FY 2004-2008 Revenue Estimates - page v The Revenue Committee Expresses Its Appreciation to the Business and Government Communities Who Assisted in the Development of this Report Frank Cowles Owner & President Cowles Nissan Chrysler Plymouth Peter Kane President Kane & Associates, Inc.<br><br> John Layman Chief Economist Dept. of Taxation, Commonwealth of Virginia Lonnie Plaster Broker Cowne, Odendhall and Plaster, and President Prince William Association of Realtors Kevin Runey General Manager Cowles Nissan Chrysler Plymouth FY 2004-2008 Revenue Estimates - page vi FY 2004-2008 Revenue Estimates - page vii Christopher E. Martino Director of Finance COUNTY OF PRINCE WILLIAM 1 County Complex Court, Prince William, Virginia 22192-9201 (703) 792-6700 Metro 631-1703 ext.<br><br> 6700, FAX 792-7695 FINANCE DEPARTMENT June 15, 2003 TO: Craig S. Gerhart County Executive FROM: Christopher E. Martino Director of Finance RE: Adopted Projections of General County Revenue, Fiscal Year 2004 3 2008 I am pleased to present the FY04-08 Adopted Projections of General County Revenue.<br><br> This report was prepared in accordance with the County 9s Principles of Sound Financial Management as part of our responsibility to citizens to carefully plan for the funding of services, including the provision and maintenance of public facilities. During the development of the revenue forecast, the Revenue Committee again sought input from private sector representatives associated with the County 9s major revenue sources. These discussions assisted the Committee in identifying and interpreting important local and national economic conditions and trends.<br><br> The assumptions determined by the Revenue Committee provide the capacity to reduce the real estate tax rate by seven cents in fiscal year 2004 from $1.23 to $1.16, and maintain that rate through 2008. This rate was adopted on April 15, 2003, by the Board of County Supervisors. The adopted projections are greater than those in the prior year five-year forecast.<br><br> This increase is because of the continued high levels of activity in the real estate market and the continued growth of Prince William County. Accordingly, I recommended the updated revenue estimates be used in preparing the 2004 Fiscal Plan, the Capital Improvement Plan for fiscal years 2004 to 2009, and for other strategic financial planning purposes. I would like to thank the members of the Revenue Committee, the participants from the business community, and all others who contributed to the preparation of this report.<br><br> FY 2004-2008 Revenue Estimates - page viii FY 2004-2008 Revenue Estimates - page ix TABLE OF CONTENTS INTRODUCTION .................................................................................................................. ....1 Review of the Economy in 2002 and Outlook for 2003 ...........................................................1 Residential Housing.........................................................................................................3 Conclusions.................................................................................................................... .........9 TAX REDUCTION PLAN ...................................................................................................10 Revenue Increases Not Triggering a Tax Reduction.......................................................10 Implementing the Tax Reduction Plan...........................................................................12 Performance of the Tax Reduction Plan.........................................................................13 MAJOR REVENUE SOURCES AND KEY ASSUMPTIONS .................................................14 Real Estate Revenue............................................................................................................<br><br> ..16 Real Estate Taxes - 010/020...........................................................................................16 Residential Real Estate..................................................................................................17 Commercial Real Estate.................................................................................................20 Retail......................................................................................................................21 Office Buildings.....................................................................................................21 Special Purpose......................................................................................................21 Exonerations..................................................................................................................2 2 Public Service Taxes - 041 ............................................................................................23 Real Estate Tax Deferrals 3 021.....................................................................................24 Land Redemption 3 025.................................................................................................25 Real Estate Penalties 3 160............................................................................................26 Personal Property Revenue....................................................................................................27 Personal Property Tax on Vehicles - 071/079/1308........................................................27 Individual Personal Property Tax............................................................................28 Business Personal Property Tax..............................................................................30 Personal Property Prior Year 3 072................................................................................31 Personal Property Deferrals 3 081..................................................................................31 Personal Property Penalties - Current Year 3 170...........................................................32 LOCAL Sales Tax Revenue ..................................................................................................33 Local Sales Tax - 210....................................................................................................33 Consumer Utility Revenue ....................................................................................................35 Consumer Utility Tax - 220...........................................................................................35 Housing Units ........................................................................................................37 Number of Businesses............................................................................................38 Percent Change in Wired Revenue..........................................................................38 Cellular Phone Revenue .........................................................................................39 BPOL REVENUE.................................................................................................................40 BPOL Tax Revenue - 235..............................................................................................40 Investment Income.............................................................................................................. ..41 FY 2004-2008 Revenue Estimates - page x Investment Income - 0510 .............................................................................................41 Portfolio Yield........................................................................................................42 Portfolio Size .........................................................................................................44 ALL OTHER REVENUE SOURCES.......................................................................................45 Revenue Sources Over $1.5 Million......................................................................................45 Interest on Taxes - 140 ..................................................................................................45 Vehicle Decals - 250 / 259.............................................................................................46 Recordation Tax - 260...................................................................................................47 Tax on Deeds 3 261.......................................................................................................48 Cable TV Fees 3 390.....................................................................................................49 Revenue Sources Under $1.5 Million....................................................................................50 Daily Rental Equipment Tax - 215.................................................................................51 Bank Franchise Tax -230...............................................................................................51 BPOL Taxes - Public Service 3 236...............................................................................51 Transient Occupancy Tax 3 270.....................................................................................51 Miscellaneous Business Licenses - 380..........................................................................51 Interest Paid to Vendors - 520........................................................................................51 Interest Paid on Refunds - 521.......................................................................................52 ABC Profits - 1301........................................................................................................52 State Wine Tax 3 1302 ..................................................................................................52 Rolling Stock Tax - 1303...............................................................................................52 Passenger Car Rental Tax - 1304...................................................................................52 Mobile Home Titling Tax - 1305...................................................................................52 Federal Payment in Lieu of Taxes - 1700.......................................................................52 Appendix A - General Property Tax Rates.............................................................................53 INDEX OF TABLES AND FIGURES......................................................................................55 FY 2004-2008 Revenue Estimates - page 1 INTRODUCTION As this revenue forecast was taking shape in early 2003, the United States stood at the verge of war in Iraq. In his State of the Union address on January 28, President Bush reaffirmed to Americans and the world his resolve that Iraq will disarm, either on its own or through military action by the United States and its allies.<br><br> Apprehensive in the midst of this political uncertainty, businesses were reluctant to invest, expand and increase employment. Thus the national economy continued its slow pace of growth. Economists and financial analysts, unable to predict the length of a military conflict, confined themselves to assessing the many possible fiscal consequences of the war.<br><br> As most military planners expected, the war was short and decisive. With the rebuilding phase beginning in Iraq, economists expect oil prices to decline, financial markets to continue their post-war rebound and economic activity to accelerate. A prolonged conflict accompanied by disruption of world oil supplies could have escalated inflation, pushed up real interest rates as increased Federal deficits to finance the war crowded out private borrowers, and ground economic expansion to a halt.<br><br> Prince William County has fared very well relative to Virginia and the rest of the nation during the recent economic slump. However, that success came primarily as a result of a strong housing market and robust consumer sales. Higher interest rates, sluggish consumer spending and a renewed recession as the result of a prolonged conflict would likely reverse the County 9s economic fortunes.<br><br> This revenue forecast takes a cautiously optimistic perspective. The projections were based on the assumption that a military conflict in Iraq would not produce any serious, long-term adverse effects on the economy. Indeed, that seems to be the outcome.<br><br> If the anticipated economic turnaround occurs, the forecasts contained herein may prove to have been conservative. REVIEW OF THE ECONOMY IN 2002 AND OUTLOOK FOR 2003 The United States Real Gross Domestic Product (GDP), the broadest measure of economic activity, showed that the United States emerged from recession in 2002. Growth continued at a sluggish pace, however, by historic standards, as the following graph illustrates.<br><br> The graph presents actual data through 2002 and the projected 2003 and 2004 rates of growth from the National Association for Business Economics 9 (NABE) panel of forecasters. The NABE panel expects real GDP growth of 2.3 percent in 2003 and 3.6 percent in 2004. FY 2004-2008 Revenue Estimates - page 2 Figure 1.<br><br> United States Gross Domestic Product -1 0 1 2 3 4 5 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Annual Percent Rate of Change The NABE panel is modestly optimistic about other measures of national economic performance in 2003 as well. It anticipates growth of personal consumption expenditures to lag 2002 but to grow 2.3 percent. The economists expect consumption to grow 3.3 percent in 2004.<br><br> Business fixed investment is expected to climb by 1.4 percent in 2003 after declining in 2002 and rebound to 8.1 percent in 2004. The panel does not expect the national unemployment rate to exceed six percent on an annual basis as some economists now fear. It projects the rate of consumer price inflation to remain in check at 2.3 percent and 2.2 percent in 2003 and 2004, respectively, and the interest rate on the 10-year Treasury Bond to decline to 4.00 percent in 2003 but increase to 4.70 in 2004.<br><br> 1 Virginia The outlook for the Commonwealth of Virginia 9s economy in the next year is not as positive, according to John Layman, the Chief Economist and Director of Revenue Forecasting in Virginia 9s Department of Taxation. Mr. Layman addressed the Prince William County Revenue Committee on November 14, 2002 and presented a rather bleak outlook for the Commonwealth.<br><br> Mr. Layman said that in Virginia during Fiscal Year 2002 employment declined for the first time since 1992, growth of personal income is projected to be at its lowest rate in over thirty years, growth of wages and salaries will be only two percent and that growth of 1 Source: cNABE Outlook, d National Association for Business Economics, May 22, 2002. FY 2004-2008 Revenue Estimates - page 3 general fund revenue was the weakest on record.<br><br> He added that the Commonwealth is expected to have lost 35,000 jobs in its Fiscal Year 2002. Mr. Layman anticipates improvement in Virginia 9s economic performance in its Fiscal Year 2003 but still expects it to lag behind the nation in job and income growth.