Can Gloucester County, Virginia, use revenue from its voter-approved 1% local sales tax to pay down debt on past school construction, or only to fund new school construction or major renovations going forward?

Subject

Gloucester County Sales Tax revenues are to be used to fund capital projects for "new construction or major renovation" of Gloucester's public schools and not for debt mitigation.

Plain-English summary

In November 2020, Gloucester County voters approved a 1% local retail sales tax. The referendum stated the tax revenue would be used "solely for capital projects for the construction or renovation of schools in Gloucester County" and that the tax would expire by July 31, 2040. The authority for the tax sits in Va. Code § 58.1-605.1, a statute the General Assembly passed to let localities levy an additional sales tax to fund school capital projects.

Delegate Keith Hodges asked the Attorney General whether the county could redirect some of that revenue to pay down debt on earlier school capital projects, the school construction and renovations that predated the new tax.

The Attorney General said no. The statutory language uses "new construction or major renovation" and the referendum used "construction or renovation." Reading the statute as a whole (including the expiration clause tied to repayment of bonds or loans financing new capital projects), the AG concluded the revenue is for future construction or renovation. Older debt on past school projects is not "new construction" and is not within the scope of what voters approved.

What this means for you

For Gloucester County supervisors and finance staff

The opinion holds that the § 58.1-605.1 sales tax revenue is restricted to capital projects for new construction or major renovation of county schools, including the bond and loan financing costs of those projects, and may not be diverted to pay down debt on earlier, pre-referendum school capital projects. Under the opinion, bonds serviced with the revenue must finance new construction or major renovation rather than preexisting obligations.

For the Gloucester County School Board

The opinion holds that the revenue is restricted to new construction or major renovation under § 58.1-605.1(G) and is not discretionary money; debt on past projects falls outside that scope.

For Gloucester County taxpayers

The opinion holds that the 1% tax is statutorily tied to new school construction and major renovation, so applying it to legacy debt or to an unrelated budget gap is outside what the AG reads the law to authorize. The opinion is persuasive rather than binding authority.

For other Virginia counties considering a school sales tax

The opinion reads § 58.1-605.1 narrowly: the "new construction or major renovation" limit is forward-looking and does not reach historical debt. As the AG's reading of a statewide statute, the same interpretation would apply to other qualifying localities operating under it.

Common questions

What is the Gloucester County 1% sales tax?
A local-option additional sales and use tax levied under Va. Code § 58.1-605.1. Gloucester voters approved it in November 2020 with an expiration date of July 31, 2040.

What can the revenue be used for?
"Capital projects for new construction or major renovation of schools in the qualifying locality, including bond and loan financing costs related to such construction or renovation."

Can the revenue be used to pay down old school debt?
According to this Attorney General opinion, no. The statute focuses on new capital projects. Debt from earlier capital projects does not count as new construction or major renovation.

Can the revenue finance bonds for future school projects?
Yes. The statute expressly includes "bond and loan financing costs related to such construction or renovation." So if Gloucester issues bonds to build a new school, the sales tax revenue can service those bonds.

Does this opinion apply to other Virginia localities?
Section 58.1-605.1 applies statewide to qualifying localities that adopt this kind of tax by referendum. The opinion's interpretation of "new construction or major renovation" is the AG's reading of the statute, so other localities operating under the same statute should expect the same treatment.

Is this opinion binding on Gloucester County?
No. AG opinions are persuasive but not binding. A court could read the statute differently. But the AG's view often carries weight with auditors, bond counsel, and local officials weighing how to spend restricted funds.

Background and statutory framework

Section 58.1-605.1 was enacted to let designated Virginia localities raise an additional 1% sales and use tax for school capital projects, by referendum. Subsection (G) restricts the revenue to "capital projects for new construction or major renovation of schools in the qualifying locality, including bond and loan financing costs related to such construction or renovation." Subsection (A)(2) ties the expiration of the tax either to the repayment date of bonds or loans used to finance the capital projects, or to a date chosen by the governing body, but not more than 20 years out.

