Mayor Danny Avula has proposed a penny increase to the City’s Sales Tax as a way to pay for better schools. He has done so with the "promise" to reduce the meals and real estate property taxes. But, have all options been explored.
Richmond’s public-school buildings need major investment. That point is difficult to dispute.
The harder question is whether adding another penny to the city’s sales tax is the best, fairest and most strategic way to raise the money.
Mayor Avula is supporting a proposal that would ask Richmond voters to approve an additional 1% local sales tax dedicated to constructing and renovating public schools. The administration estimates that the tax would generate approximately $47 million annually and could support as much as $850 million in school construction by 2034.
Those numbers make the proposal attractive. Unlike annual budget negotiations, a dedicated sales tax would provide a relatively predictable stream of revenue that could be used to issue bonds and move several school projects forward simultaneously.
But calling the sales tax a useful option is not the same as proving it is the best option.
Before Richmond asks residents to pay a higher tax on everyday purchases, city leaders should demonstrate that they have thoroughly examined economic development, underused public assets, tax incentives, regional partnerships, state funding, debt restructuring and other potential revenue sources.
So far, the public case for the tax appears stronger on the need for school construction than on the question of whether all reasonable alternatives have been explored.
What Richmond Is Proposing
Under recently expanded Virginia law, local governments may ask voters to approve an additional sales tax of up to one percentage point for school construction or major renovation.
The money cannot be used for teacher salaries, classroom supplies, transportation, mental-health services or other operating expenses. It is legally restricted to qualifying capital projects and related financing costs. The tax must also include an expiration date, generally tied to the repayment of the bonds or loans used to finance the projects.
Richmond officials estimate that the additional tax could raise between approximately $47 million and $50 million per year. Groceries, essential personal-hygiene products and prescription medications would not be subject to the additional tax.
The proposal therefore has several legitimate advantages.
It would create a dedicated revenue stream that could not easily be redirected to unrelated city spending. Visitors, commuters and suburban residents who shop in Richmond would contribute alongside city residents. The revenue would also grow as taxable retail activity grows.
Most importantly, it could allow Richmond to rebuild schools more quickly than it could through the existing capital budget alone.
Those are meaningful benefits. Richmond should not pretend otherwise.
The Tax Would Still Fall Most Heavily on Ordinary Consumers
Sales taxes are politically appealing because they are collected in small increments. A penny on every dollar rarely produces the same sticker shock as a larger real-estate, vehicle or meals-tax bill.
But the cumulative burden is real.
The existing combined general sales-tax rate in Richmond is 6%. The proposed increase would generally raise it to 7% on taxable purchases. Richmond consumers also pay a 7.5% city meals tax on prepared food, in addition to applicable sales taxes.
Mayor Avula has said that, if voters approve the school sales tax, he will propose reducing the meals tax from 7.5% to 6.5% and lowering the real-estate tax rate from $1.20 to $1.19 per $100 of assessed value.
That commitment softens the proposal but does not erase its distributional concerns.
Lower-income households generally spend a larger share of their income on taxable consumption than wealthier households. Exempting groceries and prescription medication helps, but families would still pay the additional tax on clothing, school supplies outside exempt periods, household goods, appliances, furniture, electronics, repair materials and many other ordinary purchases.
The city should therefore provide a detailed analysis showing who is expected to pay the tax, including estimates for Richmond residents, suburban shoppers, tourists and business purchasers.
Without that information, the phrase “visitors will help pay for our schools” risks becoming more slogan than fiscal analysis.
A Dedicated Tax Is Not a Substitute for an Economic-Development Strategy
The central weakness in Richmond’s argument is not that a sales tax cannot work. It plainly can.
The weakness is that the administration has not yet publicly demonstrated that Richmond has a comprehensive plan to expand the tax base before increasing the tax rate.
Economic development should not be presented as an instant replacement for $47 million in annual sales-tax revenue. New development takes time. Projects can stall, incentives can reduce early revenue and optimistic projections do not always survive contact with bulldozers, interest rates and municipal bureaucracy.
But economic development must still be part of the school-funding conversation.
Richmond’s proposed FY2027 budget describes economic development as a way to increase the tax base supporting essential services. The city has established goals of adding or retaining 600 jobs and securing $600 million in announced capital investment during the fiscal year.
Those goals sound impressive, but announced investment is not the same thing as recurring net revenue.
