As localities deal with education funding shortfalls, Patrick County considers lodging tax increase

Patrick County officials will consider increasing the county’s occupancy tax to cover a shortfall in its schools funding.

The proposed tax increase represents one of several tactics taken by localities across Southside that have been faced with an unexpected boost in state education funding, and a related increase in the required local match.

Patrick County officials said during the July 8 board of supervisors meeting that they are considering bridging their $75,806 gap by increasing their occupancy tax rate, which is currently set at 5%.

The occupancy tax, or lodging tax, is related to hotels, short-term rentals like Airbnbs, campgrounds and bed-and-breakfast inns. A 1% increase in the rate would translate to an additional $140,000, enough to cover the remainder of the county’s match and other infrastructure-related projects, like replacing the library’s HVAC system. The proposal will be discussed at an Aug. 12 public hearing.

Neighboring localities have found other ways to deal with similar school funding shortfalls.

Henry County originally had expected to receive about $72 million in education funding from the state. The state eventually provided $80 million, which meant the county had to add more than $3 million to its local match.

Officials debated whether to move funds from the public safety budget, raise taxes or make a one-time withdrawal from county reserves. The board of supervisors held a public hearing on a possible tax increase but eventually decided to dip into reserves, to the tune of $975,845.

The move, while considered a stopgap, allowed Henry County to enter the 2024-2025 fiscal year with an education budget balanced at $107 million.

In many respects, Henry County’s experience echoes that of neighboring Pittsylvania County.

“The fiscal year 2025 school contribution was certainly challenging this budget season,” said Kim Vanderhyde, Pittsylvania County’s finance manager.

Unlike Henry County, Pittsylvania County enacted a real estate tax increase of 4 cents, bringing its rate to 66 cents.

The tax hike allowed the county to increase its education allocation by $2.5 million, for a total local match of $24.6 million. But it wasn’t entirely for education funding.

“The tax increase was not just for the increased education contribution but also for increased costs in overall operational costs,” Vanderhyde said.

The increased match wasn’t an issue in Danville, where officials have exceeded the required local match for a number of years, according to budget director Henrietta Weaver.

After the state increase, the required local share was $17.5 million, while the city allocated $27.8 million. Last fiscal year’s local share totaled $17 million, while the city paid $25.3 million.

Martinsville has yet to confirm details concerning its local match but plans to do so during its meeting on Tuesday, according to City Manager Aretha Ferrell-Benavides.

While some localities had to account for a larger state allocation, nearby Franklin County faced the opposite challenge: It received about $3.7 million less from the state this year, according to deputy county administrator Brian Carter.

The cut led to the closure of two elementary schools, Burnt Chimney and Henry.

Carter said this was due to changes in the local composite index, a formula that determines a local match relative to the state’s allocation. But he said that even if the local match had gone up, it likely wouldn’t have been a problem due to the county’s current education funding habits.

“There have historically been no issues with the local match as the county has funded well above the required local match,” Carter said. The county contributed about $10 million over the required local match in the fiscal year that just ended, he said.

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