Wednesday, April 2, 2014

The Big Picture in Small Purcellville

In a small town like Purcellville, everyone seems to know everyone else's business. 
Except, that is, for the town's business.
Think back to the late 1800s.  How did the small towns in America develop in the first place? How did these amazing “hometowns” get built before tax incentives, zoning, state highway systems, subsidies for water and sewer systems, and even the 30-year mortgage? 

A thriving town out in the “middle of nowhere” had to have an excellent government.  They were organized and used resources wisely. Everything had a purpose and place, and those places had value to the people who used them. How many areas in Purcellville have places worth building, with value, and are sustainable and what will we do to preserve them?

The Comprehensive Plan for Purcellville can be viewed as a public guide for growth in our Town. However, there are clues to the real growth agenda in the budget proposal for 2014

Directly from our 2014 Budget proposal:
In the recently released population estimates from the Weldon Cooper Center, the Town’s population was listed as just over 8,000 residents. This is well within the projections for our total final build-out of between 8,000 to 9,000 residents.

Purcellville's population is currently just above 8,000 residents.  With the addition of Purcellville Green and the future Mayfair development, our population may exceed the build-out estimates, and we are already at the 2030 estimates for population growth for the town.  

The Water/Sewer system that came online in 2008 is constantly referred to as an “Unfunded mandate” by town officials and in the budget. The Basham Simms Wastewater Facility, first built in the 1970s, was modernized in 2002, and upgraded again in 2008. In 2005, Virginia’s State Water Control Board began requiring sewage treatment plants around the state to reduce significantly nitrogen and phosphorus in wastewater. Historically, wastewater treatment plants have been major sources of the nitrogen and phosphorus pollution harming the Bay and its rivers, especially in the Potomac River system. For that reason, all new or expanding treatment plants in the Potomac River basin were required to install technology to remove the maximum amount of nitrogen and phosphorus by 2010.

With regards to the water system, from 2014 Budget:
The Town has had to absorb $50,000,000 in debt that it cost the Town to meet these mandates and requirements. While many of the Town residents and businesses have demanded that we remain a small community of 8,000 to 9,000 residents, this comes with a price tag particularly in the utility system, which will cap out at about 2,800 customers. The economics of economy of scale will clearly come into play and our rates will be much higher than most of our neighbors to the east. While the expected growth and final build-out will pay for much of the capital costs, the debt service we are incurring now has to be paid which requires us to raise rates to cover this cost.

Before the upgrade, the system was operating at less than 50% capacity and today our system is operating at or below 40% (not sure how they justified the capacity upgrade other than to accommodate future growth).    $5 million in funding for the upgrade came from a Virginia Water Quality Improvement Fund grant. The rest of the funding came from low-interest loans that the town’s residents will pay off now and in the years to come.  

No one argues the benefits to the environment and adding new water resources was needed so we don't experience more droughts, but those could have been accomplished without building a system so large that the current and possibly near future population can barely support it.  Purcellville residents have one of the highest utility rates in the region (Note: future budget decrease of utility rates by 6%). 

The Purcellville water/sewer system was built likely with the intention that the town would continue to grow, and when that growth was created, the town would get the cash and it would pay for the $50 million utility system upgrade. This worked as long as the town grew, but then the recession came and the system where progress can only come from growth weakened and its similarities to a Ponzi scheme become more apparent.

The decision to spend $50 million on the system upgrade and $8 Million on the new town hall are the biggest contributors to our Town debt and can be construed as a breach of fiduciary duty to the citizens of Purcellville. This responsibility has nothing to do with council members skill or competence, but a violation of the fiduciary duty to residents occurs whenever a council member's action results in harm to one or more of their constituents. 

What constitutes misconduct:
  • Use of council position to derive profit or otherwise promote personal interest at the expense of the citizens. 
  • Use of the council position as a forum for prosecuting personal vendettas against a particular resident. 
  • Favoritism among the council to the detriment of others. 
The expense of the citizens is quite apparent. 

