Vithoulkas: Coming data center revenue offers Henrico opportunity to do something ‘really exceptional’

New revenue from data centers in Henrico will provide a big boost to Henrico’s bottom line in the next decade or so, and its impact could help fund some “really exceptional” initiatives by the county’s board of supervisors, according to Henrico County Manager John Vithoulkas.

During the first portion of a two-day board of supervisors retreat Wednesday morning at the Deep Run Recreation Center, board members heard details about how the county is positioning itself financially to buffer against the threat of an economic downturn – and what it might be able to do to mitigate new expenses for its citizens and businesses.

Vithoulkas told supervisors that he has instructed the county’s finance officials not to include in coming budget proposals any anticipated new tax dollars from data centers in the county, so that those funds instead could be reserved and used to address projects the board deems priorities.

“You have the ability as you go forward to do some things with that revenue that’s coming,” Vithoulkas said. “You have an opportunity from the fiscal side to do some things that are really exceptional.”

What could that look like? Perhaps the money could be used to address blight, aging residential or retail areas, Vithoulkas theorized, or to prep sites for advanced manufacturing options.

Board Chairman Tyrone Nelson (Varina District) wondered if the county could invest even more into mental health supports or school system initiatives, or pay with cash for larger projects that otherwise might be slated for inclusion in the county’s next (as-yet-unscheduled) bond referendum.

The county is planning a $23.6-million adult crisis and detoxification center at the Eastern Henrico Government Center that will offer 16 crisis-stabilization unit beds for short-term care, 16 other detoxification beds and 16 other recliners that will be available for 23-hour evaluation of patients. The school system also announced in March a new comprehensive, $17.8-million mental health plan for students and their families, but Nelson said the needs of the community may even outweigh the services that will be provided by both initiatives.

“Let’s just expand the level of care that we can offer, if possible,” he said.

Another possibility would be reducing the county’s real estate tax rate, Nelson said, by using the offsetting growth in the data center tax revenue. Nelson said he struggles with the topic of data centers, understanding on one hand the value and benefit they bring to the county’s economic development efforts and bottom line but also aware of the concerns some citizens and environmental groups hold about their potential impacts to the environment, particularly in Eastern Henrico.

Three Chopt Supervisor Misty Whitehead said she would welcome more conversation about funding mental health assistance, providing more public transportation options or possibly making school meals free or more affordable.

Even as signs nationally point to a coming economic slowdown or recession, Henrico has buffered itself well in several key ways, county finance director Sheila Minor told the board, but it also faces some risk in other areas.

The county’s unemployment rate (slightly below 3%) is about equal to the state’s and below the national level of about one percentage point higher. And Henrico residents continue to have the lowest average monthly tax burden among residents of the state’s 10 largest localities (about $272, as compared with $310 for Chesterfield residents, $379 for Richmond residents and nearly $626 for Fairfax County residents).

And total gross revenues from last fiscal year – about $1.479.2 billion – exceeded the county’s current fiscal year spending plan by $50 million, she said.

But, Henrico (like all Virginia localities) relies heavily upon real estate tax revenue; 48% of its funds come from that source, so officials are particularly sensitive to any changes to the housing market or slowdown economically that could result in lower revenues or require more effort to collect that money.

The county should expect a decrease in state funding (much of which goes toward education), Minor said, and in elastic revenue sources, such as hotel and motel tax and meals tax fees, if the economy slows.

But, its investment in sports tourism in recent years could help prevent against significant drops in both. The county’s ability to capture sports tourism dollars is paying off in a big way, to the tune of more than a $75-million annual impact to the county’s economy, Minor said. Officials have held for years to the mantra that even in economy slowdowns, though families may cancel or forego traditional vacations, most will still travel for their children’s sporting events.

Property assessments in Henrico were up overall about 5.6% this year, following two consecutive years of double-digit jumps. Real estate tax revenue is anticipated to be just more than $500 million in Fiscal year 2025 for the first time in the county’s history.