The county’s financial status is showing positive trends over the last five or so fiscal years, the Patrick County Board of Supervisors learned at a February 26 work session.
“The 2018 time period, just coincidentally, is about five years ago. That was really, in fairness, the low point in terms of fund balance, some challenges in the county, but since that time period we’ve seen very steady trends of much more financial strength,” Kyle Laux, of Davenport & Company LLC, the county’s financial advisor, said during the update.
In the study, Davenport measured Patrick County against a peer group that included Buchanan, Tazewell, Wise, Carroll, Giles, and Floyd Counties and other localities of similar size and budget that face the same types of challenges as Patrick.
Laux said the county’s unemployment rate is the lowest it’s been in a decade.
“We thought this was a very nice, positive trend. Clearly, we had the spike with the pandemic across the board for everybody and created that anomaly in the 2020 time period. But to be in 3.6 percent in terms of the unemployment rate for the county you are tied with” the United States average and “just a smidge above Virginia” is promising, he said and added the peer group average was 3.7 percent.
The median household income has also grown substantially, roughly 41 percent over the last decade, or about 3.9 percent annually.
Laux said the Compound Average Growth Rate (CAGR), is on average how much that median household income has grown over the last five and 10 years.
“You’ve experienced very nice growth. The five-year has been growing on average five percent, that’s for these numbers both higher than the state and the nation,” he said.
The 10-year CAGR is 3.9 percent, while the state average is 3 percent, and the national average is 3.8 percent.
On a comparative basis, Laux said Patrick County is above the peer group median of $45,298 at a median household income of $49,180.
Laux said the county’s assessed value has remained stable over the last decade, “but I think what’s nice to see is we’re almost back to, just a smidge below, the level of the total assessed value where we were 10 years ago.”
However, the county’s total assessed value is a little below the peer group’s median, Laux said, adding the median is just above $2 million while Patrick County’s is $1.983 million.
The county’s assessed value per capita is a strong number, of about 116,000, he said.
“Anything above 100,000 is generally viewed as pretty positive, and so you’re about 116,000 or thereabouts, so it’s a strong number. The peer group median was about $112,000, we’re $116,000. Take a couple of the outliers out, and we’re right in line with that peer group median. (A) good solid level relative to our neighbors,” he said.
Patrick County’s real estate tax rate is 73 cents per $100 of assessed value, Laux said, adding that is a little on the higher side relative to the peer group. The neighboring locality median is 60 cents per $100 of assessed value.
“Personal property tax, you’re below the peer group median. So, at $1.71 the peers are above $2. That’s one (area) where you’re below in terms of the peer comparative,” he said.
Laux said the county’s meals tax is right at 4 percent, which is the peer group median.
“The nice thing about a meals tax is there’s kind of a built-in inflation measure to it, and so as you go out to eat … it just costs a little bit more every time you go right now, it’s not any fun,” he said.
But the revenue from that tax is discretionary because folks don’t have to go out to eat unless they want to, he said.
“It’s kind of a built-in, inflationary adjustment there. As the price of a Big Mac goes up, so too does the revenue associated with it in terms of the meals tax,” he said.
Like the meals tax, Laux said the county’s 5 percent Transient Occupancy Tax is within the peer group median.
“This is another very nice revenue source for you with the unique situation with Primland, etc. I think this generates about $140,000 or thereabouts in terms of annual revenue, and so it gives you a nice comparative advantage relative to other folks,” he said.
Laux said the county’s general fund produced a surplus five out of the past six fiscal years.
“There has been some one time, or call it limited time, revenues that have helped,” he said of the federal stimulus act, ARPA dollars, etc. The county has “been able to help bolster the reserves. That’s been a big positive to you.”
Laux noted this budget cycle is the first one in several years where there is no special federal stimulus.
“So, this FY25 budget cycle is very, very important in terms of getting reset with our recurring annual revenues, taking aside the sort of special one-time federal projects relative to our annual recurring expenditures,” he said.
Laux said the single biggest revenue of line item is property taxes. It accounts for about $16 million of the county’s $24 million generated by recurring revenues. It grows on average about 4.5 percent each year.
Laux said expenses have been growing at a slower pace than revenues, and the county’s unassigned fund balance also has been steadily increasing from fiscal year 2018 to fiscal year 2023.
He recommended the county set a policy going forward to make sure the unassigned fund balance does not drop below the 15-20 percent range of general fund and school expenditures.
“If we get to 20, that’s better,” he said. “The higher the number, the stronger. I think you’ll see many of your peers are in the 15-plus percent range in terms of those policies.”
If Patrick County is about 22 percent in terms of the unassigned fund balance versus the general fund and school expenditures, Laux said the peer group median is about 19.3 percent.
The county currently has about $29.7 million of outstanding debt that’s at a fixed rate.
“It all looks like a mortgage versus a credit card, meaning it’s paid in fixed annual principal installments,” he said. “It doesn’t grow unless you as a board proactively go out and borrow some dollars and it is only growing to the extent that you’re borrowing to make an investment in capital projects.”
Laux said the payments on the debt are level for about the next 10 to 12 years.
“Right at about $2.6 to $2.7 million a year, we’re kind of sitting at that level. We do get some decline out into ’37 and ’38 we’re basically about level here for the foreseeable future,” he said.
The county’s debt service is currently at 4 percent. Laux said this roughly translates to about four pennies out of every dollar in the budget going to make a debt service payment.
“That’s on the low side of things. You could arguably have a policy anywhere in the 8 to 10 percent range and still be viewed very, very strongly,” he said.
Laux said the Public Service Authority’s (PSA) operating revenue has grown over the last five years with the operating expenses growing about 6.6 percent over that same time period.
“Reserve levels have increased, and so a similar theme on water and sewer … having some of those built-in reserves is critical to the capital planning, the financial planning, also clearly on the water and sewer side,” he said.
Laux said one policy recommendation is for the county to consider adopting reserves relative to the size of the budget.
“Something in the 300 days would be very strong,” he said.