It is an embarrassment to the residents of Purcellville that our town council/government has the nickname of "Purcellville Mafia." Purchasing a building from a church (which several town council members are members of/conflict?)  in terrible disrepair that county officials recommended against due to its condition and paying more than double its value and to date has cost residents $8+ million dollars was a breach of trust and, in the eyes of many, gross negligence.  Allowing town council members to vote on zoning issues when there is a valid conflict of interest involved (monetary relationship) between a council member and the applicant and excusing the behavior under the guise that "Purcellville is a small town, and it would be hard not to know someone that comes before the council" is a blatant dismissal of the code of conduct and conflict of interest parameters.  Enlarging the water/sewer system to unsustainable levels causing such a burden to our town while claiming it was "mandated" is deceitful.  

Has growth lowered our taxes and utility burden?  Let’s compare:

Purcellville                                            Leesburg
Water Rate*                          $15.17 per/1,000 gal(med use)       $5.83 per/1,000 gal(med use rate)
Sewer Rate                            $14.21 per/1000 gal                         $5.37 per/1,000 gal

Personal                                 $1.05 per/$100                                $1.00 per /$100
Tax (Vehicle)

Real Estate Tax                   $.192 per/$100                                    $22.5 per/$100   
Fireman’s Field Tax            $3.5 per/$100
Public Utility Real
Taxable Property               $22.5/per $100

Meals Tax                              5%                                                  3.5%
Cigarette                               $.65                                                  $.75

*Medium Use Rate, based on average household usage with 4 persons. 

Here is a Business Tax Comparison:  Purcellville (right) & Leesburg

 Purcellville Residents do not have access to natural gas.  Many of our homes use propane to fuel furnaces or for cooking. The price of propane is such that it is nearly triple the cost of natural gas. 

1,000 gallons of propane (average use) at $2.99 per gallon (considered a competitive low rate) will cost $2,990 for the year.  Natural gas would be $757.79. 

The high cost of living expenses offset any benefit to lower home prices.  Some residents happily accept it since Purcellville lured us for other reasons.  Many however did move here looking for affordability only to discover the net monetary gain of moving did not materialize. Also, Purcellville residents must commute further and incur higher transportation costs than our neighbors to the East, so it is more expensive to live in Purcellville.  

If we are to attract and retain quality residents it is important that our town give residents value for their investment.  Building and creating a town that is no different than that which they moved from will create resentment and discontent leading to constant turnover in residences, which can ultimately lead to community decline.                                

More clues to the hidden agenda of growth from the 2014 Budget Proposal:

Another significant challenge is that the Town is closely reaching the ultimate build-out of our existing corporate limits. With the exception of several residential projects that are currently underway, the remaining small section of development along Hirst Road, Patrick Henry College and the business component on Route 287 is all that is left to develop with the exception of some potential positive redevelopment or reuse of existing business parcels in Town.

We expect that most of these projects will be completed in the next five to eight years and at that point, we will be facing a scenario unlike any other jurisdiction in Northern Virginia.  This scenario will result in the Town not having any additional property located within the corporate boundaries where vacant land will allow for new residential or commercial projects. At this point, the Town will see a significant if not complete decline in our availability fees, proffers, new residential and commercial assessments not attributed to renovations and other similar sources of new revenue. At this point, the Town will have to rely on creative revenue options and increased business opportunities from residential growth in Western Loudoun to allow us to continue to see a positive expansion in our overall revenue sources. It is rare that a community in Northern Virginia reaches a point where the majority if not all of the property inside the corporate limits is built out with the exception of tearing down and renovating. While we will be an attractive community of 8,000 to 9,000 thousand residents with a good 70/30 mix or greater, the ability to bring in additional economic development and potential residential development in the community with ease on vacant property will be eliminated.

