Richmond and Henrico: A Tale of Two Revenue Streams

henricoline

You could almost write the story arc in Mad Lib format by now: Richmond Mayor Dwight C. Jones proposes a thing. The Internet Comments Sectiontariat, knowing that the administration proposing the thing is that of Mayor Dwight C. Jones, not exactly the most popular executive in Richmond’s history at this point, reacts with universal condemnation and horror, certain that whatever the thing is, it is probably as bad as building three new Redskins Training Camps inside of 6th Street Marketplace.

Here’s the thing though: when the administration says Richmond’s government can’t afford to do the things citizens want it to without collecting more revenue, and that taxes and fees may need to rise, that didn’t come from nowhere. A quick and dirty comparison of the tax take between the City of Richmond and the neighboring county of Henrico offers a really easily overlooked possibility: maybe Richmond really just doesn’t take in enough money.

Let’s start with by far the largest source of revenue: local property taxes. In the current budget cycle, Richmond expects to bring in $250,225,128 in property tax revenue for its 214,114 citizens — $1,169 per capita. Henrico is anticipating $408,950,000 total for the 318,611 county dwellers, which makes $1,284 in property tax per capita, nearly 10% more than Richmond.

rvarev-proptax

What gives? Even though Henrico’s property tax rate of $0.87/100 is substantially lower than Richmond’s $1.20/100, the county’s taxable property value is about $35.6 billion to Richmond’s $20 billion. With nearly 80% more value to collect on, the county collects more revenue even with a 35% lower tax rate.

So what would put the two in parity? To oversimplify, Richmond could just about match Henrico’s property tax revenue per capita under two scenarios tackling the equation from either end. If Richmond’s taxable property value increased by about 15%, or $2.9 billion, that would just about do it without moving the current tax rate. The city could also raise the real property levy to $1.37/100 at the current book value. That’s a 15% increase, but just about what Petersburg is currently collecting.

Since raising property taxes is pretty unpopular, this should lend a little clarity to why the Jones administration has put such a strong emphasis on economic development, even if there’s a lot of (legitimate) disagreement about some of the ways they’ve pursued that goal.

What’s going on here then? Surely property taxes make up a bigger slice of the pie in Henrico, and that explains the disparity?

Nope. When considering all revenue, the gap is even more vast. Richmond is anticipating $709,152,771, and Henrico is looking for $1,256,906,591. On a per capita basis, that means Richmond is collecting $3,312 in total revenue for every citizen, while Henrico is collecting $3,945 — about 19% more.

rvarev-total

When we talk about our priorities for future local government budgeting, we have two really unfortunate and hugely unproductive instincts in Richmond:

  • To assume there are simply vast inefficiencies lurking in city administration that, if someone just had the guts to go in and eliminate, we could afford to do anything we wanted, and
  • To turn every discussion about future budgeting into a referendum on past budgeting — and I know you, Richmond, I know you have a project or expenditure on the tip of your tongue that you want to fume about right this second — on the premise that if we just hadn’t spent some money on whatever that thing was, we would be able to afford whatever the thing was we want to do now.

You’ve gotta let those go, y’all. Nobody is going to find a way to trim 20%, or even 10%, from the city’s budget without completely crippling even the most basic public services, and we can’t take back money that’s already been spent to put towards something else.

Focus on what’s real and what’s right now. Richmonders want their government to spend more money on schools like Henrico, but Richmond’s government doesn’t bring in as much revenue per person, and its debt capacity for capital projects is tapped out.

Sometimes, it’s just this obvious: we can’t afford to do what we want because we just don’t have enough money.

How Brexit could impact Virginia trade

While an ocean separates Virginia and the United Kingdom, the 21st century world is a pretty small place for things and stuff. The UK vote to leave the European Union has economists widely predicting some pretty serious economic turmoil in the future. What could it mean for Virginia though?

The UK is one of Virginia’s biggest trading partners

According to the US Census Bureau’s Origin of Movement Series, the United Kingdom was the 4th largest importer of goods from Virginia in 2015. The US $1.05 billion worth of material exported to the UK made up about 5.8% of the commonwealth’s $18.1 billion in exports.

brexit-bar

We don’t just sell to the UK either. Virginia imported about $1.2 billion worth of goods from in the same year, or about 4.8% of the state’s total imports.

brexit-import

A word of caution about these figures: “Origin of Movement” data is designed to capture the origin of transportation for foreign-bound goods by US companies, not their point of manufacture. This figure includes products that weren’t made in Virginia, but were first packaged for transit out of the United States here, and fails to include any Virginia products that were shipped to other states before leaving the country. It certainly doesn’t match up precisely with the actual volume of goods moving out of or into the country via Virginia, a state with large and sophisticated shipping facilities and advanced logistics operations.

Even with those caveats on the actual numbers, it’s clear that the United Kingdom is one of Virginia’s most important trading partners. How could their leaving the European Union affect that?

A weaker pound means the United Kingdom can’t afford our stuff

Even before any procedural steps have been taken to physically part from the EU, the pound has massively depreciated against the dollar in the expectation that the UK could face a long, difficult road to rebuild favorable trade agreements with continental Europe.

A pound that’s weak against the dollar puts our products at a comparative disadvantage to UK customers. While sterling remains in the doldrums, importers in the United Kingdom will be searching for other suitable sources of goods that have become too pricey to purchase from the US.

We could get some bargains, but don’t count on many

Of course, the inverse – that a strong dollar could make some things we import from the UK more affordable – is also true. Unfortunately, much of what the US as a whole imports from the UK (Data: World Bank) is very specialized products like industrial machinery and medicines, which are unlikely to be repriced at retail, and refined petroleum, which is typically sold in dollar-denominated funds anyway.

Screenshot_062416_032803_PM
By the way, click through to this thing, this site is amazing

So is Virginia going to be OK?

Yeah, things are gonna be fine! Our economic fortunes are more closely tied to Old Blighty than they are to the rest of Europe, but while Virginia should be ready for some ripple effects from any trouble in their domestic market, direct international exports from the commonwealth make up a comparatively small percentage of our $480 billion gross state product. That’s because we happen to remain in our own version of the EU free trade area: the United States domestic market.

What Virginia firms sell to and buy from the UK matters, but the direct aggregate impact should be relatively small.