<br><br> The primary reason for the continued weakness is the decline in high wage technology sector and manufacturing employment. Moreover, the exercise of stock options, which helped the Commonwealth 9s economy and revenue significantly in the late 1990s, is not expected to continue. Overall, growth of employment, wages and salaries will improve during Virginia 9s 2003 Fiscal Year, but remain below trend.<br><br> Prince William County In 2002, Prince William County 9s economy surpassed those of both the nation and Virginia. Looking forward to 2003 and beyond, the County appears poised to continue its strong economic performance. The County 9s relative prosperity, and budget surpluses, in the midst of broader economic difficulties, arose because of a confluence of structural changes over the past three decades, and strength in a few sectors of the national economy.<br><br> According to data from the Bureau of Economic Analysis, in 1969 over half of the earnings in Prince William County came from the government sector (55%). Services, the retail trade and construction each produced about 10 percent of the County 9s earnings. Over the next thirty years, Prince William County expanded and diversified its economic base.<br><br> By 1999 (the latest data on personal income broken down as earnings by place of work), earnings from the government sector shrank to about one-quarter of the County 9s total, and services, in particular business services, expanded to about one-quarter of earnings in the County. Earnings from the retail trade grew to 14% and earnings from construction increased to 13% of the total. Manufacturing, recently the weakest sector nationally, now comprises only about 5% of all earnings generated in Prince William County.<br><br> Prince William County 9s economic structure has largely isolated it from the more severe economic woes other regions of the country have suffered. The County depends heavily on residential housing and consumer spending to maintain its prosperity and levels of local government services. These two sectors have fared relatively well during the recent recession and subsequent sluggish recovery as homebuyers and consumers kept the economy afloat.<br><br> Residential Housing Real estate taxes, primarily residential real estate, constitute the majority of Prince William County 9s revenue. The residential property sector has performed vigorously for the past few years and this strength shows no signs of abating. According to data from the Virginia Association of Realtors, home sales exceeded 8,600 in 2002.<br><br> The average price of those homes sold grew to $219,624 in 2002 from $180,575 in 2001 and $156,303 in 2000. The following graphs illustrate this remarkable growth since 1996. FY 2004-2008 Revenue Estimates - page 4 Figure 2.<br><br> Home Sales in Prince William County Moreover, building permits, an indicator of future residential construction, reached nearly 6,000 units in 2002. 2 They had previously never exceeded even 5,000. Figure 3.<br><br> Residential Unit Building Permits in Prince William County 2 Source: Prince William County Department of Public Works. 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Annual Home Sales and Average Sale Prices in Prince William County 0 1000 2000 3000 4000 5000 6000 7000 8000 9000 10000 1996 1997 1998 1999 2000 2001 2002 $- $50,000 $100,000 $150,000 $200,000 $250,000 Home Sales Average Price FY 2004-2008 Revenue Estimates - page 5 Similar strength in residential property markets around the nation have led some economists to fear that a speculative bubble has emerged that may collapse, along with property values. However, at a panel discussion on the housing market at the recent annual meeting of the National Association for Business Economics, all three participants, including the chief economists from the National Association of Realtors and the Mortgage Bankers Association of America, and a representative from Fannie Mae, agreed that no national housing bubble exists.<br><br> According to the panelists, price appreciation in some markets, including the Washington, D.C. metropolitan area, will likely moderate, but no one expects prices to fall. Lonnie Plaster, President of the Prince William Association of Realtors, speaking to the Prince William County Revenue Committee on November 7, 2002, indicated that appreciation in the local residential real estate market will moderate in 2003.<br><br> Mr. Plaster commented that he already sees signs of moderation. For example, new builders generally were not negotiating with potential buyers prior to July 2002.<br><br> Since then, some have been negotiating prices or offering incentives. On the plus side, he commented that Homeland Security will bring more new residents from around the country and add to the demand for housing in the Northern Virginia area. Reasons for the current and expected future strength of the housing market include strong demand created by low mortgage interest rates, continued low unemployment and solid income growth, immigration bringing new home buyers into the market, technological innovations that make mortgage borrowing easier and cheaper, Federal mortgage support through institutions such as Fannie Mae and Freddie Mac, and a steady flow of foreign investment into the U.S.<br><br> mortgage lending market. On the supply side, builders have been careful not to allow construction to outpace sales. They therefore have no unsold inventories that would require quick unloading in case of a downturn in demand, which would drive prices significantly lower.<br><br> CNN quoted National Association of Realtors Chief Economist, David Lereah on January 27, 2003 saying, cI think we 9re going to see much of the same thing for the first half of 2003 with an economy later in the year offsetting higher mortgage rates. d He continued, cIn the last two years housing has been the beneficiary of a weak economy d meaning that low interest rates have made home ownership more affordable now than ever before. The market for commercial real estate in Northern Virginia and Prince William County is a vastly different story. The tech sector collapse, retrenchment by WorldCom and other firms, and broad economic weakness has substantially increased vacancy rates in the area and slowed the pace of new construction.<br><br> Peter Kane, President of Kane & Associates, Inc., a Manassas firm specializing in commercial real estate, also spoke with members of the Prince William County Revenue Committee. He said that the main areas of weakness in the Northern Virginia commercial real estate market were in high-tech, luxury hotels and Class A office space. However, he did not think that this weakness would severely impact Prince William County 9s economy.<br><br> The County 9s stock of commercial property is skewed toward other sectors, such as retail and industrial. In this forecast, Prince William County has reduced somewhat the projected rates of appreciation and new development for commercial real estate compared with the outlook in last year 9s forecast. FY 2004-2008 Revenue Estimates - page 6 Vehicles Vehicle additions are important to Prince William County in two ways.<br><br> First, personally-owned vehicles are the County 9s primary source of personal property tax revenue. Second, strong increases in the stock of vehicles in the County represent robust local consumer demand. Month-by-month additions tend to be volatile and exhibit seasonal patterns.<br><br> Therefore, the following graph includes a twelve-month moving average that shows the annual trend in vehicle additions. As evident in the moving-average line, additions peaked in October 2002 and slowed during the remaining two months of the year. Additions remain, however, at a historically high level.