 2002. Based on the City Manager's findings and recommendation, City Council will initiate further discussions on this issue in the future.

Increased flood incidents in some parts of Hampton have been an area of focus for the city. Determining ways to mitigate this flooding will require extensive studies and evaluation. While the city is committed to finding long-term solutions, it has been determined that an expanded drainage maintenance and flood prevention program is one important initiative that can be undertaken in the immediate term.

To facilitate this, the storm water fee will be increased by $1.00 per month per equivalent residential unit. This means that homeowners will pay $12 more a year to enhance off-street ditch and drainage canal maintenance, and to fund new construction of future drainage improvement projects.

The storm water fee in Hampton has not been increased in several years. Hampton's present rate is considerably lower than peer localities.

Another new initiative in the Capital Budget is the Flood Assistance Program which, in the next Fiscal Year, provides for the purchase of 3 properties that have experienced flooding in their living space and which provide public benefit. Late last year, impacted home owners were encouraged to apply for this program. $500,000 has been allocated for this program to purchase properties which give the city access to do better and enhanced drainage maintenance along Newmarket Creek.

The need to create navigation improvements on Hampton's waterways has been identified as an important priority. As an initial step the city in November 2005 entered into a contract with a consulting firm to begin the necessary permitting process with the Army Corps of Engineers, the Virginia Marine Resources Commission, and the Virginia Department of Environmental Quality with the intent to undertake navigation improvements on the upper reaches of Hampton River.

Since then, a number of detailed and technical field studies have occurred as well as consultation with marine contractors regarding the most efficient methods of dredging for this project. A public meeting and questionnaire were also undertaken to determine the extent of navigation difficulties residents are experiencing, their desire for tertiary channels to private piers to be included in the permit application, and their willingness to pay for dredging of connecting private channels.

The permit application, scheduled to be submitted this summer, will include dredging of the main channel of the river as well as dredging a portion of the tertiary channels. However, the portion from the private piers to the city dredged channel will not be paid for by the city.

The FY08 budget calls for $1.7 million from the Capital Budget to accomplish this work.

In future years, it is the City Manager's intent to address other important navigation improvement projects in the city, following this initial work.

For some time, citizens have expressed a desire to be relieved of the annual ritual of removing and then replacing the burdensome decals on their windshields. The FY08 budget supports the elimination of the requirement to display a city decal on vehicles. Approximately $3 million in revenue presently is generated by decal sales. In their place, a local license registration fee would be implemented. To assure that the collection ratio for these revenues remains the same, approximately $200,000 is included in the FY08 budget for additional mailings and the increased use of field inspectors by the Treasurer's Office, using the license plate reader and other tools available to them.

Copies of the City of Hampton's FY08 budget will be available in Hampton Public Libraries, and at www.hampton.gov/budget.