The public needs to know how much additional real-estate, business-license, personal-property, sales, meals and lodging-tax revenue those projects are expected to generate. It also needs to know how much Richmond is returning through grants, rebates, infrastructure commitments, tax increment arrangements or other incentives.
The FY2027 proposal includes approximately $4.9 million for economic-development performance grants.
That does not necessarily mean the incentives are unwise. A well-designed incentive can produce far more revenue than it costs.
But before placing another tax on consumers, Richmond should publish a project-by-project accounting showing:
the public subsidy or incentive;
the promised private investment;
the number and quality of jobs created;
the amount of revenue collected to date;
the expected annual net revenue after incentives;
and the point at which the city receives a positive return.
Richmond does not merely need development announcements. It needs revenue-producing development.
Has Richmond Fully Used Its Existing Tax Base?
Richmond’s proposed FY2027 General Fund totals approximately $1.1 billion, an increase of roughly $42.6 million over the adopted FY2026 budget. The city projects approximately $959.9 million from local sources.
Those figures create an important question.
If existing General Fund revenues are already projected to grow by more than $42 million, how much of that growth could reasonably be devoted to school capital needs?
It would be irresponsible to claim that all revenue growth is available for schools. Employee compensation, public safety, utilities, debt service, social services, inflation and numerous other obligations compete for the same money.
Nevertheless, the city should show voters a complete funding bridge. That document should identify the cost of each proposed school project, existing money already programmed, borrowing capacity, expected state or federal assistance, annual revenue growth and the remaining gap the sales tax would fill.
At present, the proposal is being marketed primarily around the large number the tax could produce. A responsible public debate also requires examination of the smaller numbers scattered across the existing budget.
A few million dollars recovered through improved collections, reduced vacancies, procurement reform, unnecessary consulting contracts, revised subsidies or better management would not replace the sales tax. But combined over several years, those savings could reduce the size or duration of the tax.
Review Tax Collection and Delinquent Accounts
Before imposing a new tax, Richmond should provide an independent report on the taxes and fees it is already owed.
That review should cover delinquent real-estate taxes, business-license taxes, meals taxes, lodging taxes, personal-property taxes, parking obligations and other receivables. It should identify how much is collectible, how old the debt is, which collection tools are being used and how Richmond’s collection performance compares with similar cities.
The proposed budget assumes a 97% collection rate for real-property taxes.
A 97% rate may be reasonable, but the remaining percentage represents real money. The city should explain how much uncollected revenue is associated with owner-occupied homes, commercial property, disputed assessments, bankrupt entities and chronically delinquent accounts.
Aggressive collection must be balanced with protections for vulnerable homeowners. Richmond should not finance school construction by pushing elderly or low-income residents out of their homes.
But compassion for vulnerable residents is compatible with firm collection from profitable businesses, absentee owners and sophisticated entities that have the ability to pay.
Reconsider Underused Public Property
Richmond owns land, buildings, parking facilities and other assets throughout the city. Some are essential to service delivery. Others may be underused, poorly managed or waiting indefinitely for redevelopment.
A comprehensive school-funding strategy should include an inventory of city-owned assets and their potential value.
Possible approaches could include carefully structured ground leases, joint-development agreements, disposition of genuinely surplus property and redevelopment that preserves long-term public ownership while generating recurring lease or tax revenue.
The key word is recurring.
Selling public property can create a burst of cash, but Richmond should not sell valuable assets simply to cover ongoing obligations. A one-time sale should generally support a one-time capital expense, while a lease or revenue-sharing arrangement may produce a longer stream of income.
The city should also evaluate whether major downtown properties are being developed in ways that maximize taxable activity and public return.
A parcel that produces housing, offices, entertainment, retail activity and events may generate several types of revenue. A project dominated by tax-exempt uses, public subsidies or low-activity space may generate far less.
Schools should be part of the city’s real-estate strategy, not an afterthought financed after every other development decision has been made.
The Richmond Coliseum Question Belongs in the Discussion
The decision to demolish the Richmond Coliseum and redevelop the surrounding area is directly relevant to this debate.
The Commonwealth’s 2026 budget included $15 million to assist with Coliseum demolition.
Richmond officials may ultimately conclude that demolition and redevelopment will create more value than preserving the arena. But that conclusion should be supported by a transparent comparison.
What would a renovated Coliseum cost?
How many concerts, sporting events, conventions and community events could it host?
How much admissions, meals, lodging, parking and sales-tax revenue could it generate?
Would renovation stimulate surrounding development?
