As Spotsylvania County Chief Accounting Officer Beckie Forry ran down the list of concerns about the local economy stemming from potential cuts to federal funding, some members of the board of supervisors appeared to grow weary from the gloomy prospects.
Forry’s presentation Tuesday night made board members hearken back to the financial misery associated with the 2008 recession and housing crisis and the financial fallout of the COVID-19 pandemic.
“Changes in federal funding could directly affect local tax revenue streams, potentially limiting our ability to sustain essential services,” Forry said.
But despite the forewarning from Forry and county staff, the supervisors remained committed to County Administrator Ed Petrovich’s $953 million proposed budget that calls for an advertised real estate tax rate of 73 cents per $100 of assessed value — the same as the current fiscal year.
The board voted 5-2 to accept all of Petrovich’s recommendations for various taxes and fees with Chair Chris Yakabouski of the Battlefield District and Deborah Frazier of the Salem District voting against the proposal.
Frazier made a substitute motion to advertise the real estate tax rate at 74 cents per $100 of assessed value, but only Yakabouski supported the motion. When the board votes on the final tax rate, it cannot go above what was advertised but can go lower.
The board also debated potentially raising the real estate tax rate and lowering the personal property tax, but Forry did not have all the information handy for them to make an informed decision.
“Everybody hates the car tax because you have to literally write the check and you write it right before summer vacation and right before Christmas,” Yakabouski said. “So that’s a double whammy.”
The supervisors listened intently to Forry’s long list of issues the county could face with potential cuts to federal funding.
Forry acknowledged that her report was “depressing,” and that it’s too early for a comprehensive analysis. But she said it was a necessary conversation so that county officials are aware of the impacts of cuts to federal funding.
She said federal job losses, contract cancellations and fluctuating tariff rates are all factors that could affect the local economy.
“While the full extent of these impacts remains uncertain, we do anticipate an economic slowdown,” Forry said.
Forry then went on to outline the federal funding the county currently receives, identified areas of vulnerability and discussed a path forward.
The state and federal government provides Spotsylvania with $280 million, with $33.3 million coming from the federal level. The Department of Social Services (DSS) would face the most dramatic hit, as 25.8% of its funding comes from the federal government. The school division receives 6.3% of its funding and public safety 2.6% from the federal government.
Also, Forry noted that 30% of state funding stems from the federal level.
“We need to be careful and plan for any risks the state may reduce their budget to make their budget whole based on these federal changes,” Forry said.
Forry is concerned that DSS receives $3.4 million a year to support essential programs for vulnerable communities and $6.1 million for the Children’s Services Act, which protects and provides for special needs and at-risk youth. There is also $2.3 million in additional grants and assistance for other vital programs.
She went on to highlight that the local economy could suffer from federal government layoffs, since many county residents work in Washington as civilians and contractors.
“Local option taxes are a crucial part of the county’s revenue, generating over $70 million in FY24, or 19% of the general fund,” Forry said.
Forry added that county officials can expect lost wages for federal employees to impact local businesses and tourism. She said to keep an eye on the foreclosure of homes in the Northern Virginia region.
“Obviously, that will trickle down into our area,” she said.
Forry said the county’s transportation funding formula may be affected, which will impact what projects get completed. She said to also look out for a renegotiation of the Federal Tax Cuts and Jobs Act, because if certain changes are made, municipal bonds could lose their tax-exempt status.
“Tax-exempt bonds play a critical role in the county’s financing of infrastructure projects,” Forry said. “Borrowing costs would rise significantly, making projects more expensive and reducing funds the county reinvests into its local economy.”
Forry said there is no “one-size-fits-all solution,” and the situation with the federal administration remains fluid.
But she suggested county officials evaluate discretionary spending, prioritize essential services, temporarily pause new expenditures and strategically use fiscal reserves to manage short-term impacts, which will help maintain long-term stability.
Forry said her office will continue to monitor federal legislation, state budget decisions and will stay engaged with similar localities through participation in the Virginia Association of Counties and the Virginia Municipal League. She said staff must also maintain strong relationships with national credit agencies to “safeguard the county’s financial reputation.”
Supervisor Lori Hayes of the Lee Hill District said supervisors should be aware of approximately $8 million in veteran tax relief funds that the county will not receive.
Still, not everyone on the board bought into Forry’s sobering report.
Livingston District Supervisor Jacob Lane said he will not “hit the panic button” just yet.
Kevin Marshall of the Berkeley District said President Donald Trump’s administration is attempting to enact strategies to bring more jobs and prosperity to the nation. Marshall said it’s important to be cognizant of the potential impacts of federal cuts, but he’s hopeful Forry’s presentation will be “way off.”
“We’ve seen a lot happen at the federal level these last two months,” Marshall said. “But if you use the analogy of a deck of cards, I don’t think we’ve seen the whole deck by any means … I believe some of the decisions that’s been made with the tariffs and different things, it’s been made by the president with the intentions of increasing business here in America and putting people to work here in America.”
