Funding of Constitutional Officers - Virginia Joint Legislative Audit ...

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------------- Exhibit5-------------, Computing Revenue Capacity Revenue Capacity ::: [Estimated TnJe Value of Real Estate PropertyJ x [Statewide Average Tax RateJ ... [Estimated True Value of PSC Property] x [Statewide Average Tax Rate] '" [Number of Motor Vehicles] x [Statewide Average Personal Property Tax Per Vehicle] '" [Adjusted Number of Motor VehiclesJ x [Statewide Average of Local Motor Vehicle License Fees] ... Sales Tax Revenue ... [Adjusted Gross Income] x [Average ·Other • Tax RateJ Revenue Capacity = [$408,537,oooJ x [.00837] ... [$54,189,000] x [.00742] "" [15,617] x [$125.44] ... [13,916] x [$15.83] ... [$546,746] Example: lee County (1987) '*' [$123,780,408] x [.01988] = $2,460,754.51 Source: JLARC staffpresentation of Commission on Local Government data. Measuring Motor Vehicle License and Retail Sale Revenues. Potential revenue generated from the motor vehicle license tax can be estimated by multiplying the number of motor vehicles in each locality by the statewide average motor vehicle license tax. For retail sales, revenue produced from this tax is available directly from the Department ofTaxation and the Auditor of Public Accounts; no estimation procedure is needed, because the statewide rate for the local option portion is uniform at one percent. All cities and counties levy this local option sales tax. Measuring Other Revenues. "Other" revenues consist oftaxes or fees levied by localities on consumer utility bills, business, professional, and occupational licenses capital, transient occupancy, meals, and admissions. These referred to as "consumption taxes," because yield varies as 28
local residents consume goods and services. Adjusted gross income is used as a proxy for the revenue base for these miscellaneous taxes and fees. Advantages of the Reyenue Capacity Measure Currently, revenue capacity is one ofthe most important dimensions ofa local government's fiscal position. The major advantage to the measure is that it provides a direct method ofsumming together each local government's revenues on a comparable basis. It is a more accurate measure of the ability of local governments to raise revenues. Because it gives a balanced picture of local fiscal capacity, this measure is appropriate for estimating the revenues oflocalities. And, because a local government's revenue capacity is computed relative to others in the State, comparisons can be made concerning the strength ofthe revenue capacities ofall ofVirginia's local governments. Capturing the Local Importance ofTax Bases. Revenue capacity accounts for local variation in the relative importance of the various tax bases. That is, in the revenue capacity measure, the weights vary across localities and depend on the relative size of the tax bases in each locality (when the local tax bases are measured using average tax rates). Other measures oflocal ability to pay for public programs do not account for these local variations. Utilizing More Precise Proxies. The revenue capacity measure uses precise proxies to represent certain revenue sources. Itis able to estimate, in dollars, revenues that can be generated from real property taxes. In addition, both tangible personal property revenue and motor vehicle license revenue are measured as separate components with the use of proxies. The base used for both of these components is the number of motor vehicle registrations for the calendar year. Tangible personal property revenue is obtained by multiplying this base by the statewide average tangible personal property rate, and motor vehicle revenue is obtained by multiplying the base by the average motor vehicle license fee for cars under two tons. Estimating Relative Ability to Raise Revenue. Revenue capacity is a measure ofthe revenues generated by separate revenue sources. These components ofrevenue capacity can be compared with each other. Revenue capacity represents local revenues in dollars, assuming localities apply average tax rates. It also shows the relative ability of a locality to raise revenues. The Local Reyenue Capacity Ratio Once the revenue capacity of each locality is measured, it becomes the basis for calculating the local revenue capacity ratio. Mter revenue capacity is calculated for each city and county in Virginia, it is divided by each locality's population. This ratio is then divided by an identical statewide ratio (total statewide revenue capacity divided by total statewide population). The resulting local revenue capacity ratio is a relative measure which varies by each locality. A locality with a local revenue capacity ratio 29
Page 3 and 4: REPORT OF THE LEGISLATIVE AUDIT AND
Page 5: Preface State funding for constitut
Page 8 and 9: e local governments' relative abili
Page 10 and 11: the constitutional offispecific eva
Page 12 and 13: current process, some changes in sy
Page 15: Table of Contents I. INTRODUCTION 1
Page 18 and 19: ROLES OF THE STATE AND LOCAL GOVERN
Page 20 and 21: missioner of revenue, treasurer, an
Page 22 and 23: STUDY APPROACH JLARC staff develope
Page 24 and 25: differences in the ability of local
Page 26 and 27: cost responsibility for each catego
Page 28 and 29: Exhibit 1 Workload Factors Used in
Page 30 and 31: account for regional differences in
Page 32 and 33: Recommendation (3). The General Ass
Page 34 and 35: Recommendation (5). The General Ass
Page 36 and 37: cost re~;ponsJlbiJjty State should
Page 38 and 39: Exhibit 3, a "yes" has been placed
Page 40 and 41: For some other service categories,
Page 42 and 43: A variety of other revenue sources
Page 46 and 47: greater or equal to 1.0 can raise m
Page 48 and 49: are divided evenly between the Stat
Page 50: a COJmnlOIllW€:a!t;h ft..,Uy,,, .
Page 53 and 54: The reimbursement cycle begins when
Page 55 and 56: process occurs prior to the assessm
Page 57: Appendixes ~ Appendix A: Study Mand
Page 60 and 61: AppendixB Mathematical Formulas Use
Page 62 and 63: Appendix B (Continued) Personnel Co
Page 64 and 65: Appendix B (Continued) Revenue Capa
Page 66 and 67: Appendix B (Continued) Personnel Co
Page 68 and 69: Appendix: C Cost ResponsibilityAssi
Page 70 and 71: Appendix C (Continued) COST RESPONS
Page 72 and 73: Appendix C (Continued) COST RESPONS
Page 74: AppendixD Local Revenue Capacity fo
Page 77 and 78: Examples J.i"U.nClLlng 'O.J'U'..u''
Page 79 and 80: State and Support for Sheriffs Offi
Page 82 and 83: ~ ~ State and Local Support for Com
Page 84 and 85: Ou,a~ll;;; and for Local J:l,;xBI.m
Page 86 and 87: State and Local Support for Sheriff
Page 88 and 89: Local for Court Clerks: Example 2
Page 90 and 91: •••••••••••
Page 92 and 93: AppendixF Agency Response As partof
Page 94 and 95:
Introduction The Compensation Board
Page 96 and 97:
- DISAGREES that any stan rd should
Page 98 and 99:
RECOMMENDATION 1. The General Assem
Page 100 and 101:
determining judicial needs. As a re
Page 102 and 103:
In the budget process currently use
Page 104 and 105:
It is a common misconception that t
Page 106 and 107:
The development of state/local perc
Page 108 and 109:
The Compensation Board AGREES with
Page 110 and 111:
AppendixG JLARC StaffComments on th
Page 112 and 113:
officers could maintain monthly rec
Page 114 and 115:
expertise, level of automation, nat
Page 116 and 117:
such as is available in education f
Page 118 and 119:
etween workload indicators and the
Page 120 and 121:
government operations. This is expl
Page 122:
Recent JLARC Reports Organization o
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