Revenue sharing agreement

The pact was signed when the County Board of Supervisors was chaired by Gerald Fisher. Under the terms, Charlottesville stopped pursuing annexation in exchange for the County agreeing to pay a portion of its real estate tax revenue. Nearly two-thirds of County voters agreed at a special election to the deal, which stopped the City's attempts to take over commercial property along U.S. 29.

The deal is capped at 10 cents of the County's real estate tax rate.

In Fiscal Year 2009, the City will be paid $13.6 million. Next year that will rise to $17 million because the formula is calculated on assessments that are two years old.

The first payment was $1.3 million.

Recently, Supervisors Ken Boyd (Rivanna) and Lindsey Dorrier expressed their desire to revisit the issue. Dorrier told the Daily Progress: “The county is having rough economic times and the city has a surplus,” said Dorrier, a lifelong area resident. “This is the exact reversal of what it was [in 1982] and I think county citizens can expect supervisors to do something about it. It’s probably irresponsible to just keep increasing the amount we spend … and assume everything is OK.”

“If the county had not grown so fast, the amount would be much lower,” Fisher said. “It’s a sign of success for the county’s ability to pay and it seems to me that the county has managed to keep its tax rate very low despite it.”

The county’s tax rate is 68 cents per $100 assessed value, lower than some other Virginia localities with similar population sizes.

Fisher, who served on the board from 1972 to 1987, said that annexation threatened everything the county wanted to accomplish.

Up until 1987, Virginia’s independent cities were allowed to annex land in the surrounding counties in order to expand their tax bases. In most places around the country where annexation occurs, both the city and the county can tax the annexed land. In Virginia, though, only a city could take advantage of taxes on annexed land, which led to bitter and divisive annexation battles between cities and counties, said Albemarle’s county attorney, Larry Davis.

Charlottesville annexed around 9 square miles of land between 1818 and 1968. There were nine separate annexations, said Jim Tolbert, the city’s director of neighborhood services.

Fisher said he personally experienced the angst of annexation.

“I was annexed twice by the city, once as a child and once as a homeowner,” he said. “I know how disruptive it was to the people involved. It has provided the city with a great deal of money to deal with the social issues that are harder for … city government, and it makes us a community. Now, the jurisdictions are still looking at merging and consolidating services. None of that would have been easy, and some of it would have been impossible with the threat of annexation.”

F.A. Iachetta, who served on the board with Fisher, agrees. Iachetta supported the original agreement in 1982.

“The number has gotten very large because of inflation, just like everything else,” Iachetta said.

A city analysis of the situation shows that if Charlottesville had successfully annexed the property it wanted back in the 1980s - which included areas that are now heavily developed in the county’s growth areas - taxes would have generated $19.4 million for the city last year, based on the city’s tax rate of 95 cents per $100 assessed value. Officials said that if the city had more land, such as commercial property along U.S. 29, it would have a larger tax base - money the county would lose out on if annexation had occurred.

Given that, Supervisor Dennis S. Rooker says he thinks the agreement is fair overall.

“More than likely, the city would have annexed areas around U.S. 29,” Rooker said.

But one unintended consequence, Rooker said, is that because 60 percent of county land is in the land-use tax program - an initiative that gives a tax break to those who maintain farmland, forested acreage and open space - the county is paying the city more than it collects on that land.

For city officials to consider changing the city-county agreement, the council would likely have to consider combining city-county services, said City Manager Gary O’Connell.

Reversion?

Known as “reversion,” where the city would become a town in Albemarle, the idea was eventually rejected when reversion talks took place in the 1990s. Under some reversion scenarios, Charlottesville-Albemarle would have one school system and one social services department, for example.

“Since you can’t do annexation, the only thing I could think of is, are there services we could consolidate that might be a replacement for some of the city revenue sharing agreement?” O’Connell said.

Charlottesville Mayor Dave Norris says county residents and others who call the revenue-sharing agreement unfair should look at what the city would be getting if it had successfully annexed land in the 1980s.

“I’d be happy to terminate the revenue-sharing agreement if we can get all the land that we could have gotten through annexation,” Norris said.

“Anybody that says the city’s getting the better end of the deal I think needs to look at the numbers. It’s not even close.”