We are being told that the only way to equalize the water/sewer rates is to add more taps to the system and that expansion is needed for revenue sources otherwise taxes will increase.  Our town has committed itself to a system where our government heavily relies on revenues from new growth.  If this arrangement were truly successful, Purcellville would have little debt after a decade of rapid growth, yet we have a higher per capita debt (nearly $9,000) than municipalities that have recently filed for bankruptcy in the U.S. 

With this new growth, we obtain new long-term liabilities and the revenue collected will never come close to covering the costs of maintaining the infrastructure.  Municipalities receive a tenth of the revenue for each dollar of liability and growth merely provides an illusion of prosperity.  Did our government leaders ever ask themselves if a project would generate enough tax revenue to sustain its maintenance over multiple life cycles? 

Purcellville financed this growth by borrowing staggering amounts of money and now our financing mechanisms are becoming more exotic.  According to our budget, officials intend to use “bond proceeds to refund the town’s previously issued GO bonds.” 

Purcellville obtained a AAA rating from Standard & Poor’s due to the “town’s full-faith-credit pledge and agreement to levy ad valorem property taxes without limitation.”  Moody’s states our rating was “secured by the town’s general obligation unlimited tax pledge” and lastly, Fitch states their rating was backed by “unlimited taxing power.”  

Of course, there is a limit on how much they can tax residents. 

Personal incomes are not guaranteed to rise each year and a household has a fixed amount of money they can spend each year.  If the tax burden is too high, residents will choose to move to points outside of town limits or to municipalities deemed more affordable.  

Attractiveness of an area to a business depends on the purchasing power of the region. The measure of the market’s ability to buy is based on disposable income, retail sales, and population.  Reilly’s Law of Retail Gravitation depends on the boundaries between two cities and the breaking point where a person is indifferent to shopping in either city. 

 No matter how many restaurants or businesses that exist in Purcellville, each household has a finite amount to spend.  Opening more establishments doesn’t mean more spending will take place; the hope, of course, is that Purcellville will retain more of the household’s purchasing dollars here in town and prevent retail leakage to other areas, mainly Leesburg.   The fine line for any community is not getting over stored, a situation where there are lots of retails stores and no one store will be able to make a profit. 

With regards to Autumn Hill, it was likely always going to be brought into the Town of Purcellville and the back and forth was to make it look like a fight for the citizens took place.  The developer had no intention of building the nearly 500 residences zoning allowed and had stated so many years before.  This was used as a political scare tactic to justify its annexation. Why not just tell the people the truth?   Our town needs to serve this new community with municipal water and sewer to capture tap fees and to gain more customers to equalize resident’s utility bills. The downside, of course, is that we will assume the future maintenance liability and the net gain will, over time, likely be a net loss. 

What should really drive development are our residents.  Asking neighborhood shoppers directly is a more accurate way of determining needs and wants rather than relying solely on what a developer is willing to build.  Purcellville will never capture all of our resident’s purchasing dollars due to our close proximity to Leesburg and other large retail centers, but a survey will help identify products and services that we currently purchase inside and outside our town and create opportunities for sustaining our local businesses and what the potential is for new business development.  This information can be used to help existing businesses to refine their offerings and to spur sustainable growth. 

Purcellville water and sewer rates are being lowered by 3% each in the coming year. This was made possible by savings realized from refinancing of our debt.  The property tax rate will remain the same, however since assessments are up, everyone't taxes will be increased anywhere from 7-15%.  My personal tax burden increase was roughly 8% based on my assessment increase.  I understand the needed increases in the cost of doing business and I am glad to pay my fair share, but myself and others have seen little benefit to the community from the almost $60 million dollars spent on just two projects.  

Growth for the sake of growth is a trap that is hard to escape. Too much growth has destroyed much of the natural beauty that made some of America’s landscapes special.  There must be balance in all that we do, especially with regards to growth.  After the spending spree of the last 8 years, it will be an uphill battle to strike a balance for Purcellville and to preserve its character.