Do you remember the selling of a lottery as a means to fund public education here in Virginia? How's that going? While lottery retailers are given signs to tout how much they've "given" to schools, there was still a con-game going on with these funds. Why? Because the new revenue stream wasn't added onto existing funding levels, and instead replaced money siphoned off for other purposes.
Another classic example of this shell game is happening in Montgomery County now.
Consumer or citizen or taxpayer, city or town or county government -- all are savvy enough to recognize a shell game. As state funds for schools don't meet actual costs, localities have to pick up the additional costs in the percent they pay. This applies as well for funding road maintenance, social services and law enforcement -- while other revenues streams such as state grants or appropriations from alcohol sales don't trickle down.
Localities are provided with few means of generating tax revenues necessary to provide services. The state controls this, leaving localities with special use taxes for prepared foods, room occupancy and real property rates. These really aren't that regulated either, with few limits or caps. This allows the Commowealth to let the localities look like the bad-guys when state funding diminishes.
The populist mantra of "no new taxes" has become a hot potato, with all elected officials tossing any increases to someone else in an attempt to hide them. "No new taxes" is code for "more efficient government" for the uninitiated, but doesn't necessarily mean privatization which represents same cost and less service in most situations.
In Blacksburg, the dilemma is competing with behemoth Virginia Tech, which as a state agency doesn't have to collect meals or lodging taxes. This gives the university a pricing advantage over private businesses competing for the same market share. To balance the town budget, a long adhered to policy of giving a dealer discount for meals taxes is going away. Making a business be the patsy for taking the heat on collecting public taxes is already hard to swallow, and competing on an unlevel playing field isn't easy. In considering this change, businesses are being told they are lucky they ever got this break (the modest discount) and that it's a simple accounting procedure today. Yeah, this presumes every business buys monthly service from Quicken®, hires an accountant and has expensive electronics to mindlessly track all the tax reporting and filings.
In Christiansburg, the dilemma is funding over $3 million annually for leisure and recreation services that actually serves an uncertain percent of town taxpayers and provides an unknown and unmeasured contribution to meals and lodging revenues. Without a one time bequest plus a withdrawal from its piggybank, the town has a budget shortfall of $1 million this year.
Christiansburg is considering a change in how some of the special use taxes allowed by the state are used, and bumps up against regional partnerships and business operations throughout the county.
In 2004, a certain segment of the business community proposed an increase to occupancy taxes as a means to establish a regional approach for tourism development. The idea was adding 1% to the current taxes paid by lodging guests to create a pool of funds to develop and implement a cohesive marketing program without cost to localities or residents. Both the towns and the county were on board by fiscal year 2005, with the first tax receipts dribbling in by that December.
No one was really sure what this collective 1% would provide, and therefore specific deliverables were a bit nebulous. Besides, it took until 2007 for all three of the funding partners to execute contracts with the regional organization which was established to provide these services.
Now, Christiansburg is considering another shell game approach relative to the lodging taxes. This represents $850,000 in tax revenues a year. That's 7% of every dollar spent for a bed per night. Before the lodgers asked for a 1% contribution for tourism development, it was only 5%. So far, of the regional partners -- and again, this excludes Virginia Tech's food and lodging operations -- Christiansburg contributed more. But that is changing and is incidental to what was agreed upon in 2005.
Christiansburg's proposed budget of $29.9 million derives 27.4% of its General Funds from businesses. Prepared food tax is the largest revenue source in the budget, after carryover or bond proceeds (money collected but not yet spent). Food taxes are presumed to be linked both to tourists, as well as paid by locals who dine out. Business related contributions grow significantly once general property, utility and vehicle taxes are factored in to the overall revenues generated by this economic piece of the pie. This then becomes the key means of keeping residential taxes and user fees lower, and maintaining other services or amenities.
In squabbling over an approximate $20,000 dollars, Christiansburg has positioned itself as an entity that "doesn't play well with others" as regards the local chamber of commerce, the Tourism Development Council, the MPO and businesses throughout the region. They'd be delighted if placing a bulls-eye on the back of the local chamber president takes the hit for their discontinuing in the regional tourism partnership (bonus points given by those still grousing about the two town chamber's merging into a countywide organization). They've worked tirelessly to make an individual their personal whipping boy, and admittedly he can sometimes rub some people the wrong way (that's a human attribute we all share). But that person also successfully led the campaign to establish a regional tourism board, and has grown chamber membership and expanded its services while raising the profile of Montgomery County through award winning programs.
All this effort, instead of establishing metrics to measure what the town's leisure activities contribute to the local economy, developing a town-specific marketing program highlighting business or historic assets, or having a basic business model for an aquatic center or tourism plan -- even though they, too, have had plenty of time to make this happen.
In Blacksburg and Christiansburg, businesses are watching this shell-game as town budgets are being finalized. They -- along with their customers -- are savvy enough to recognize a tax increase no matter how it is packaged. Our neighbors in Botetourt, Pulaski, Giles, Floyd and Roanoke Counties and all their various towns and cities, must be laughing with glee as they cull the businesses and tourists heading their way.