Hanover budget keeps tax rate low and transfers $10 million more to schools

The current plan doesn’t include funds to directly address the recent water crisis. However, water and sewer fees are projected to increase 5%, which they estimate to cost the average resident an additional $7.84 every other month.

Meanwhile, financial staff are worried about the future of its grant and loan funding from the feds.

The general fund — essentially a county’s bank account used for core functions — is budgeted at $413 million, up $26.6 million (6.9%) over the previous year.

About 60% of that new revenue is going towards schools and public safety. The rest is split between capital projects, debt service, human services, operating funds and compensation. The county has also built in a 3% merit increase for all county employees.

The real estate tax rate is expected to remain at 81 cents per $100 of assessed value, the lowest in the Richmond region.

County Manager John Budesky said it is always a balancing act when setting the tax rate, choosing between services the county asks for without requiring residents to pay more. Neighboring Henrico County recommended a tax rate decrease — from 85 cents to 83 cents — but Budesky said Hanover isn’t following suit.

“We need to be competitive (at providing services) to our peers in the region,” Budesky said. “And maintaining our rate will do that and allow us to cover the budget.”

The county, like the region, has seen swelling property values since the pandemic when interest rates surged home purchases and overall demand. Maintaining the same tax rate while home values rise means residents pay more per year.

Hanover anticipates that the previous years’ rapid increase in home values has cooled for the foreseeable future. The most recent assessments showed a rise of 3.3%.

Budesky said his hope is that residents appreciate the way the county is spending taxes as a way of maintaining their home values.

“If our school systems were not strong, that could have an impact on home values,” Budesky said. “If this wasn’t a safe community, that would have an impact on home values.”

Funding to make the water system more resilient

Last month’s water crisis left many in Hanover asking its government to disconnect from Richmond’s water utility. The eastern half of the county was left without drinkable water for several days when the Richmond plant failed.

While there aren’t direct funds built into the budget to sever ties from Richmond, Budesky said the crisis may have changed the conversation around the future of Hanover’s water. Hanover and Henrico have endorsed regional oversight of the Richmond water utility. What that oversight looks like is still in its initial stages.

“It’s easy to say get off a Richmond system, build your own self-independence — and that’s ideal — but its sometimes not financially prudent,” the county manager said. “Rate payers have to pay for those improvements. Water is not cheap, and if we dumped another half-billion plus expenditure into a rate increase, water may not be obtainable for some folks.”

The public utilities budget includes $27.6 million in capital expenditures for the upcoming year, and $196 million total planned over the next five years.

Future plans could include investment in the plant and pipes that bring water specifically to Hanover.

“I don’t think anything is off the table, but the way it’s structure now, we’re literally a buyer of a service,” Budesky said. “We can no longer be just a buyer.”

Budesky said the county is doing long-term water supply planning work now.

Unsure what federal funding could be lost

Hanover County’s use of federal funding is relatively limited, but if that funding is lost, it could impact key programs.

The federal government previously said it was ending all payments on government grants, and loans. That was later paused by a judge, though local governments expect that federal funding cut to come back in some capacity.

Hanover receives about $24 million in federal funding. About $45 million more is included in the five-year capital budget, but yet to be received.

“It’s concerning to us,” said Shelley Wright, Hanover’s budget director. “We think about things years in advance. This is certainly something we will respond to, but it’s not good financial practice to not have any idea (if funds will be cut), even if it’s a small portion.”

A couple of examples are $9 million used for school nutrition and the $900,000 Hanover Dash program that provides rides to seniors. If one of those programs loses all, or a significant chunk of funding, they could stop all together.

“You can’t necessarily stop these programs on a dime,” Wright said. “There are a lot of things we are concerned about as far as the logistics of how that would happen.”

Funding for schools

Around 35% of total general fund goes to schools. That equals about $10 million more in funding than the previous year. The amount from the state rises about $5 million for school operating funds. The schools are budgeting for a 3% salary increase to employees, which is supported by the proposed county budget. A $4.5 million increase for teachers is also supported, coming out to around an $8% raise.

A number of new schools are in the works. Hanover expects to replace about seven schools between 2023 and 2033.

Ashland Elementary opened this year, combining Patrick Henry Elementary and John M. Gandy Elementary. This year, Washington and Henry elementary, Beaverdam and Battlefield Park school replacements will be completely funded.

Economic development projects

Hanover is using $350,000 to create a new tourism office, including two new positions. That money isn’t coming from local taxes directly from residents, but from lodging taxes on hotels and motels.

“We are seeing a real demand and interest in Hanover County’s tourism market,” Budesky said.

The county has invested heavily in its sports facilities. Sports tourism has been a region-wide push for several years. Hanover has largely been an overflow, or secondary, option in that market, but Budesky said the county would push to increase its prominence.

The county’s niche has been in cross country with investments at Pole Green Park. Three NCAA tournaments have been held there over the past three years. Hanover has also invested heavily in upgrading its facilities for soccer, field hockey, lacrosse, softball and baseball, the county manager said.

Economic development efforts are also targeting projects in small area plans. These plans will look at specific corridors — Route 33, the Doswell corridor, Creighton Road, Old Town Mechanicsville. Hanover has budgeted around $180,000 to study those “key economic corridors” to revamp their character, architecture, and attract new businesses.

Road widening

About $160 million in roadway improvements are planned over the next five years. The $20 million widening of Pole Green Road is one of those projects.

Safety improvements are planned for Walnut Grove and Route 360 at $10 million. Route 33 is slated for a widening consistent with the results of the small area plan there. The intersection of Sliding Hill and Peaks roads is also due for a roundabout.

There are about $74 million in other roadway improvements.

The budget was presented to the Board of Supervisors Wednesday. Budget work sessions will be held at 2 p.m. on Wednesdays over the next few weeks before the final budget is approved.