Lower land values squeezing Richmond-area governments

Real estate assessments across central Virginia continue to decline, government services keep going down with them, and the hope for a quick recovery is nearly impossible, say area and regional government leaders.

Chesterfield County is the latest locality to report depressed numbers on land and building values, and Henrico County isn't far behind. That news comes on the heels of bad assessment reports from Hanover County and the city of Richmond.

With local government revenue heavily dependent upon real estate taxes — more than 50 percent of local revenues come in that way — and an assessment process that typically takes 18 months or longer to catch up to sales trends, the ever-lower values, and the depressed revenues they generate, mean an ever-lengthening time until government service returns to pre-recession levels.

"These are dire times," said Neal Menkes, the director of fiscal policy for the Virginia Municipal League, which offers legislative assistance and other services to more than 200 city, town and county governments across the state. "This is having a tremendous impact on localities across the state."

He said that lower revenues, coupled with greater demands from an equally strapped state government, and the loss of federal stimulus funds, means bad times are here to stay for the near future.

In a short news release Wednesday, Chesterfield said the assessed value of all property in the county decreased by 2.9 percent in the 2011 calendar year. Commercial real estate was up for the year, but there's nearly four times as much residential property in the county and a 5.3 percent drop in residential values brought down the overall average.

In Henrico, the assessments that start arriving in the mail Friday will reflect a 3.3 countywide percent dip in value.

Hanover announced in January that it had a 5.6 percent decrease in assessed values. Richmond released its figures in November, showing a 2.5 percent drop.

The continued decline in Chesterfield, said Budget Director Allan Carmody in a statement, was expected and isn't "anticipated to have any detrimental impact to any program or service offering."

But Board of Supervisors Chairman Daniel A. Gecker of the Midlothian District specifically mentioned lower real estate assessments last week in setting his priorities for the year.

Gecker said he wasn't comfortable restoring services until the real estate market solidified, and that while increases in consumer spending-based revenue was a plus, it wasn't enough to justify increased county spending.

"I would hope (that) we not add anything operationally until the real estate base stabilizes," he said on Friday. "We lost $1 billion (in real estate value) last year, which is about $9.5 million in tax revenue."

Jim Campbell, the executive director of the Virginia Association of Counties, said the problem was statewide, deep-reaching and far from over.

"Localities have already had to cut to the bone," he said. "Beginning now, we're seeing localities have to cut back services because there's no money to support them.

"We're going to start seeing fairly dramatic cuts in services."

He and Menkes said with a lag of 18 months to two years projected between recovery and rising assessments — assessments are based on sales trends, not government funding needs — the dire conditions won't change soon.

"Next year looks like it's going to be even more dire," Campbell said. "Maybe in 2014, at the earliest, the tide will turn."

Menkes said that quick recovery wasn't going to happen.

"That's the reality of it," he said.

In Chesterfield, a weak market for existing residential real estate pulled down an improving commercial sector, resulting in the dip of 2.9 percent during the last calendar year.

The total taxable assessed value for the residential real estate is $23.2 billion. The commercial and industrial market is valued at $6.4 billion.

The residential market dipped for the fourth straight year, with the 2011 drop of 5.3 percent following drops of 1.5 percent, 4.8 percent and 5 percent in 2008, 2009 and 2010, respectively.

The commercial market actually improved in 2011, increasing by 1.4 percent. So, too, did new construction, with $310 million in new projects, an increase of 8.9 percent from 2010.

In January, Hanover reported a third straight year of decline, with the county tax base taking a $1.4 billion hit during the period.

In Henrico, the 3.3 percent drop in real estate assessments last year for residential and commercial properties resulted in a loss of approximately $14 million.

The numbers in Richmond were reported in November. At the time, the city assessor said that single-family home value fell about 5 percent and that the city's overall tax base decreased by 2.5 percent. The multifamily residences (7.7 percent increase) and commercial (2.6 percent) segments showed improvement.