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Municipal debt is a thing of the past in Ashland.
But had it not been for a 1996 lawsuit, the town’s debt scenario could be very different. That was the year Ashland and Hanover entered into a voluntary settlement agreement relating to an annexation lawsuit after the town’s efforts to expand its boundaries.
As part of the settlement, a three-judge panel ordered Hanover’s department of public utilities to take over operation and maintenance of the town’s waterworks, thereby eliminating one of the larger contributors to municipality debt for Ashland.
“I think I’d be the first to say, in my experience in running water systems in other localities, that if we still had that responsibility solely, I can’t imagine that we wouldn’t have debt,” said Charles Hartgrove, Ashland town manager.
Hartgrove said there are pros and cons to not having control of the town’s water infrastructure. For example, it’s hard to plan for the future without dictating where utilities will expand. Hanover County, however, has been a good partner when it comes to coordinating economic development efforts in town limits or making sure that utility work coincides with road improvements.
“In that sense, I think because of our relationship with the county, it’s been pretty positive,” Hartgrove said.
In addition to waterworks, the town doesn’t have any other multi-million obligations, such as building schools. The town’s last debt was issued in 1993 for construction of the Ashland Police Department headquarters, the purchase of fleet vehicles, and completion of several waterworks and road infrastructure improvements. This debt was paid off last July, and the town now utilizes what it calls a “pay-as-you-go” model for capital projects in town, where money is set aside from year to year until a project can be paid in full.
According to Hartgrove, this model has its origins in the 1990s.
“Previous town councils…made some political and administrative decisions that helped put us on this path,” he said.
In the 1990s, town council implemented a capital projects fund and started saving for items such as fleet maintenance for public works vehicles, and road and stormwater projects.
Over the last 15 years, Hartgrove said this model evolved into the town’s capital improvement plan (CIP), a budgetary document reviewed by the town’s planning commission and town council, which prioritizes capital spending on an annual basis.
“Some of those projects in the CIP, you’re seeing funded every year in a small amount, through the pay-as-you-go method, and some of those are placeholders for things that may happen 25 years down the road,” Hartgrove said. “Council over the last several years has made a conscientious decision to fund capital projects yearly at a level that allows them the opportunity to pay as you go.”
This year’s capital expenditures total approximately $3.2 million, but Hartgrove said that number fluctuates from year to year.
One of the major undertakings in the plan that takes effect this July is the first phase of downtown streetscape improvements, which will target two blocks on Railroad Avenue west of the train tracks.
The town is close to completing a major overhaul of the College Park neighborhood, one of the major projects called for in the current year’s CIP, which entailed improvements to the neighborhood’s streetscape and drainage infrastructure. The project moved forward in February with a price tag of $853,000 and had been called for in multiple CIPs.
How it’s paid for
In order to fund the pay-as-you-go model, Ashland obviously has to have the annual revenue streams necessary to cover the up-front project costs.
Hartgrove said the town is fortunate to have a diverse revenue base.
“Ashland is different from a lot of localities in Virginia because we’re not as solely reliant on real estate and personal property taxes,” he said.
Many localities’ revenues ebb and tide alongside real estate trends, Hartgrove added. While those sources are a big factor in the town’s annual budget – real estate revenues are currently down due to declining property assessments – Ashland also charges a business license (BPOL) tax and levies taxes on meals, lodging and cigarettes as well as sales tax on goods sold within town limits.
“All those things combined give us a fairly diverse revenue stream,” Hartgrove said.
Currently, Hartgrove said the businesses surrounding the Interstate 95 corridor in Ashland help drive local revenues. Annexations in 1977 and 1996 put the highway within town limits, and Ashland has benefitted from the core of restaurants and hotels that attract motorists.
“As they continued to develop, it’s also greatly increased the revenues the town’s brought in over the last three decades,” Hartgrove said.
The caveat, Hartgrove said, is Virginia is what’s known as a “Dillon’s Rule” state, meaning that the state has preeminence over local governments. Review panels at the state level have targeted local governments, specifically in regards to local taxation.
“I think there’s a lot of unknowns. We don’t know what each General Assembly session holds for localities in Virginia,” Hartgrove said.
Funding from Virginia’s department of transportation also has Hartgrove worried. While the legislature approved a sweeping transportation plan in its last session, Hartgove is uncertain how those funds will be doled out. Ashland is currently among the towns eligible to receive funding from the state to maintain its 114 miles of roads. Revenues for road maintenance totaled nearly $1.5 million in the budget that takes effect in July.
“We’ve not heard anything that makes us think that’s going to go away, but it’s something that’s always in the back of our minds,” Hartgrove said.