<br><br> Figure 4. Vehicle Additions in Prince William County Frank Cowles and Kevin Runey of Cowles Nissan Chrysler in Woodbridge addressed the Prince William County Revenue Committee on November 11, 2002. Mr.<br><br> Cowles anticipated some slowing in the new vehicle market because of fear of losing employment on the part of many people. However, intense competition in the vehicle market will help keep prices down and create value for buyers. Mr.<br><br> Runey anticipates annual national vehicle sales in 2003 to fall to 16.2 million units from an expected 16.7 units in 2002. This expected slowdown is attributable mainly to the phasing out of zero-percent financing and other incentives, and the cpull-forward d effect those incentives had of advancing some sales consumers might not have otherwise made until 2003. 4,000 5,000 6,000 7,000 8,000 9,000 10,000 11,000 12,000 13,000 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 FY 2004-2008 Revenue Estimates - page 7 Job Market According to data from the U.S.<br><br> Department of Labor and the Virginia Employment Commission, unemployment in Prince William County remains significantly below that in the nation and Virginia. Of the areas considered in this report, only the Northern Virginia regional unemployment rate was lower than that of the County. The following graph presents a comparison of the unemployment rates in those areas since 1992.<br><br> The 2003 rate is the 6.0 percent national rate of unemployment forecast from the National Association for Business Economics. 3 Figure 5. Comparative Rates of Unemployment (percent rate of unemployment) 0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Percent Rate of Unemployment United States Virginia Virginia Part of Washington MSA Prince William County With the economy stabilizing and perhaps growing faster in 2003, the unemployment rate will not likely rise much more, if at all, in 2004.<br><br> The wildcard for job creation is political uncertainty, such as further terrorist attacks in the United States, which could depress the economy. However, adverse political events may cause less severe damage to Prince William County 9s economy than those of others in the nation because of the increased Federal spending and employment in the Northern Virginia region that would result. The Washington Post quoted economist Christine Chmura in an article last 3 Source: Virginia Employment Commission and the National Association for Business Economics FY 2004-2008 Revenue Estimates - page 8 August saying, cWashington is holding up very well compared to some of the other large tech regions, like Silicon Valley.<br><br> The key reason is the influence of the federal government and those contracts. d The same article quoted Steven Cochrane, Chief Regional Economist with the consulting firm Economy.com, cWashington didn 9t get hit nearly as bad as other technology centers because of defense spending. Defense work is really increasingly tied into telecommunications and Internet infrastructure, and all sorts of weaponry needs millions of lines of software code. d Retail Sales Tax Revenue Retail sales tax revenue both provides financial resources to the County and serves as an indicator of local consumer demand. For the past approximately three years, growth of those revenues in Prince William County has shown remarkable strength, as seen in the twelve-month moving average line in the graph below, 4 which defied a weaker national trend.<br><br> However, County residents 9 buying power showed signs of strain last fall. The seasonally-adjusted figures show retail sales tax revenue dropping from September to November of 2002 but rebounding sharply in December. Much of the fluctuation is likely because of inconsistent reporting of local revenues from the Commonwealth, which collects all sales taxes and remits back the local portion.<br><br> Some of the relatively slower growth in activity, compared to that of last year, may reflect concerns about a sluggish economy and potential war. In any event, holiday season sales in Prince William County seem to have ended on a robust note as County consumers showed continued, if somewhat reserved, optimism. Figure 6.<br><br> Retail Sales Tax Revenue (seasonally adjusted) 4 Source: Prince William County Department of Finance $1,900,000 $2,100,000 $2,300,000 $2,500,000 $2,700,000 $2,900,000 $3,100,000 $3,300,000 $3,500,000 $3,700,000 Jun-99 Dec-99 Jun-00 Dec-00 Jun-01 Dec-01 Jun-02 Dec-02 FY 2004-2008 Revenue Estimates - page 9 CONCLUSIONS This discussion ends where it began: with uncertainty. Growth of the national economy remains sluggish as Americans move past their fears of the potential economic consequences of the war in Iraq. The growth of Prince William County 9s economy during the national recession has continued during the weak recovery.<br><br> Most likely in 2003 the County 9s residential housing market will remain robust, but slow from its historic levels of activity. The County 9s employment situation will remain stable with a relatively low rate of unemployment. Vehicle sales growth will moderate but remain at strong levels.<br><br> Growth of retail sales will slow, but not collapse into recessionary conditions. On the whole, the outlook for Prince William County 9s economy is positive: slower growth than during the recent past but sustainable growth keeping our citizens employed and growing the County 9s revenues without tax rate increases. FY 2004-2008 Revenue Estimates - page 10 TAX REDUCTION PLAN On April 14, 1999, the Board of County Supervisors adopted a Tax Reduction Revenue Trigger Plan.<br><br> This plan states that general revenues in excess of current estimates (the cprior year revenue forecast d) generated by real increases in residential or commercial value provide a trigger(s) to reduce the real estate tax rate. The goal was to reduce the real estate tax rate by eight cents over a ten-year period. The first penny of the tax rate equivalent of additional revenues is applied to reduce the real estate tax rate.<br><br> The second and third pennies of the tax rate equivalent of additional revenues are applied to County and Schools capital/operating improvements. For additional revenues above the three cents, these options are repeated. Revenue Increases Not Triggering a Tax Reduction Revenue increases beyond those forecasted can be accompanied by additional costs beyond those included in the five-year plan.<br><br> Revenue increases caused by additional residential units over the prior year estimates and inflation above prior year estimates are accompanied by additional costs and are therefore not available for a tax rate reduction. Approximately $5,350,000 of additional revenue in FY2004 is not available for a tax rate reduction or other triggers. The following table summarizes inflation and additional housing units assumed in the FY04-08 forecast as compared to the assumptions in the FY03-07 forecast: Table 1.<br><br> Assumptions Not Triggering a Tax Reduction FY2004 FY2005 FY2006 FY2007 FY2008 Number of Additional Housing Units Base Forecast 3,575 3,305 3,275 3,275 NA Current Forecast 4,824 4,596 3,543 3,225 3,225 Inflation Base Forecast 2.5% 3.0% 3.0% 3.0% NA Current Forecast 2.5% 3.0% 3.0% 3.0% 3.0% Revenue Increases Triggering a Reduction in the Tax Rate Revenue increases above the adopted forecast (the cprior year forecast d) that are not accompanied by additional costs provide positive fiscal effects and are available for a tax rate reduction. Such revenue increases are caused by additional increases in residential property values, additional commercial square footage, or new revenue sources. The following table compares the assumptions included in the prior year with the current forecast.