Localities share pain of fiscal 2011

Chesterfield County's painful possibility of a $38 million budget shortfall in the next fiscal year catches other localities wincing, too.

"We share Chesterfield's concerns," said Henrico County Finance Director John A. Vithoulkas. "Fiscal year 2011 is a double whammy."

State funding and local real estate taxes are expected to be lower, Vithoulkas said, and those two sources contribute about 70 percent of the revenue in the general fund.

He said he did not want to speculate on what the Henrico shortfall might be because it could change depending on the governor's final budget in December. But he said Henrico is "absolutely not" expecting a shortfall as much as the potential $38 million in Chesterfield.

In Richmond, officials have already faced "extraordinary financial challenges" and tough decisions in the current 2010 fiscal year and will "continue to be cautious" in preparing for 2011, said Marcus D. Jones, deputy chief administrative officer for finance. Department heads are being asked to identify areas for improved operations and economies of scale.

In Hanover County, "We certainly are seeing softness in our revenues," Administrator Cecil R. "Rhu" Harris Jr. said last week.

Vithoulkas said Henrico made several adjustments while preparing the current budget in anticipation of lower revenue.

"We saw 2011 coming like a freight train," he said. "One of the major decisions in the current year budget was to defer two bonds for capital projects in fiscal 2010."

Instead of issuing the bonds for new projects, the county refinanced existing bonds whenever possible to take advantage of lower interest rates, he said.

The county also has capped increases in the budget at 5 percent annually since 2002.

"The formula has worked for many years," Vithoulkas said. "When revenues were up, we were still managing expenses. We went into the recession with a budget that didn't depend on revenues that might not come in a bad economy."

Henrico used $14 million in stimulus money to fund capital-improvement projects, primarily in schools, rather than using it to maintain county operations.

Real estate assessments will not be determined until the end of 2009, so the slightly improving housing market could limit the impact on Henrico's real estate taxes, he said. Commercial real estate in the county has seen a more serious downward trend because of bankruptcies by Circuit City and LandAmerica in western Henrico and the closure of Qimonda's factory in eastern Henrico.

The county revenue loss from Qimonda is about $4 million, but the bigger loss was the 2,500 jobs that disappeared, Vithoulkas said.

"That has more of an impact on the local economy and tax revenue coming in. That's not just Henrico's economy but the whole region. People that worked at Qimonda were regional residents. . . . What's going to pull the region out is new jobs."

Henrico finance officials will update the community on the county economic situation at a town meeting sponsored by Tuckahoe District Supervisor Patricia S. O'Bannon on Oct. 6 at 7 p.m. at Maybeury Elementary School.

"As you go into fiscal 2011, the 5 percent [annual budget increase] is clearly not possible," Vithoulkas said. "At this point, we're going to be looking at some things that reflect kitchen-table conversations that maybe our grandparents had: 'This is what it means to be frugal.'"

Contact Katherine Calos at (804) 649-6433 or .

Staff writers Will Jones and Holly Prestidge contributed to this report.