By Brandon Martin
The City of Martinsville formally began the reversion proceedings by filing a notice of intent with the Commission on Local Government (CLG) on Sept. 15, 2020.
Henry County subsequently filed its response in December.
Following is an overview of some of the key positions and arguments being considered by the CLG.
Services/Facilities
The city’s notice on page 36 discusses the current government services offered by the city and the new proposals post-reversion.
As noted in the filing, “responsibility for governmental services within Martinsville would be allocated between Martinsville and Henry County in the manner according to the traditional town-county relationship.”
Currently, the two localities have individual school superintendents and administrative staff. They do not “operate jointly” and “do not otherwise contract jointly for the provision of public education.”
Based on numbers from the 2019-2020 school year, enrollment in city schools was 1,930 students. Per fiscal year (FY) 2018 data, the city schools had 167 total teachers for kindergarten through 12th grade. In FY2019, Martinsville contributed $6,144,512 to its school board.
The city proposes that post-reversion, “Henry County would assume full responsibility for operating the educational system for all residents of Henry County, including residents of Martinsville.”
The city also proposes eliminating its positions for Sheriff, Circuit Court Clerk, and Commonwealth’s Attorney, along with the separate jail and Circuit, General District, and Juvenile and Domestic Relations District courts.
“In FY2019, Martinsville spent $2,401,821 for judicial administration services and $3,473,582 for support of correction and detention services provided through the Sheriff and the Probation Office,” according to the notice.
After reversion, the city proposes “Henry County and its Sheriff, Circuit Court Clerk, and Commonwealth’s Attorney would provide and finance all judicial administration services provided to the citizens of the new town of Martinsville and receive all state funding appropriated for those purposes. Judges appointed to serve in the 21st Judicial Circuit and 21st Judicial District would continue to serve the citizens of Martinsville and Henry County.”
This is the same proposal as for the city’s Commissioner of Revenue, Treasurer, Registrar, and Board of Elections.
Currently, the city and county are served by a joint Henry-Martinsville Department of Social Services (HMDSS). The Henry-Martinsville Social Services Board (HMSSB) presides over the department, with Henry County appointing six members and Martinsville appointing the other three.
“Martinsville and Henry County have an agreement providing that Martinsville will reimburse Henry County for its share of administrative, operating, and maintenance costs that are unreimbursed by state or federal grants,” the notice states. “In FY2019, Martinsville provided $349,886 in local funding to the HMSSB.”
After reversion, the city proposes “Martinsville would have no responsibility for local funding of the Social Services Board. Henry County would assume full responsibility for local funding of the Social Services Board.”
A similar proposal is suggested for Martinsville’s role in the Henry-Martinsville Health Department and Piedmont Regional Community Services Board.
Martinsville also proposes to continue providing “door-to-door curbside waste collection and drop-off recycling services in the same manner as it currently provides.”
Other services the city would continue to provide are law enforcement, public safety, fire, rescue, building inspections, public works, parks and recreation, the library, Blue Ridge Regional Airport Authority, and planning and community development.
In conjunction with the transition of services to the county, Martinsville also proposes to transfer Clearview Elementary School ($1.2 million), Martinsville High School ($16.4 million), Albert Harris Elementary School ($9 million), Martinsville Middle School ($7.3 million), and the old gym ($317,400). The Town of Martinsville would retain all other properties.
The city also lists the terms and conditions for the use of other schools and associated properties that will be retained in the possession of the newly formed town.
The counsel for the city states on pages 69-70, “The Henry County School Board should be given the right to use those school facilities currently owned by Martinsville on a basis that will fairly recognize the value of Martinsville’s interest in such facilities.”
It adds that, “The Henry County School Board should be given the right to use those school buses currently owned by Martinsville on a basis that will fairly recognize the value of Martinsville’s interest in those vehicles.”
The county responded, “The primary flaw with Martinsville’s proposal is its failure to provide the county with sufficient assets to carry out the services the city proposes to transfer to the county. The city also seemingly asks the county to compensate it for those assets that it does propose to transfer to the county.”
To provide the additional services inherited from Martinsville, and “to procure additional assets” and “incur additional capital, personnel and other expenses associated with those obligations,” the city must “grant to the county, at no cost, all of the assets the city currently uses to provide the services that will be transferred to the county post-reversion. Martinsville would have no need for the majority of those assets once it transfers the related services to the county.”
The additional facilities include Patrick Henry and Druid Hills elementary schools and the Municipal Building, the Sheriff’s Office Jail Annex, Prison Farm and others.
“The additional facilities requested by the county amount to “a minimum of $11,205,800 using the City’s assessed and insured values.”
The county generally agreed to all the transfers noted by the city in its filing, but did however, add the need to address one-time expenses brought upon by the combining of services.
In a best-case scenario, with the city transfers all the assets associated with the transferred services, the county still projects that it will incur one-time costs of $1,310,000.
“Even after the one-time onboarding costs for new employees and facilities, there will be ongoing administrative costs associated with the larger workforce and asset base,” the county states in their notice. “These recurring costs will be reflected in increased expenses in areas like human resources, information technology, procurement, finance, legal, contractual services, facilities repair and maintenance, and salary and benefit equalization to bring compensation and benefits for former city employees in line with county compensation.”
The county anticipates that the recurring costs will be at least $31,287,234.
Finances
The city stated on page 34, “Assuming that the net aggregate fiscal impact on Henry County resulting from the reversion is addressed solely by an adjustment in Henry County’s real property tax rate, the estimated adjustment required in that rate would be a 5¢ increase reaching a rate of 60.5¢ per $100 assessed value of real property.”
