Opinion ID: 6826017
Heading Depth: 2
Heading Rank: 3

Heading: Need to Expand Tax Base

Text: Hopewell Hopewell contends that “[t]he evidence before the trial court clearly established that Hopewell has a need to expand its tax resources, including its real estate and personal property tax bases.” The Commission recognized its financial needs, Hopewell says, noting that in recent years, Hopewell has experienced less fiscal growth than Petersburg and Prince George and is among the most fiscally stressed localities in the Commonwealth. The testimony of several witnesses also demonstrated its fiscal stress, Hopewell states, and proved its need to expand its tax resources. Offsetting this evidence, Prince George produced testimony showing that from the standpoint of true values of real estate per capita, adjusted gross income per capita, and taxable sales per capita, Hopewell was “the strongest of the three localities” involved, with Petersburg second and Prince George third. Prince George also showed that Hopewell was not taking full advantage of a sizeable machinery and tools tax base; only six other localities have a higher machinery and tools tax base and only one exceeds Hopewell on a per capita basis. By raising its tax rate to the Virginia average, according to the testimony, Hopewell could gain approximately 1.7 million additional tax dollars annually. Furthermore, during 1987-88, Hopewell increased its assessed values by more than $100 million as a result of industrial expansion. In addition, at the time of trial, two cogeneration facilities were under construction and expected to add approximately $200 million to Hopewell’s tax base. Hence, there was a conflict in the evidence on the subject of Hopewell’s need to expand its tax resources. The trial court resolved the conflict in favor of Prince George, and no legal or logical reason compels us to disturb the trial court’s action. Petersburg Emphasizing that it is “one of the most fiscally stressed cities in the State,” Petersburg contends that, while it is fiscally sound, it “faces circumstances beyond its control that require augmentation of its financial resources.” The circumstances over which it has no control, the city says, are “lethargic growth in real estate and public service corporation values, high local tax burden, high unemployment, loss of major businesses, and development trends in adjacent areas [caused by the construction of Interstate Highway 295 and the extension of Temple Avenue].” The Commission had no difficulty, Petersburg maintains, in finding that “ ‘both current circumstances and prospective conditions underscore the City’s need to augment its tax resources.’ ” Yet, Petersburg laments, the trial court, inexplicably, found that the city “has no need to expand its tax resources.” In making this finding, the trial court held that “Petersburg’s problems, if not self-induced, are fully susceptible of correction by Petersburg, within its present boundaries.” Petersburg contends that this holding is not supported by evidence and is the result of Prince George’s injection of “a redherring into the case.” We disagree. At trial, Prince George produced two experts, Thomas G. Johnson, an econometrician, and Bill G. Evans, a management consultant. The testimony of these experts showed that Petersburg does not manage its fiscal affairs efficiently. Johnson developed the Virginia Impact Projection Model, designed to “make appropriate comparisons and . . . predictions of [cities’] expenditures and revenues over time.” He testified that Petersburg spends $87 annually per capita for fire protection while the average Virginia city with Petersburg’s characteristics spends $59. Further, Petersburg spends $581 annually per capita on education against the average city’s $414 per capita. For police protection, Petersburg spends $120 annually per capita compared to the average of $94. Finally, on public works, Johnson testified that Petersburg spends $107 annually per capita, or $26 more than the $81 spent by the average city. Johnson opined that in 1988, Petersburg spent $8,398,321,'or 17%, more than the average Virginia city. He also testified that Petersburg’s “development expenditures” were significantly less than those of the average city. Evans opined that Petersburg “could operate its fire department with 42 fewer firefighters than it now employs at a savings of $1.2 million a year” without affecting the department’s current level of service. Evans also said that by re-scheduling the hours of police officers from the current four-day week to a five-day week and by making other changes, the city could save an additional $455,000 per year. Finally, Evans estimated that the city could save 35% of the cost of trash collection by using larger trucks and making pickups once a week, rather than the current practice of using small trucks and making pickups twice per week. If the trial court chose to credit the testimony of Johnson and Evans, as it obviously did, then there was evidentiary support for the holding that Petersburg’s problems are susceptible of correction within its present boundaries. There was other support, however. Leonard Bogorad, a real estate analyst, testified that Petersburg could increase its property tax base to the extent of $660 million by developing the “best categories” of the vacant land within its present boundaries. He also said that by developing only 10% of its vacant land, the city could increase its real estate tax base by at least $66 million, or far more than the assessed values of real estate in the area proposed for annexation.