How does that potential compare with the expected net revenue from the planned replacement development after subsidies and public costs?
These questions matter because economic-development decisions either expand or narrow the city’s future ability to fund schools.
A productive arena would not generate $47 million in direct city revenue every year. Suggesting otherwise would turn the building into a fiscal fairy tale. But a successful event venue, combined with restaurants, hotels, retail, parking and nearby private development, could contribute to a broader revenue portfolio.
The city should not ask taxpayers for another penny without showing whether one of its most significant public assets was evaluated as a possible economic engine.
Regional Cooperation Should Be More Than a Talking Point
Richmond’s schools serve city residents, but the city functions as the economic and cultural center of a much larger metropolitan region.
Tens of thousands of people enter Richmond for work, entertainment, health care, dining, education and government services. Regional residents benefit from city roads, cultural institutions, public safety infrastructure and economic activity.
The proposed sales tax would capture some spending by nonresidents. That is one of its strengths.
But Richmond should also seek broader regional arrangements for assets and services that serve the entire metropolitan area.
A regional arena, convention strategy, major sports facility or cultural district should not be financed and operated as though only Richmond residents benefit. The city should explore shared authorities, revenue-sharing agreements and regional capital contributions where appropriate.
Virginia’s independent-city structure makes regional cooperation difficult, but difficulty is not an excuse for avoiding the conversation.
Demand More Support From the Commonwealth
Virginia has given Richmond the authority to tax itself. That should not be confused with the Commonwealth accepting full responsibility for the condition of public-school buildings.
School construction is a statewide challenge. In 2026, Virginia directed approximately $119 million toward school-construction assistance while expanding the ability of localities to seek voter-approved sales taxes. State leaders acknowledged that the amount represented only a fraction of the broader need.
Richmond should continue pushing for substantially greater state support.
The city is home to the state capital and contains a large amount of government and tax-exempt property. It also carries concentrated infrastructure, poverty and service-delivery responsibilities.
A local sales tax may be one tool, but it should not become a convenient way for the Commonwealth to hand Richmond a hammer and walk away from the construction site.
Consider a Portfolio Instead of a Single Tax
The strongest alternative to the one-cent tax may not be one dramatic revenue source. It may be a portfolio.
That portfolio could include:
a smaller or shorter-duration sales tax;
annual dedication of a portion of natural General Fund revenue growth;
state school-construction grants;
revenue from selected public-property leases;
improved tax collection;
economic-development revenue benchmarks;
regional contributions to regional assets;
reprioritized capital spending;
private and philanthropic partnerships for appropriate project components;
and limited borrowing structured around the city’s long-term debt capacity.
A portfolio approach would spread risk and reduce dependence on a single tax.
It would also require the city to make difficult choices. A new sales tax is administratively simple. Building a broader revenue strategy means reviewing projects, incentives, assets and spending priorities one ledger line at a time.
That work is less glamorous, but taxpayers deserve it.
Is the One-Cent Sales Tax the Best Option?
The honest answer is that Richmond has not yet presented enough information to know.
The tax is potentially the fastest and most reliable way to generate enough money for a large school-construction program. Its legal dedication to school capital projects provides valuable protection against diversion. Exemptions for groceries and essential products reduce some of the burden, and spending by commuters and visitors would help support the program.
But the tax also asks consumers to compensate for decades of deferred maintenance, limited capital planning and uneven economic-development performance.
Before the referendum, the administration and City Council should publish a comprehensive alternatives analysis. It should compare the proposed tax with realistic combinations of economic-development revenue, property-tax growth, state aid, asset revenue, borrowing, spending reprioritization and improved collections.
The analysis should not rely on inflated assumptions. Economic development cannot magically produce hundreds of millions of dollars overnight. An arena cannot single-handedly rebuild the school system. Cutting a few administrative positions will not finance several new schools.
But those limitations do not excuse the city from examining every credible option.
Richmond’s children deserve safe, modern and dignified schools. Richmond taxpayers deserve evidence that the city has chosen the fairest and most effective way to pay for them.
A one-cent sales tax may ultimately be part of the answer.
The city has not yet proved that it should be the entire answer.
Brian K. Telfair
Publisher & Editor | The Richmond Chronicle
Independent commentary and investigative analysis on Richmond government, public spending, economic development, and the decisions shaping the city’s future.
The Richmond Chronicle
Asking the questions City Hall would rather not answer.
No comments:
Post a Comment