The Gloucester ballot question (November 2020) tracked the statutory language: "for capital projects for the construction or renovation of schools in Gloucester County." The AG read the words "new" in § 58.1-605.1(G) and the surrounding subsections as forward-looking, applying only to projects that the tax will fund going forward, not to liabilities from earlier school capital work.

The AG's interpretive tools are the standard ones: ascertain legislative intent, give plain language its plain meaning, prefer the rational reading over a strained one. He grounded the analysis in Cuccinelli v. Rector & Visitors of the Univ. of Va., 283 Va. 420 (2012).

Citations

• Va. Code § 2.2-505 (AG advisory opinions)
• Va. Code § 58.1-605.1 (local-option sales tax for school capital projects)
• Cuccinelli v. Rector & Visitors of the Univ. of Va., 283 Va. 420 (2012)

Source

• Landing page: https://www.oag.state.va.us/annual-reports-opinions/official-opinions
• Original PDF: http://www.oag.state.va.us/files/Opinions/2021/21-020-Hodges-Issued.pdf

Original opinion text

Office of the Attorney General
Mark R. Herring
Attorney General

202 North Ninth Street
Richmond, Virginia 23219
804-786-2071
Fax 804-786-1991
Virginia Relay Services
800-828-1120
7-1-1

December 21, 2021

The Honorable M. Keith Hodges
Member, House of Delegates
Post Office Box 928
Urbanna, Virginia 23175

Dear Delegate Hodges:

I am responding to your request for an official advisory opinion in accordance with § 2.2-505 of the Code of Virginia.

Issue Presented

You ask whether Gloucester County may divert monies collected from a sales and use tax, implemented pursuant to § 58.1-605.1(G), to debt mitigation for previous capital projects involving construction or major renovation of Gloucester's public schools.

Applicable Law and Discussion

Section 58.1-605.1 was enacted by the General Assembly to permit localities to levy additional local sales and use taxes to fund capital projects for the construction or improvement of schools. Section 58.1-605.1(G) provides, "[t]he revenues from this tax shall be used solely for capital projects for new construction or major renovation of schools in the qualifying locality, including bond and loan financing costs related to such construction or renovation."

When construing a statute, our primary objective is "'to ascertain and give effect to legislative intent,'" as expressed by the language used in the statute. "'When the language of a statute is unambiguous, we are bound by the plain meaning of that language.'" And if the language of the statute "'is subject to more than one interpretation, we must apply the interpretation that will carry out the legislative intent behind the statute.'"

The plain language of § 58.1-605.1 is clear that the statute applies to "capital projects for new construction or major renovation of schools." Other subsections within § 58.1-605.1 support the fact that this statute applies to new school capital projects. Subsection (A)(2) states that

[a]ny tax imposed pursuant to this section shall expire (i) if the capital projects for the construction or renovation of schools are to be financed by bonds or loans, on the date by which such bonds or loans shall be repaid or (ii) if the capital projects for the construction or renovation of schools are not to be financed by bonds or loans, on a date chosen by the governing body and specified in any resolution passed pursuant to the provisions of subdivision B 1. Such expiration date shall not be more than 20 years after the date of the resolution passed pursuant to the provisions of subdivision B 1.

Subsection (B) requires that the "tax may be levied only if the tax is approved in a referendum." The Sales Tax Referendum approved by Gloucester's voters in November 2020 reads: "Should Gloucester County be authorized to levy a general retail sales tax at a rate not to exceed (1%), provided the revenue from the sales tax shall be used solely for capital projects for the construction or renovation of schools in Gloucester County and that the sales tax shall expire by July 31, 2040?" The referendum and the information released to Gloucester's voters describing the referendum further support the fact that the sales tax revenues would be used prospectively for new construction or major renovation of Gloucester's public schools and not for debt mitigation.

Conclusion

Accordingly, it is my opinion that the Gloucester County Sales Tax revenues are to be used to fund capital projects for "new construction or major renovation" of Gloucester's public schools and not for debt mitigation.

With kindest regards I am,

Very truly yours,

Mark R. Herring
Attorney General