<br><br> Revenue increases attributable to these assumptions are available for ctriggers. d The FY04-08 forecast then becomes the base year for the forecast next year. FY 2004-2008 Revenue Estimates - page 11 Table 2. Tax Triggers FY2004 FY2005 FY2006 FY2007 FY2008 Avg.<br><br> Value of New Residential Property Base Forecast $306,282 $301,732 $332,456 $345,778 NA Current Forecast 312,615 344,677 360,569 376,375 $391,430 Increase in Existing Residential Property Base Forecast 8.00% 4.00% 4.00% 4.00% NA Current Forecast 17.52% 8.00% 4.00% 4.00% 4.00% Increase in Commercial Value Base Forecast 5.00% 3.00% 3.00% 3.00% NA Current Forecast 3.83% 3.00% 3.00% 3.00% 3.00% Increase in Commercial Square Feet Base Forecast 989,800 830,000 916,400 1,000,000 NA Current Forecast 491,590 688,816 910,000 1,046,400 910,000 FY 2004-2008 Revenue Estimates - page 12 Implementing the Tax Reduction Plan The FY03-07 forecast becomes the base year for the FY04-08 forecast. Therefore, revenues in excess of the base year are susceptible to the trigger methodology, or needed to accommodate growth or inflation. Moreover, an additional $2,489,437 from a real estate tax reserve from FY03 was available as trigger revenue in FY04.<br><br> The first penny of tax of tax rate equivalent of additional revenues is applied to reduce the real estate tax rate. The second and third pennies of tax rate equivalent of additional revenues are applied to County and Schools capital/operating improvements. The FY04-08 forecast assumptions triggered a cumulative total of five tax rate reductions and eleven capital/operating improvement triggers.<br><br> Table 3. Implementing Tax Reduction Plan FY2004 FY2005 FY2006 FY2007 FY2008 Real Estate Tax Rate 1.16% 1.16% 1.16% 1.16% 1.16% January 2003 General Revenue Forecast $513,124,072 $571,325,379 $618,806,939 $666,857,201 $719,997,153 Real Estate Tax Reserve from FY03 2,489,437 Total Projected Available Funds 515,613,509 571,325,379 618,806,939 666,857,201 719,997,153 Adopted Budget 499,742,000 535,775,000 573,154,000 616,476,000 Increase in General Revenue Forecast $13,382,072 $35,550,379 $45,652,939 $50,381,201 Revenues Associated with Expenditures $5,351,981 $10,414,741 $11,870,583 $12,610,496 Revenues Available for Additional Spending ("Trigger" Revenues): $10,519,528 $25,135,639 $33,782,356 $37,770,705 Spending (2nd Penny) 5,387,917 11,626,493 15,254,755 15,712,397 Compensation/Spend. (3rd Penny) 8,081,876 14,401,270 14,833,308 18,807,986 Total Additional Spending 13,469,793 26,027,763 30,088,063 34,520,384 Balance (one-time Revenues) ($2,950,265) ($892,124) $3,694,293 $3,250,321 General Revenue Increase $13,382,072 $35,550,379 $45,652,939 $50,381,201 County Share of Revenue (43.25%) 223,002,843 $ 247,098,227 $ 267,634,001 $ 288,415,739 $ School Share of Revenue (56.75%) 292,610,666 $ 324,227,153 $ 351,172,938 $ 378,441,461 $ FY 2004-2008 Revenue Estimates - page 13 Performance of the Tax Reduction Plan The following chart illustrates the performance of the trigger plan as forecast for FY04-08, benchmarked against the original goals the Board of County Supervisors adopted on April 14, 1999 and against the forecast for FY03-07: Figure 7.<br><br> Performance of Tax Reduction Plan $1.15 $1.16 $1.17 $1.18 $1.19 $1.20 $1.21 $1.22 $1.23 $1.24 $1.25 $1.26 $1.27 $1.28 $1.29 $1.30 $1.31 $1.32 $1.33 $1.34 $1.35 $1.36 $1.37 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 Goals Adopted in 1999 FY04-08 Forecast FY03-07 Forecast FY 2004-2008 Revenue Estimates - page 14 MAJOR REVENUE SOURCES AND KEY ASSUMPTIONS The following sections of this report contain the key assumptions that were the topic of discussion at one or more Revenue Committee meetings. The comments and insights from private sector participants contributed greatly to the formation of these assumptions. Other references and information sources were used to supplement the assumptions derived in the committee discussions.<br><br> Major revenue sources are identified as those summarized below: Table 4. Summary of General Revenue Estimates by Major Category (Thousands) Real Estate Tax Rate: 1.16% 1.16% 1.16% 1.16% 1.16% % to Total FY2003 (FY2004) Revised Estimate FY2004 FY2005 FY2006 FY2007 FY2008 Real Estate Taxes 61.44% $279,700 $315,285 $354,953 $382,746 $411,526 $442,339 Personal Property Taxes 17.72% $86,000 90,946 101,520 111,894 122,205 134,442 Sales Tax 7.42% $36,100 38,096 40,144 42,552 45,105 47,812 Consumer Utility Tax 4.34% $20,400 22,245 24,599 27,396 30,813 35,053 BPOL Tax 3.24% $14,800 16,603 17,511 18,572 19,697 20,891 Investment Income 1.41% $5,400 7,256 10,016 11,504 11,726 11,922 All Other 4.42% $22,500 22,694 22,582 24,143 25,785 27,539 Total General Revenue 100.00% $464,900 $513,124 $571,325 $618,807 $666,857 $719,997 Increase over Prior Year 10.4% 11.3% 8.3% 7.8% 8.0% School Portion $291,198 $324,227 $351,173 $378,441 $408,598 County Portion 221,926 247,098 267,634 288,416 311,399 FY 2004-2008 Revenue Estimates - page 15 Table 5. Revenue Estimates by Category Acct.<br><br> FY2004 FY2005 FY2006 FY2007 FY2008 Code GENERAL REVENUE SOURCE ESTIMATE ESTIMATE ESTIMATE ESTIMATE ESTIMATE 0010 REAL ESTATE TAXES $307,131,000 $346,140,000 $373,975,000 $402,834,000 $433,120,000 ROLLBACK SUPPLEMENT 1,200,000 750,000 500,000 250,000 250,000 0020 REAL ESTATE TAX EXONERATIONS (5,191,000) (4,500,000) (4,488,000) (4,431,000) (4,331,000) SUBTOTAL 303,140,000 342,390,000 369,987,000 398,653,000 429,039,000 0041 R/E TAXES - PUBLIC SERVICE 10,558,000 10,822,000 10,931,000 11,040,000 11,371,000 0021 REAL ESTATE TAX DEFERRAL (350,000) (275,000) (250,000) (325,000) (325,000) 0025 LAND REDEMPTION 852,640 791,584 754,950 732,970 719,782 0160 REAL ESTATE PENALTIES 1,084,000 1,224,000 1,323,000 1,425,000 1,534,000 TOTAL - - REAL ESTATE 315,284,640 354,952,584 382,745,950 411,525,970 442,338,782 0071 PERSONAL PROPERTY TAXES 90,877,000 100,757,268 111,129,768 121,440,818 133,472,518 0072 P/P - PRIOR YEAR 74,000 75,000 75,000 75,000 75,000 0081 P/P TAX DEFERRAL ($1,550,000) ($1,025,000) ($1,200,000) ($1,375,000) ($1,375,000) 0170 P/P PENALTIES 1,545,000 1,713,000 1,889,000 2,064,000 2,269,000 TOTAL - - PERSONAL PROPERTY 90,946,000 101,520,268 111,893,768 122,204,818 134,441,518 0210 LOCAL SALES TAX 38,095,500 40,144,000 42,552,000 45,105,000 47,812,000 0220 CONSUMER UTILITY TAX 22,245,000 24,599,000 27,396,000 30,813,000 35,053,000 0235 BPOL TAXES - LOCAL BUSINESSES 15,639,761 16,480,755 17,469,337 18,517,448 19,628,782 0510 INVESTMENT INCOME 7,256,000 10,016,000 11,504,000 11,726,000 11,922,000 0140 INTEREST ON TAXES 2,364,102 2,658,884 2,886,701 3,120,563 3,375,069 0250 VEHICLE DECALS - REGULAR 5,692,000 5,960,504 6,320,226 6,701,662 7,106,110 0260 RECORDATION TAX 5,700,000 5,049,412 5,390,393 5,754,400 6,142,988 0261 ADDITIONAL TAX ON DEEDS 2,300,000 1,836,150 1,960,143 2,092,509 2,233,814 0390 CABLE TV FEES 3,513,000 3,769,000 4,001,000 4,233,000 4,475,000 All OTHER REVENUE OVER $1.5 MILLION 19,569,102 19,273,950 20,558,463 21,902,134 23,332,981 0215 DAILY EQUIPMENT RENTAL TAX 200,090 214,096 229,083 245,119 262,277 0230 BANK FRANCHISE TAX 556,400 595,348 637,022 681,614 729,327 0236 BPOL TAXES - PUBLIC SERVICE 963,000 1,030,410 1,102,539 1,179,716 1,262,297 0270 TRANSIENT OCCUPANCY TAX 1,263,000 1,316,000 1,453,000 1,602,000 1,765,000 0520 INTEREST PAID TO VENDORS (224,700) (240,429) (257,259) (275,267) (294,536) 0521 INTEREST PAID ON REFUNDS (80,374) (86,000) (92,021) (98,462) (105,354) 1301 ABC PROFITS 411,950 440,787 471,642 504,656 539,982 1302 STATE WINE TAX 187,785 200,930 214,995 230,045 246,148 1303 ROLLING STOCK TAX 47,615 50,948 54,514 58,330 62,414 1304 PASSENGER CAR RENTAL TAX 588,500 629,695 673,774 720,938 771,403 1305 MOBILE HOME TITLING TAX 115,560 123,649 132,305 141,566 151,476 1700 FED PAYMENT IN LIEU OF TAXES 48,150 51,521 55,127 58,986 63,115 MISC. ALL OTHER GENERAL REVENUE 11,093 11,869 12,700 13,589 14,541 ALL OTHER REVENUE UNDER $1.5 MILLION 4,088,069 4,338,823 4,687,421 5,062,830 5,468,089 TOTAL GENERAL REVENUE $513,124,072 $571,325,379 $618,806,939 $666,857,201 $719,997,153 FY 2004-2008 Revenue Estimates - page 16 REAL ESTATE REVENUE Real estate revenues are broken down into the following categories: general real estate tax, public service tax, real estate tax deferral, land redemption, and real estate penalties. Real Estate Taxes - 010/020 The real estate tax is the single largest revenue source for the County contributing approximately 61% of general revenues.