By Brandon Martin
The City of Martinsville unanimously voted to move forward with the process of reversion during a public hearing on Dec. 10.
The decision came after the city’s legal firm, Troutman Sanders, presented studies on the financial impact of reversion and the consolidation of school divisions. The studies revealed a pressing need for the city to relieve financial burdens through the process of reversion.
“A reversion would result in a $31.7 million reduction in operational expenses that the city is currently having to fund,” said Stephen Piepgrass, the Troutman Sanders attorney who gave the presentation. “Once you’re a town, those operational expenses are the county’s responsibility rather than the city’s.”
While the fiscal report proposes that the city or town resident’s taxes remain at the same level, the county would need to increase taxes. According to the report, the county’s revenues would increase by approximately $28.7 million but their expenditures would also increase by approximately $30.6 million. The proposal to solve this $1.9 million difference would be an increase of the current county real estate tax of $0.555 by five cents.
“There is a reduction in the current city tax rate of 1.0621 to 0.4571, but then the difference is made up by the five cent increase in county taxes,” Piepgrass explained. “Because town residents would also pay county taxes, the end result is a net wash.”
Piepgrass reiterated that this tax plan is just a proposal and, after negotiations, the numbers could change.
The county would absorb revenues such as those from state or constitutional offices, use of property, charges for service and recovered costs. It would also take on revenues from property taxes, local sales and use taxes, taxes on recordation/wills, grantor taxes, and court fines and forfeitures. Revenues from state recordation tax sources, state and federal victim witness aid, and state jail per diem aid would also be taken by the county, along with revenue from federal, state, and local school operational funds and school cafeteria funds.
On the other side of the equation, the county would also take on city expenditures such as expenditures for general government administration, judicial administration, public safety and community planning. Additionally, the county would onboard expenditures for school board, school cafeteria fund and social services.
The city’s legal counsel on reversion did note that there were some costs and savings not covered in the study, such as redundancies such as the courthouse and office space.
“There is a much larger package that gets submitted to the Commission on Local Government and some of those costs and savings might be included later, depending on how much of a difference it makes,” he explained.
After discussing the financial impact, Piepgrass covered the role school consolidation would play in the reversion process.
“What’s really driving the reversion consideration is schools,” he said. “There’s a significant decline in enrollment, and that decline in enrollment for city schools is projected to continue. More pupils means more state funding and with less pupils, means less state funding.”
He noted the Local Composite Index (LCI) is a measurement that is used by the state in order to determine how much funding local schools are awarded.
“The LCI was never really intended for the purpose that it is being used,” he continued. “It’s something, frankly, that the legislature needs to address. It’s thrown off to a large degree for localities like ours by the success of northern Virginia. Nearly all direct state aid, including State Basic Aid, is distributed to local school divisions through use of the LCI.”
For fiscal year (FY) 2019-20, Martinsville ranked 131st out of 134 school divisions in LCI and Henry County ranked 127th. It is projected that the LCIs for both will continue to decline, officials said.
Due to the low correlated amount of money with the LCI, local funds were used to prop up the school systems. When it comes to the amount of local contributions to the school division, Henry County ranks 115th while Martinsville comes in at 11th.
The study, conducted by S. John Davis & Assocs., Ltd., found that Martinsville’s “fiscal effort nearly triple[d] from 2011-2012 to 2016-2017, primarily due to its overstressed tax base.”
During the presentation, a sharp decline in fall enrollments was revealed for both the city and county between 2012-2019, with Martinsville’s decline even more dramatic.
According to the study, “the loss of direct state aid due to the continuous decline in enrollment has been nearly catastrophic” and “has forced substantial increases from local sources.”
Piepgrass also mentioned factors such as school employee compensation as an obstacle to work through during negotiations on reversion. It is suggested by the report that teachers under a consolidated system be paid using new scales created from the city and county current scales.
One proposed method of achieving a cost saving, is the reduction in numbers of teachers, staff and administrators.
“Cost savings of $1,420,960 pursuant to the reduction of thirty-three Martinsville City School Division teachers to conform to the Henry County pupil-teacher staffing ratio of 14:1 rather than the 11.6:1 pupil-teacher staffing ratio used by Martinsville,” Piepgrass said.
The report offers alternative scenarios ranging from increased costs of $407,919, to savings of $501,628, in personnel expenses per fiscal year.
Following the presentation, former mayors Barry Greene and Gene Teague spoke in support of the city finally voting to revert.
After public comments were heard, all members of the City Council voiced their support for reversion and further talks with the county.
“We want to sit down with Henry County and I feel that we can negotiate, but we have to take this step for our citizens,” Mayor Kathy Lawson said before casting her vote for reversion. “We are elected by the city residents and that’s who we have to look out for right now.”
Now that the city has voted to file their petition and evidence with the Commission on Local Government, the county will file their response. Following a two to three day hearing, the commission will file a report with their conclusion. Once they have filed the report, the state Supreme Court will appoint a three-judge court to preside over the case. Whatever the decision, it can be appealed to the Supreme Court.
Following the final ruling, the city maintains the option to accept or decline town status prior to 21 days after entry of the court order granting reversion. This is viewed as an important right because the court might impose conditions that make town status unacceptable.
