By Callie Hietala
An advisory opinion issued Dec. 21 by Attorney General Mark Herring could affect Henry County’s current budget allocation to pay down school debt.
In his opinion, Herring wrote that sales tax revenues for Gloucester County “are to be used to fund capital projects for ‘new construction or major renovation’ of Gloucester’s public schools and not for debt mitigation.”
According to Herring’s website, the opinions issued by his office “are not legally binding” but “are frequently relied on by courts and members of the General Assembly, in addition to the officials to whom they are addressed.”
The opinion was issued at the request of Del. Keith Hodges, R-Urbanna, who took issue with Gloucester County’s use of tax revenues generated by an increase in sales tax to fund new construction and major improvement projects for the county’s school system. Gloucester officials chose to use some of the revenue to pay down debt incurred by previous school construction and renovation projects.
Though Herring referred specifically to that county, his advisory opinion could impact Henry County, which directed the tax revenues in much the same way after voters approved the measure to levy an additional 1 percent sales tax to help with new school construction and improvement projects.
“We had a pretty significant budget hole” during last year’s budgeting process, said County Administrator Tim Hall. “We decided we would take to the Board of Supervisors a plan to use some of that money toward the budget deficit, and the board considered and approved it.”
Hall said the proposed use of tax funds was brought to County Attorney George Lyle for his legal opinion.
“The language was not specific as to whether it was new debt or whether it was to pay off current school debt. So, based on his looking at it, we went ahead,” Hall said.
The section of the Code of Virginia allowing for the tax increase specifies that “revenues from this tax shall be used solely for capital projects for new construction or major renovation of schools.”
School board chairman Thomas Auker said the decision to direct the funding toward previous school debt was made without consulting with the school board.
“We found out about it after the decision had been made,” he said. “We would have liked to have had some input to it, because they just simply took that money and were using it for other things.”
Auker said the school board reacted with disbelief and dismay.
“I think we were shocked because Mr. Hall had told us at a meeting that that would not necessarily happen, and it did. When the people voted to do that 1 percent tax, I feel the people have spoken and the board of supervisors didn’t have the right to take it away,” he said.
Henry County School Board member Teddy Martin, of the Reed Creek District, said local school officials also sought Herring’s opinion after the Henry County Board of Supervisors chose to allocate some of the tax revenues to pay down debt from previous school construction and improvement projects.
“We said our facts are very similar— (the county) is trying to use the funds for Meadow View (Elementary) debt that occurred before the passage of” the new legislation, said Martin, who was among the school board members and candidates, including Ray Reynolds, who helped bring the issue to the forefront.
Martin, who also is president of the Virginia School Board Association, said vice-chairman Francis Zehr of the Ridgeway District, and the school board unanimously approved an addition to its legislative agenda, asking the General Assembly to clarify whether the county’s use of the tax revenues fell within the accepted guidelines.
“I think it’s great the attorney general ruled in our favor, because the county took $2.6 million away from us and we have projects that we need to do in order to get the schools in great shape,” including completing the bus garage and needed repairs to improve the aging buildings, Auker said.
“We’re just going to have to wait and see what the supervisors do,” Auker said. “It’s in their hands now, so they need to deal with it.”
A narrative in the county’s budget indicated that several factors contributed to the budget shortfall, including the staffing and startup costs of the new jail, “unfunded mandates from the Commonwealth regarding salary increases for Compensation Board employees, skyrocketing costs for the Children’s Services Act; and the increased thresholds for minimum wage pay for our part-time employees.”
Darrell Jones, the county’s finance director, said the current debt for the school system is $21,325,000, most of which (about $14,600,000) is related to the construction of Meadow View Elementary.
Jones said the estimated debt service payments for the county’s school system for fiscal year 2022 were $2.6 million. In its budget process, supervisors “approved taking the first $2.6 million of the sales tax money” to pay the debt service “on the school construction projects from prior years, the most recent being Meadow View (Elementary.)”
Hall said the county was aware that Gloucester had taken a similar action, and that an opinion was being sought on “whether that was the appropriate action. We told the board about that” before the vote was approved.
Hall said he anticipates the board will revisit the issue and decide how to proceed.
He also noted that Herring’s ruling “is an advisory opinion, it is not a law or mandate.” However, should the supervisors follow it, “then we need to show them what that might look like.”
County staff will need time to determine the impact of losing those funds, Hall said, adding the potential loss “leaves us with a huge budget hole, and that will be an ongoing concern.”
County officials also must decide how to manage the debt service payments moving forward which “is going to be a difficult process to work through,” Hall said, adding that he believes this year’s costs can be mitigated with the county’s reserve fund.
“I think, based upon the information we now have in hand, the board obviously will consider where we stand and we certainly will comply with any regulations handed down,” said Jim Adams, supervisor chairman and of the Blackberry District.
He said he anticipates the board likely will discuss the issue at its January meeting.
Lyle could not be reached for comment.