CHRISTIANSBURG — The Montgomery County Board of Supervisors on Monday passed 6-1 a $104.1 million bond issuance that will finance a multitude of Virginia Tech-affiliated projects in Blacksburg, Roanoke and other parts of the state.
The bond request came from the Virginia Tech Foundation, which is using the county’s Economic Development Authority as a financial conduit.
The foundation is turning to the EDA due to the fact that the bonds will go toward a variety of tax-exempt projects.
Supervisor Chris Tuck issued the only opposing vote.
While the issuance doesn’t affect the EDA’s or county’s debt capacities, the foundation is paying the EDA a $100,000 fee for serving as a conduit. That fee is based on the size of the issuance, but is capped at $100,000.
The bond request has in recent weeks shed light on a state-backed privilege that allows foundation-owned properties to pay a reduced amount in local real estate taxes.
How much those properties give back in taxes depends on the duration of the tenants’ leases. Properties used for purely academic or research functions, however, do not contribute any local property tax.
Some supervisors have raised concerns about the potential effects of properties that pay less in taxes. They have said that foundation properties not contributing their fair share in taxes can complicate how the county manages the growth driven by the university.
Prior to Monday, supervisors asked the foundation to reassure them in writing that one of the projects covered by the bonds — a roughly 236,000-square-foot, five-story building in downtown Blacksburg — would guarantee at least some tax revenue.
The foundation responded with a letter stating that it’s the organization’s customary practice to negotiate an initial 10-year lease with two five-year renewal options.
“It’s in our best interest to negotiate the longest term possible,” foundation president John Dooley told supervisors.
Foundation leases are taxed at 100% — or like any other taxable property in the county — if they are for at least 50 years, according to information previously provided by county staff. If the lease is for less than 50 years, the assessment is reduced by 2% for every year less than 50 years.
Leases, however, are taxed at a minimum of 15%.
The county also provided the formula for how leases with renewal options are calculated. For example, leases under the foundation’s customary practice would be taxed at 40%.
The bond-financed projects to be built in Blacksburg are expected to earn the county an estimated $141,461 a year in real estate taxes, according to documents submitted by the EDA. That amount would grow to $642,790 if those properties were taxed at 100%.
Before voting on Monday, a few supervisors asked foundation officials in attendance if the organization would be open to working out some kind of payment agreement in lieu of property tax.
“They [Tech] are the economic drivers in this county. We certainly wouldn’t want anything to slow that down. … Our only concern, of course, is the tax laws,” Supervisor Steve Fijalkowski said before asking Dooley about a payment in lieu agreement.
Dooley voiced openness to such an agreement, among other options.
“We’re willing, wanting to engage in a meaningful conversation that would include the county, the town of Blacksburg … the university and the foundation to talk about a long-term solution or options that could be considered,” he said.
Tuck, however, asked if the foundation would make a minimum kind of commitment immediately, to which Dooley declined.
“I’m not in that position to make that commitment this evening,” Dooley said.
Commitments such as refusing to enter into leases less than five years could “short sell” the county in the long run, Dooley said.
In addition to Blacksburg and Roanoke, the bonds will finance projects in Northern Virginia, Henrico County and Hampton.