Financial advisers say Washington County could delay raising taxes to pay for Alpha building

ABINGDON, Va. – Washington County will be able to buy and renovate a $7.5 million building for county government offices without raising taxes until at least 2013, based on a report from the county’s financial advisers.

The Washington County Board of Supervisors voted 6-1 Tuesday to buy the 48,000-square-foot building at Interstate 81’s Exit 14 that currently houses Alpha Natural Resources’ corporate headquarters. Next year, Alpha plans to move into a new office building in Bristol. In October, the company’s current building appraised for $8.1 million.

The county plans to use the building to consolidate its administration, treasurer and commissioner of revenue offices under one roof with improved public access. County officials said the cost of the buying the Alpha building is significantly less than other options considered for consolidating those offices.

According to a plan presented by the county’s financial adviser, Davenport & Co., a combination of factors means the county can delay the tax impact of the building purchase and other current capital improvement projects until at least 2013.

Those factors include:
* Rental income: According to the deal approved Tuesday, Alpha would pay the county $60,000 a month to rent the building until September 2011, a figure equivalent to its current rent. The Davenport plan said the rental income would cover the debt service on the building purchase through 2011 and provide $625,000 for renovations.
* Low interest rates: Washington County’s strong credit rating, combined with historically low interest rates, means an opportunity to borrow money at less than 4.75 percent.
* Earlier tax payments: A portion of the estimated $9 million that will flow into county coffers this spring because of the transition from annual to twice-a-year tax collections can be strategically used to offset the purchase costs. Davenport projected that the debt service would amount to a tax increase of 1.5 cents for every $100 of value.

But, according to Davenport’s financial projections, using $1.7 million of those early tax revenues would delay the impact of all of the county’s capital improvement projects until 2013.

In addition to the $7.5 million office building, the county’s projects include: $10.2 million for school system building and renovations; a $5.9 million industrial park road and grading project; a $2.5 million building acquisition and roof renovation for the sheriff’s office; a $900,000 library; and a $600,000 renovation to the county building across from the courthouse.

The total projected tax impact of those projects is 4.6 cents, with 2 cents needed in 2013 and 2.5 cents in 2015. Commissioner of Revenue David Henry said that for a homeowner whose property is valued at $100,000, a 1-cent property tax increase is equivalent to an additional $10 on the annual tax bill.

However, county officials are hopeful that the economy will turn around by 2013, providing sufficient revenue to cover the projects without a tax increase.

Supervisor Nicole Price, the only one who voted against the purchase plan, said she worries about the uncertain economic climate.

“This recession is being called the worst in 70 years. It’s being called a bleak, dismal forecast for state revenues, for local revenues, for our budgeting process,” Price said. “So my concern is not knowing what our reductions are from the state. … If you don’t know how much money you’re going to have, how can you make this kind of commitment?”

Rick Nida, spokesman for Alpha, said the building deal is “a bargain for both parties.” He did not say how much it would cost Alpha to get out of its lease with Johnson Stone Mill LLC without buying the building, nor how much it will cost the company to buy the building from Johnson before re-selling it to the county.

According to the county and the company, discussion on the deal began in late summer, after Alpha shareholders approved the merger of the company with Foundation Coal Holdings. That merger sparked the need for a larger headquarters building.

After a period of negotiation later in the fall, Alpha offered the building for sale according to specific terms, and the county board of supervisors approved the proposal Tuesday.

Next, County Attorney Lucy Phillips said, the lawyers will work out a purchase agreement to be approved by the county board and Alpha’s board of directors.

Phillips said if all goes according to plan, the county will close on the property by mid-2010.

There was one interesting glitch along the way: In the process of considering the sale, county officials discovered a $3.5 million “clerical error” in the building’s tax value.

“I am somewhat at a loss to explain the exact circumstances of this clerical error,” wrote Dave Hickey, of Blue Ridge Mass Appraisal Co., in a letter to Henry explaining the issue.

The error has since been corrected, Henry said, meaning close to $20,000 of additional tax is due for 2009. If the county hadn’t been considering the purchase of the building, the error might have gone unnoticed, he said.

County Administrator Mark Reeter said the building will need only minor renovations to prepare it for county government use.

The first floor will be divided between the treasurer’s office and commissioner of revenue’s office, according to a concept plan, with a public area in the center with service windows for citizens to access each office.

The second floor’s central area will be converted into an auditorium that’s slightly larger than the Board of Supervisors’ current meeting room, according to the plan. It also will incorporate movable partitions to create general purpose meeting rooms during the business day.

dmccown@bristolnews.com | (276) 791-070