Concerned Culpeper Citizens, Inc.

General Delivery

Jeffersonton VA 22724

ph. (540) 937-6492 website:

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December 7th, 2014

Annual Report of Culpeper Budget, Management & Development

Concerned Culpeper Citizens was chartered by the Virginia State Corporation Commission and registered with the IRS as a 501c3 thirteen years ago. In that time, we have concentrated on objective analysis of hundreds of cases in the sincere hope that County management could pursue intelligent growth on behalf of the entire County. In that objective, we feel we have been moderately successful.

Effective government will never be cheap. We repeat the ‘Baumol’ principle that labor-intensive services cannot be mechanized as can manufacturing; and cannot benefit from similar productivity gains. Because government and education, etc. are services, their costs will invariably rise faster than that of goods. We also endorse the County’s policy of ‘zero-based’ budgeting: Begin at dead stop; determine and prioritize needs; then build the resources to provide them.

Budget for FY15

Despite continued hard times, FY15 does not program any tax increases. The real estate tax rate was kept at $.83 for general government and fire & rescue, combined.

Revenues are expected to increase 2.7% overall: 4.1% in general property taxes which are one-third of the whole. Because 2014 was not a real estate reassessment year, the FY15 increase isonly due to new construction and additional vehicles.

The corresponding 2.7% increase in expenditures is heavily concentrated in the School budget which is 56% of the whole. Fortunately, the State provides more than half of school operational costs. Culpeper is becoming less wealthy compared to other counties; and this year’s lower ‘composite index’saved the County 6% in certain categories.

Unexpected positives

  • Two years ago an independent study found that Culpeper school salaries were 6.5% below market minimums. Actions to correct that include a 3% increase across the board in the FY15 budget. This budget also includes eighteen new hires.
  • Revenues for FY16 and FY17 are projected to exceed expenditures.
  • Local airport revenue increased 9%, whereas its expenditures hardly budged.

Unexpected negatives

  • Because revenues lagged expenditures, the $3.7 million gap was covered by drawing more from the reserve balance than in prior years. Next year will require a more fundamental reckoning unless reassessments rise strongly.

Anomalies and hidden snakes:

  • Four departments have disproportionately large increases: Sheriff (+6.2%), Animal Services (+12.2%), Community Services (+22.3%), and Economic development (+12.7%).
  • FY15 does not include any new full-time positions in general government. It does cover four new part-time positions (Registrar, Planning, Criminal Justice, and Library).
  • FY15 property tax revenue is projected to be four times as much as the Virginia average.
  • State funds are projected to increase only slightly compared to FY14; and the General Assembly reports more difficult times going forward.
  • The General Fund and School Funds increased both in real terms and on a per capita basis. Exception: Health & Human Services are stagnant per capita, even though well below prior years.
  • Personal Property taxes (mostly autos) rose 15%, primarily because partial year ownership invokes the new proration policy which is now fully implemented.
  • The current outstanding debt balance totals $85.3 million. Debt service is still manageable, but as a percent of assessed property, it has nearly doubled since FY13.
  • Unemployment continues to trend downward, better than the nation-wide average, but worse than the Virginia average. The only time Culpeper had better employment than Virginia was in the ‘bubble’ years, which we attribute to construction here faster than the Virginia average.
  • Total assessed property value decreased from FY14. The primary cause was the 1/1/2013 general reassessment which continued to capture post-bubble losses. But it is also noted that several of the largest accounts have dropped dramatically: Terremark went from $42m to $35m, SWIFT from $41m to $19m, and Walmart from $13m down to $11m.

Capital Improvement Plan (CIP)

  • The County’s CIP for FY15 is a comparatively low$9.5 million and includes fairly routine projects. The largest item is $4 million for water and wastewater improvements and is almost entirely covered by State and Federal funds. Secondary road improvements were limited to the Rural Rustic category which are eligible for 50% matching VDOT funds.
  • Culpeper’s F&R Association recently admitted that the companies can no longer raise sufficient funds for new equipment, such as trucks and ambulances. For the first time in Culpeper’s history, the budget will now support these capital needs, as well as the normal operational costs. But even that support ($400k/yr) is only half the companies’ request.
  • The school district projects $112 million in capital needs through FY19, including a new middle or elementary school and major renovations. Most disturbingly, beginning several years ago, Richmond began classifying Lottery Funds in lieu of general school funding, rather than the original additional school funding. Consequently, total support for schools has shrunk by about $200 million per year.

Policy

The single major policy debate in 2014 dealt with the County ‘noise ordinance’. The current version was found to be both legally defective and functionally ineffective. Law enforcement officials said they would not be able to enforce the court-certified revision; and a vocal ‘property rights’ contingent strongly criticized the entire concept. The issue was tabled indefinitely.

We had expected the BOS would continue work on Culpeper’s time-based sub-division ordinance. But in the absence of any specific legal challenge, that has been tabled indefinitely.

Comprehensive Plan. This year, work began in earnest on the State-mandated 5-year review of the County’s principal blueprint. Although some reviewers tend to view this document as merely a rough guide, the statutory intent is to encourage a highly coordinated, logical, and efficient concept for the County to develop in accordance with its long-held and time-tested objectives. As with the last two revisions, CCC is reviewing each chapter in complete detail.