<br><br> It is levied on all land, improvements, and leasehold interests on land or improvements (collectively called creal property d) except that which has been legally exempted from taxation by the Virginia General Assembly. The revenue summary for the general real estate tax applies only to real property assessed locally, which includes residential, commercial and industrial, and agricultural and resource land property types. The following tables show a ten-year history of this revenue source and the five-year revenue forecast: Table 6.<br><br> Revenue Summary 3 Real Estate Taxes 3 010/020 Revenue History Tax Rate 5 Actual Revenue Percent Change FY1994 $1.36 $155,555,991 (3.5%) FY1995 1.36 157,513,081 1.3% FY1996 1.36 162,035,845 2.9% FY1997 1.36 166,236,961 2.6% FY1998 1.36 173,689,320 4.5% FY1999 1.36 182,632,874 5.2% FY2000 1.36 193,691,695 6.1% FY2001 1.34 208,663,095 7.7% FY2002 1.30 230,638,558 10.5% Current Estimate Tax Rate Adopted/Revised Revenue Percent Change FY2003 (adopted budget) $1.23 $262,519,000 13.8% FY2003 (revised estimate) 1.23 267,000,000 15.8% Forecast Revenue Tax Rate Revenue Estimate Percent Change FY2004 $1.16 $303,140,000 13.5% FY2005 1.16 342,390,000 12.9% FY2006 1.16 369,987,000 8.1% FY2007 1.16 398,653,000 7.7% FY2008 1.16 429,039,000 7.6% Note that public service properties including railroads, utilities, etc. are not assessed locally. Rather, these properties are assessed by the State Corporation Commission and the Virginia Department of Taxation.<br><br> 5 The real estate tax rate in prior years is as follows: 1987 - $1.42 1988 - $1.30 1989 3 1990 - $1.38 1991 3 1993 - $1.36 FY 2004-2008 Revenue Estimates - page 17 Residential Real Estate The residential real estate market continued at a healthy pace in Prince William County during 2002. Housing prices continued to rise across Northern Virginia and nationwide despite the national recessionary economic climate. Low interest rates, consumer confidence, and investment potential attracted many buyers and sellers to the real estate market.<br><br> Short supply and high demand continues to push prices higher. Although the volume of sales transactions was slightly less in 2002 than in 2001, sale prices continued to rise beyond the expectations of most housing experts. The question remains: when will it end?<br><br> The residential real estate market consists of four property types: single-family homes, townhouses, residential condominiums, and apartments. Duplex units are included within the townhouse category. The apartment category consists of units within rental apartment communities and apartment buildings with five or more units.<br><br> Residential Market Value Changes The following chart shows a history of actual residential appreciation (excluding rental apartments) from fiscal year 1982 through fiscal year 2003 and the Committee 9s estimates thereafter. The actual average from 1982 through 2003 is also reflected: Figure 8. Average Annual Residential Real Estate Appreciation, 1982-2008 Average Annual Residential Real Estate Appreciation, 1982 - 2008 8.00% 4.00% 17.47% 7.60% 17.52% -5% 0% 5% 10% 15% 20% CY80, FY82 CY81, FY83 CY82, FY84 CY83, FY85 CY84, FY86 CY85, FY87 CY86, FY88 CY87, FY89 CY88, FY90 CY89, FY91 CY90, FY92 CY91, FY93 CY92, FY94 CY93, FY95 CY94, FY96 CY95, FY97 CY96, FY98 CY97, FY99 CY98, FY00 CY99, FY01 CY00, FY02 CY01, FY03 CY02, FY04 CY03, FY05 CY04, FY06 CY05, FY07 CY06, FY08 CY of Value, FY of Revenue Actual Residential Appreciation, then Forecast: Actual Ave.<br><br> 4.3%, with Forecast, 4.9% Inflation Rate, Annual Ave. 3.9% CY80/05 Average FY 2004-2008 Revenue Estimates - page 18 The following table shows the expected change in market value for residential and apartment properties during the forecast period. Table 7.<br><br> Residential Market Value Changes Revenue Year Single-Family, Townhouse, and Condominium Apartments FY2004 17.52% 12.3% FY2005 8.00% 6.0% FY2006 4.00% 3.0% FY2007 4.00% 3.0% FY2008 4.00% 3.0% Residential properties in Prince William County appreciated an overall average of 17.52%. Single family and townhouse properties each showed strong appreciation gains county-wide during 2002. Condominium properties showed slightly higher rates of appreciation throughout Northern Virginia.<br><br> This is a significant departure from prior years when townhouse and condominium appreciation lagged significantly behind single family homes. The residential appreciation of 17.52% in Prince William County is consistent with other Northern Virginia jurisdictions where the expected average appreciation rates range from 8% to 25%: Table 8. Comparison of Estimated Residential Market Value Changes from 2002 to 2003 Prince William County Loudoun County Fairfax County City of Alexandria Arlington County All Residential (Excluding Rental Apartments) 17.52% 8% 14% 25% 17% The forecast for residential appreciation beyond fiscal year 2004 reflects these market insights.<br><br> Appreciation is expected to moderate to a rate of 8% in fiscal year 2005 and 4% per year in fiscal years 2006 through 2008. The Revenue Committee expects demand for homes to continue, but not at levels equal to those in fiscal year 2004; rather, appreciation will gradually decline to levels that resemble long-range annual averages. Apartments Market Value Change Favorable conditions in the County 9s apartment market translate into an average increase in market value of approximately 12.3% for fiscal year 2004.<br><br> This increase is largely attributable to higher apartment rents. Demand for apartment units was strong during 2002, but the low supply of available units and long waiting lists found during calendar year 2001 dissipated as the apartment market returned to offering traditional rental incentives and concessions during 2002. Taking into consideration the expected small increases in vacancy beyond calendar year 2002, appreciation is estimated to continue at a lesser rate of approximately 6.0% in fiscal year 2005, and 3% per year in fiscal years 2006 through 2008.<br><br> FY 2004-2008 Revenue Estimates - page 19 Residential New Construction Units Growth is defined as the change in assessed value due to the subdivision of land and the construction of new residential units. Construction taking place in one calendar year affects real estate revenues two fiscal years later. For example, construction that occurs in calendar year 2002 affects revenues beginning in fiscal year 2004.