To mitigate the financial impact on the new town, the city would decrease its rate to 45.71¢ per $100 assessed value of real property.
The city notes that the county would gain taxable property from the new town as well.
“Based on 2019 data, reversion would increase Henry County’s total assessed real estate values to $3,514,619,854 ($631,445,800 from Martinsville) and total assessed public service real estate values to $213,170,305 ($24,296,670 from Martinsville),” the city states in the notice.
It also noted the new real estate would increase the county’s bond capacity.
By deriving additional resources from the corporate limits of Martinsville, the city contends that equitable sharing of resources will be maintained even in the event of annexation.
On page 53, the city cites the Bedford County reversion to note “to Martinsville’s tax advantage, reversion would restore its ‘authority to extend its boundaries through annexation,’ allowing it the ‘opportunity to share . . . in the development which has occurred arounds its periphery.’”
The city added “as a town, Martinsville would be able to annex territory without threatening Henry County’s tax basis in such territory.”
The county responded it disagreed with the numbers provided by the city and stated that new revenue would not be enough to cover expenditures.
“The county projects a $2,547,507 deficit in the initial year following reversion, not including the anticipated one-time costs associated with reversion,” they state in their filing. “That deficit will increase in the ensuing five years thereafter. Each penny of real property tax will generate $333,889 of revenue at a 95 percent collection rate. Thus, if the county used solely real property taxes to cover the deficit, it would have to raise its real property tax rate by $0.08 to $0.63 per $100 of value.”
Additionally, the county estimates that the city would have to reduce its real property tax rate by $0.51 per $100 of value.
Given other obligations incurred by the county in the process of reversion, they state that only adjusting real property taxes would be insufficient to cover their shortfalls.
“One of the few benefits to the county of reversion will be the ability to derive additional revenues from within the new town,” the county states in the notice. “Primarily, the revenues will come from property taxes. That benefit will be mitigated over time as the assessed values of property within Martinsville are not appreciating.”
To help close the gap, the county requested the Town of Martinsville be required to maintain the same funding each year for ten years on the Martinsville Henry County 911 Communications Center ($479,053), the Blue Ridge Regional Library ($295,308), the Martinsville Henry County Economic Development Corporation ($100,000), the Martinsville Henry County Chamber’s Partnership for Economic Growth ($60,000), and the Blue Ridge Regional Airport ($9,000).
The county also requests that revenue-sharing agreements be voided on jointly built industrial parks, making the county the sole benefactor once the debts are paid.
The county also requested the CLG require Martinsville to make single or multiple payments to offset the one-time expenses from the transfer of government services.
Wastewater
The city stated that after reversion, it intends to continue providing sewer and wastewater services set forth in the “1974 Contract” between the city and the Henry County Public Service Authority (HCPSA).
The city has owned and operated the Martinsville Regional Sewage Disposal Facility since the 1960s. To transport its waste to the facility, the city maintains a system of interceptor sewer lines that extend beyond city limits. Given the large capacity, the city eventually entered an agreement to accept, transport, and treat sewage and waste originating in Henry County.
“Currently, a dispute exists as to how much HCPSA should be contributing to pay for recent capital improvements and emergency repairs that were made to 6.2 miles of Martinsville’s Smith River sewer interceptor,” the city stated, adding the dispute is presently in litigation.
In November 2014, a 200-foot portion of the Smith River Interceptor partially collapsed. The collapse required the emergency installation of a temporary pump-around line to ensure the continued transportation of Martinsville and Henry County waste. According to the city, the emergency repairs cost Martinsville $3,346,537.
Upon inspection of the system, it was discovered that an additional $14,999,975.32 would be needed to fix other urgent problems with the interceptor lines.
“Martinsville has demanded that the HCPSA pay its contractual share of the total cost the capital improvements to the Smith River Interceptor (47%), which amounts to $7,049,988.40, along with its contractual share (47%) for the emergency repairs to the Smith River Interceptor, $1,572,872,” the city states in their notice to the CLG. “HCPSA has paid nothing toward the cost of these improvements and claims it owes nothing.”
Per the terms and conditions of reversion, Martinsville is calling for the payments to be made and that “Henry County will not open or re-open any competing wastewater facility.”
The county responded, “Martinsville’s attempt to involve the PSA in its reversion is improper. The PSA is a separate legal entity created pursuant to Virginia Code § 15.2-5100 et seq. It is not a county department. It owns its own property, employs its own employees, provides water and sewer services to parts of the county, and is responsible for setting the rates it charges for those services.”
Additionally, the county states that they have no control over the finances of the PSA to be able to repay any debts.
“Likewise, the PSA would not be a necessary party in any subsequent judicial proceeding related to reversion,” the county states, citing Va. Code § 15.2-4103. “Other interested parties, including political subdivisions such as the PSA, may intervene in the judicial proceeding, but they are not required to do so, nor can they be compelled to do so. The commission should not consider evidence concerning the PSA in its evaluation of Martinsville’s proposed reversion.”
The process
Currently, both parties are awaiting a 2- to 3- day hearing in which both localities will have the chance to present evidence and cross-examine witnesses before the CLG. Once the hearing is over, the CLG will file a report with their findings and conclusions. This will trigger the formation of a three-judge panel appointed by the Virginia Supreme Court, who will also serve as the appellate court for the panel. The panel will then issue a ruling and set the conditions in which the reversion can take place.
If the court declines to grant town status, the city must wait five years before it can attempt the process again. If the court grants the city’s request, then the city will have a 21-day period to formally accept or decline the town status. The 21-day period provides the last opportunity for residents to sway the opinion of City Council.
If accepted, the new status will become permanent and Martinsville will never be able to return to independent city status.