Development - Residential & Commercial

General. Nationally, home price recovery, as measured by the S&P Case-Shiller Home Price Index slowed in 2014 compared to 2012 and 2013. The national index is now 167, equal to its level in Spring 2005. [Note: 100 = average level of home prices in January 2000.]

The Washington DC index rose at a similarly slow rate. Culpeper new home values peaked in 2006 at $267k, dropped to $165k in 2007, and since 2010 have risen to 2005 values. This appears to be heavily influenced by recent Ryan units at Three Flags.

In 2008, at the nadir of the recession, CCC reported that building recovery would not occur before Spring 2013. Last December, we said it appeared likely to happen in Culpeper by Spring 2014. As it turns out, all predictions have been much too optimistic. Despite rising home prices, Culpeper housing permits have stagnated at about one-third the pre-bubble 600/yr average. The chart below shows this construction aspect of Culpeper’s ‘housing bubble’. (County & Town, combined, all housing types;the final two months of 2014 have been estimated)

Specific – Clevengers. One prominent developer, and Culpeper’s largest PUD, did return in 2014. Centex haggled with the County planners for eighteen months before finally presenting a new request to the Planning Commission in November. The planning staff had pushed back hard on changes to the 762-homes Clevengers Corner project, and extracted many obvious requirements. But Centex has requested so many, and such dramatic proffer changes, the new plan is a mere shadow of the original, approved 2005 plan. Further internal debate, in particular with a wary VDOT, will delay public hearings until Spring 2015.

Background. Centex (now a Pulte Homes subsidiary), Kenneth Thompson, New Wales LLC, and Culpeper County signed a Proffer Statement in January 2005 legally binding all parties to numerous terms on which all development would be contingent. (Documentation available on the County website, and from CCC.)

Pulte is recovering from years of poor speculation decisions. It is anxious to recover $29 million in sunk costs for Clevengers’ treatment plants. Key points:

  • The new request has major ‘triggers’ at 385 and 435 homes. Each trigger would commit Centex to additional expensive infrastructure. Coincidentally, 385 homes could yield $28.9 million at prevailing rates. That profit margin is virtually guaranteed by the reduced amenities, non-existent design standards, cookie-cutter house plans, minimal road improvements, and lack of commercial incentives.
  • All parties had agreed to preparatory construction to attract commercial development on Kenneth Thompson’s parcels. When Centex’s withdrawal from this agreement became known, Mr. Thompson announced he was closing the South Wales golf course.

This has turned into a 3-way game of high-stakes poker: each party has strengths and weaknesses.

  1. Centex has the capacity to build. It does not have a high profit margin plan which includes a commercial component; and it needs the golf course to market homes.
  2. Mr. Thompson has title to most commercial parcels and the golf course. He does not have easy access to capital for commercial development.
  3. The County has the power to enforce / ease proffers. It needs another 350 homes to operate the treatment plants efficiently; anditneeds the commercial component to balance the service and school costs which would plague the County budget for decades.

It is highly possible that Centex would stop building at either the 385 or the 435-unit ‘triggers’ after it recovers its investments, and before incurring the final infrastructure costs. Its analysis may be converging with CCC’s: In the new economy, Culpeper is outside the range of most daily NoVa commuters; and homes here are no longer as attractive as before the ‘great recession’.

The Epstein plan for a desired 300 homes in the southwest quadrant of Clevengers Corner continues to wait for Centex to establish the connecting water and wastewater lines. Unfortunately, whereas Mr. Epstein is known for successful modern developments, the constraints at this location no longer allow such vision. He has been forced to propose a much less desirable plan.

Specific – Three Flags. The only large development in the County with active construction at this time is Three Flags, just southwest of Town, off Rte. 29. This Ryan Homes project has ‘entry-level’ pricing similar to that of Centex, and is absorbing buyers at a pace which would require many more years to complete.

Roads

Waterloo is not yet lost history! VDOT closed the c. 1879 Waterloo Bridge over the Rappahannock a year ago. VDOT cited safety rehabilitation costs of $5 million. The Culpeper and Fauquier Boards of Supervisors, Piedmont Environmental Council, and the Society Preserving Culpeper History (SPCH) split the cost of an independent feasibility study. The respected firm reported the task was entirely feasible for $1.8 million. VDOT is studying the report. It may not wish to continue the maintenance responsibility; but no other body has volunteered. The answer may be to restrict the bridge to pedestrians, bicycles, and possibly horses. The Culpeper FY15 Budget lists this project as one of five “Future Issues” for the Board.

The County is continuing its prioritization policy for the 5-year Secondary Road Plan, which CCC and others had recommended. This year,gravel Routes 631, 655,657, 673, 748, and 775 were selected to be hard-topped under the State’s Rural Rustic Road matching fund program.

Historical Preservation

Coordinating with SPCH and local historians, three historical plaques for Fairview Cemetery were heavily edited with corrections and additions. And finally, while complimenting the Airport for its successful transition to self-sustaining operations, our strong comments noted that history-tourism based on Culpeper’s extensive military heritage is, inexplicably, a largely untapped business.

CCC Management. At its annual meeting, Directors were re-elected for another term. We briefed one new Commissioner and plan to brief others. Finally, CCC remains firmly committed as Culpeper’s only 501c3 non-profit dedicated exclusively to non-partisan, open and objective analysis of County planning. Your continued fully tax-deductible support is appreciated.

Board of Directors