<br><br> The following table summarizes the expected number of newly constructed residential units during the forecast period, and the previous four year 9s activity: Table 9. Residential Growth 3 Number of Units Revenue Year Single- Family Townhouse Condominium Apartments FY2000(a) 1,536 889 182 526 FY2001(a) 2,162 848 76 0 FY2002(a) 2,315 1,086 18 240 FY2003 3,059 941 43 1,008 FY2004 3,166 1,297 111 250 FY2005 3,000 900 160 536 FY2004 2,500 800 25 218 FY2007 2,300 700 25 200 FY2008 2,300 700 25 200 (a) - actual Construction of 4,574 new residential units and 25 apartment units was completed during calendar year 2002 which will generate new revenues for fiscal year 2004. The number of single family homes completed for fiscal year 2004 was only slightly higher than those completed for fiscal 2003.<br><br> The number of townhouse units completed for fiscal year 2004 rose to 1,297 making up for a decline in townhouse units completed for fiscal year 2003. The development trend toward small-lot village style detached units (single family detached homes on townhouse sized lots) continues in fiscal year 2004 and is expected to continue throughout the forecast period. Two mid-rise condominium properties totaling approximately 160 units are expected to be completed for fiscal year 2005.<br><br> Over 1,000 apartment units were completed for fiscal year 2004. These trends are expected to continue throughout the forecast period. Residential Values Per New Unit The average assessed value of a new home constructed during 2001 was $287,903.<br><br> Assessed values on average for new homes constructed during 2002 for fiscal year 2004 revenues are expected to increase 8.58% to $312,615. The forecast for residential appreciation of new units in fiscal years 2005 through 2008 is estimated at the same rate of appreciation as existing units. The assessed value of apartment units decreased in fiscal year 2004 due to the mix of new apartment units constructed.<br><br> The apartment units completed for fiscal year 2004 are smaller one and two bedroom units which pull down the average assessed value. FY 2004-2008 Revenue Estimates - page 20 Table 10. New Residential Assessed Value per New Unit Revenue Year Overall Residential (Excluding Apts.) Single- Family Townhouse Condominium Apartment FY2000(a) $181,000 $223,000 $126,000 $100,000 $50,000 FY2001(a) 209,062 237,970 143,776 115,178 60,000 FY2002(a) 232,577 268,562 157,537 131,916 64,300 FY2003 287,903 318,832 192,801 168,769 68,026 FY2004 312,615 355,835 215,572 213,807 139,505 FY2005 344,677 384,302 232,818 230,912 147,875 FY2006 360,569 399,674 242,130 240,148 152,312 FY2007 376,375 415,661 251,816 249,754 156,881 FY2008 391,430 432,287 261,888 259,744 161,587 (a) - actual Commercial Real Estate During calendar year 2001 in Prince William County, each of the commercial sectors experienced overall higher rental rates and stabilized vacancy rates.<br><br> The same holds true for market activity during 2002 with the exception of special purpose properties. Moderate increases in retail, office, hotel, and industrial properties were offset by significant decreases in special purpose properties. The average change in commercial assessed value is forecast at 3.8% in fiscal year 2004 and 3% per year in fiscal years 2005 through 2008.<br><br> Average assessed values per square foot in fiscal year 2004 are determined based on the added building value resulting from new construction that was completed during calendar year 2002. 6 These unit values are then adjusted to reflect the general appreciation of commercial properties during the remainder of the forecast period. Table 11.<br><br> Commercial Market Value Changes Commercial FY2001(a) 1.8% FY2002(a) 9.7% FY2003 6.7% FY2004 3.8% FY2005 3.0% FY2006 3.0% FY2007 3.0% FY2008 3.0% (a) - actual Commercial properties are categorized into five property types: retail, office, hotel, industrial, and special purpose. In fiscal year 2004, less than a half million square feet of commercial space was completed. This is a significant decrease from the prior year with nearly 1.4 million square feet completed.<br><br> Growth is expected to increase to approximately 690,000 square feet in fiscal year 2005 then return to approximately 1 million square feet in fiscal years 2006 to 2008. 6 Note that increases or decreases in dollars per square foot from one year to the next are not indicative of appreciation trend s. Unit values are based on the contributory value of the new buildings in a category divided by the added square footage in that categ ory.<br><br> Building values per square foot vary widely among different building types within each category and the types of new buildings within categories vary from one year to the next. FY 2004-2008 Revenue Estimates - page 21 Retail New construction in the retail sector accounted for 33% of all commercial/industrial growth. One shopping center, Cheshire Station, was completed along with several general retail properties.<br><br> Approximately half of the commercial/industrial tax base is within the retail sector showing moderate appreciation rates. Approximately half of retail value is comprised of shopping centers which showed slight increases in appreciation. Industrial More than half of the growth within the commercial base for fiscal year 2004 occurred within the industrial sector with approximately 240,000 square feet.<br><br> More than half of the industrial growth occurred within the mini-storage market segment with the remainder of growth in warehouse properties. Again during 2002, the supply of industrial land was being absorbed with new construction concentrated in the western part of the county and driving up market prices. Growth within the industrial sector is expected to remain stable with approximately 200,000 square feet completed per year during fiscal years 2005 to 2008.<br><br> Hotels There were no new hotels completed during 2002. Several hotels are under construction or approved for development which will be reflected in fiscal years 2005 to 2008. Economy and mid-range hotels within Prince William County showed slight increases in average daily room rates while occupancy levels remained stable.<br><br> Appreciation for fiscal year 2004 will be low to moderate for economy and mid-range hotels. Other Northern Virginia jurisdictions report that their hotel markets are showing declines in value over the last year due to decreasing occupancy levels in high-end and luxury hotels. Prince William County is not impacted by these decreases in value due to its lack of high-end hotel properties.<br><br> Office Buildings Two new office buildings were completed in 2002 for a total of 61,250 square feet. The three-story Parkway Professional Building containing 40,950 square feet is located at the intersection of Prince William Parkway and Ridgefield Road. Two Mercury Center is a one-story, 20,300 square foot office building located in Battlefield Business Park.<br><br> Moderate overall increases in assessed value within the office building sector are largely attributed to higher rents and very low vacancy rates. Growth within the office building sector is expected to remain strong during fiscal years 2005 to 2008 with the addition of between 100,000 and 150,000 square feet per year. Several of the planned office building projects include County Center, Heritage Center, Potomac Office Park, Quantico Center, and The Glen.<br><br> Special Purpose Properties within the special purpose category through fiscal year 2003 were limited to high-technology properties such as America Online I and II, New Skies Networks, and the partially completed Cyberfortress. This sector will be expanded during the forecast period to include other high-technology properties such as Eli Lilly 9s insulin manufacturing facility. FY 2004-2008 Revenue Estimates - page 22 A summary of commercial growth and assessed values per square foot during the forecast period is shown below.<br><br> Table 12. Commercial New Construction Value per Square Foot Retail Office Hotel Industrial Special Use Properties FY2000(a) $ 49 $66 n/a $37 n/a FY2001(a) 118 84 $ 11 44 $351 FY2002(a) 90 66 80 46 195 FY2003 74 75 91 39 291 FY2004 124 174 n/a 80 n/a FY2005 128 179 96 82 200 FY2006 132 185 99 85 125 FY2007 136 190 102 87 140 FY2008 140 196 105 90 125 Table 13. New Commercial Construction Square Footage Total Commercial Retail Office Hotel Industrial Special Use Properties FY2000(a) 635,175 475,680 50,995 0 108,500 0 FY2001(a) 1,354,470 573,618 63,664 59,904 429,819 227,465 FY2002(a) 790,294 137,778 199,213 195,085 258,218 0 FY2003 1,391,510 475,668 106,916 96,610 464,763 247,553 FY2004 491,590 147,059 61,250 0 283,281 0 FY2005 688,816 200,000 150,000 26,016 200,000 109,800 FY2006 910,000 350,000 100,000 60,000 200,000 200,000 FY2007 1,046,400 350,000 150,000 60,000 200,000 286,400 FY2008 910,000 350,000 100,000 60,000 200,000 200,000 (a) - actual Exonerations Estimated real estate tax exonerations are deducted from the gross local real estate tax revenue to arrive at the net local real estate tax revenue.<br><br> Exonerations are decreases in revenue due to reductions in the assessments, changes in tax liability, or tax relief programs. Reductions in the assessments are typically caused by appeals of the assessed values and account for the majority of exonerations. Changes in tax liability occur when a property changes from a taxable to a tax-exempt status.<br><br> Taxes are also exonerated for properties whose owners qualify for the Tax Relief Program for the Elderly and Disabled Program. Prince William County amended this program in January 2003 to increase the income limit to allow more County citizens to participate. The Finance Department estimates that the change will provide additional tax relief equivalent to at least $0.01 cent in terms of the County real estate tax rate.<br><br> FY 2004-2008 Revenue Estimates - page 23 Public Service Taxes - 041 Public service taxes are levied on non-locally assessed properties. The State Corporation Commission (SCC) assesses all telecommunications companies, water companies, intrastate pipeline distribution companies, and electric light and power companies. The Virginia Department of Taxation assesses railroads and interstate pipeline transmission companies.<br><br> Table 14. Revenue Summary 3 Public Services Taxes 3 041 Revenue History Tax Rate Actual Revenue Percent Change FY1993 $1.36 $10,620,707 5.6% FY1994 1.36 10,860,738 2.3% FY1995 1.36 11,328,276 4.3% FY1996 1.36 11,358,462 0.3% FY1997 1.36 11,229,547 (1.1%) FY1998 1.36 11,293,854 0.6% FY1999 1.36 11,804,605 4.5% FY2000 1.36 11,857,804 0.4% FY2001 1.34 11,762,173 0.8% FY2002 1.30 11,537,837 (1.9%) Current Estimate Adopted/Revised Revenue Percent Change FY2003 (adopted budget) $1.23 $11,100,000 (3.8%) FY2003 (revised estimate) 1.23 11,100,000 (3.8%) Forecast Revenue Revenue Estimate Percent Change FY2004 $1.16 $10,558,000 (4.9%) FY2005 1.16 10,822,000 2.5% FY2006 1.16 10,931,000 1.0% FY2007 1.16 11,040,000 1.0% FY2008 1.16 11,371,000 3.0% Historically, all market value changes within the Public Service classification have been attributable to new construction (growth). Growth is forecast to be minimal.<br><br> Revenue, however, will decrease as the tax rate reductions are effected. Public service market values are not subject to the same changes as other real estate properties. Dominion Generation plans to complete construction of a combined-cycle electric generation unit in May 2003 at its Possum Point Power Station.<br><br> The new environmentally cleaner, higher efficiency unit will replace two coal burning units and two fuel burning units. The estimated cost of the project is $280 million. The calendar year 2000, the latest currently available, assessed value of the existing generating equipment is $230 million.<br><br> At this time, it is not known how much of the $280 million cost will be attributable to real property or personal property. If completed in May 2003, this project would add assessable value for FY05 revenue year. The completion of the Dominion Generation project is forecast to bring an increase of 2% in FY05.<br><br> Table 15. Public Service 3 Changes in Assessed Value FY04 FY05 FY06 FY07 FY08 Public Service Growth 1.0% 2.5% 1.0% 1.0% 3.0% FY 2004-2008 Revenue Estimates - page 24 Real Estate Tax Deferrals 3 021 If unpaid real estate taxes at the end of a fiscal year are less than at the beginning of that fiscal year, the amount of the reduction in unpaid real estate taxes is recorded as revenue in real estate tax deferrals. If the unpaid real estate taxes at the end of a fiscal year are more than at the beginning of that fiscal year, the amount of the increase in unpaid real estate taxes is recorded as negative revenue in real estate tax deferrals.<br><br> Real estate taxes collected after becoming more than three years delinquent are accounted for as land redemption revenue. Table 16. Revenue Summary 3 Real Estate Tax Deferrals 3 021 Revenue History Actual Revenue Percent Change FY1994 $ 1,168,780 (34.1%) FY1995 1,644,285 40.7% FY1996 (176,381) (110.7%) FY1997 150,000 185.0% FY1998 440,000 193.3% FY1999 (1,421,000) (423.0%) FY2000 928,212 165.3% FY2001 1,467,386 58.1% FY2002 1,072,000 (26.9%) Current Estimate Adopted/Revised Revenue Percent Change FY2003 (adopted budget) $ 200,000 (81.3%) FY2003 (revised estimate) (350,000) (132.6%) Forecast Revenue Revenue Estimate Percent Change FY2004 $ (350,000) 0% FY2005 (275,000) 21.4% FY2006 (250,000) 9.1% FY2007 (325,000) (30.0%) FY2008 (325,000) 0% The forecast reflects the initiative approved by the Board of County Supervisors on December 10, 1996 to decrease the percentage of unpaid property taxes at fiscal year end as compared to the current year levy from 11% in FY 1996 to 6% in FY2003.<br><br> With the adoption of the FY2002 budget, additional collection resources were provided to the Finance Department and the unpaid property tax as percent of the levy was revised to 5.5% by FY2005. At the end of FY2002, the percentage of unpaid property taxes compared to the FY2002 levy was 6.7%. The revenue forecast is made by estimating collections of unpaid real estate taxes up to three years delinquent.<br><br> This revenue category varies depending on the amount of unpaid taxes at end of one year compared to previous year due to: 1. voluntary payment of taxes by property owners, 2. County resources allocated to collection efforts, and 3.<br><br> the success of those collection efforts. FY 2004-2008 Revenue Estimates - page 25 Land Redemption 3 025 Land redemption is the recognition of real estate taxes collected after being more than three years delinquent. The Code of Virginia allows the County to pursue the collection of delinquent real estate taxes for twenty years.<br><br> Table 17. Revenue Summary 3 Land Redemption 3 025 Revenue History Actual Revenue Percent Change FY1994 $ 430,826 86.4% FY1995 1,241,860 188.3% FY1996 992,773 (20.1%) FY1997 1,647,446 65.9% FY1998 696,355 (57.7%) FY1999 2,012,300 188.9% FY2000 1,278,836 (36.4%) FY2001 718,462 (43.8%) FY2002 818,871 14.0% Current Estimate Adopted/Revised Revenue Percent Change FY2003 (adopted budget) $ 979,000 19.6% FY2003 (revised estimate) 979,000 19.6% Forecast Revenue Revenue Estimate Percent Change FY2004 $ 852,640 (12.9%) FY2005 791,584 (7.2%) FY2006 754,950 (4.6%) FY2007 732,970 (2.9%) FY2008 719,782 (1.8%) This revenue category varies depending on the amount of unpaid taxes three years

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