Can a Virginia county create a countywide service district to raise tax money for its share of a regional jail's operating costs?

Plain-English summary

Delegate Edmunds asked on behalf of Prince Edward County whether the county could use the service-district statutes to raise extra ad valorem property tax money for its share of the Piedmont Regional Jail. The county's jail funding had been hit by reduced federal prisoner revenue and a smaller state share, and the county had been forced to increase its local jail subsidy by about $1.4 million over two years. Local leaders wanted to package the next tax bump as a separate "regional jail service district" levy rather than a general property tax increase, on the theory that citizens would more readily accept a labeled jail tax.

AG Herring said no. Three reasons:

Dillon's Rule and the express statutory language. Virginia local governments only have powers expressly granted, necessarily implied, or essential to their operations. Section 15.2-2400 authorizes a service district "to provide additional, more complete, or more timely services of government" than are desired in the locality as a whole. Section 15.2-2403(1) lists the categories of services that may be funded (utilities, recreation, pest control, roads, public works, and other "services, events or activities that will enhance the public use and enjoyment of and the public safety, public convenience, and public well-being within a service district"). The same subsection then carves out a sharp limit: "an annual tax shall not be levied for or used to pay for schools, police, or general government services not authorized by this section." A regional jail, the AG concluded, is general government service that benefits a region of the Commonwealth. It is not the kind of targeted, district-specific service the legislature authorized.

Service districts are about additional services, not replacement funding. Even reading subdivision (1) generously, the very nature of a service district is geographic targeting and service enhancement. A countywide district to fund the same level of jail service the county already provides is neither targeted nor enhancing. It is just a labeled general tax. The statute uses "additional, more complete, or more timely" for a reason: districts exist to deliver something extra to a discrete area, not to relabel existing general government costs.

The public-hearing rule for general tax rate increases would be evaded. Section 58.1-3007 requires a public hearing before any increase in the general tax rate. A service district public hearing is required to create the district (§ 15.2-2402) but not to later raise the district tax rate. So if a county could route an ordinary general tax bump through a service district, it could permanently bypass annual public hearings on tax rate increases. Statutes are read in pari materia to give effect to both, per Prillaman. The county may not use one to defeat the other.

Currency note

This opinion was issued in 2014. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Sections 15.2-2400 through 15.2-2413 and § 58.1-3007 have been amended several times since 2014, and the General Assembly has expanded permissible service-district uses in some areas (broadband, stormwater, transportation). Any county considering a service-district approach to jail funding today should look at the current statutory text, recent acts of assembly, and any later AG opinions.

Common questions

What is a service district under Virginia law?
A geographic subdivision of a locality created under §§ 15.2-2400 et seq. to provide and pay for additional, more complete, or more timely government services to that specific area. The district funds itself through an ad valorem property tax levied on real property within its boundaries, on top of the regular locality-wide property tax.

What are valid uses for service-district taxes?
Section 15.2-2403(1) lists things like water and sewer, sidewalks, street lighting, parks, garbage collection, pest control, mosquito control, security services, and similar district-targeted services. Subdivisions (2) and (11) cover transportation services and open-space preservation. The statute also bars use of service-district taxes for schools, police, or general government services.

Why is a regional jail not eligible?
Because a regional jail is shared infrastructure serving multiple localities and the general public, not a service targeted at a particular geographic part of a single locality. The benefit is general, not localized. It also operates like general law enforcement, which the statute expressly excludes.

Can a county still raise its jail funding contribution?
Yes, but through an ordinary general tax increase subject to the § 58.1-3007 public-hearing requirement, or through other available revenue sources. The AG did not question the underlying funding need, only the proposed service-district mechanism for raising it.

Could a service district be used for a jail expansion or addition?
This opinion does not directly address that. The opinion was clear that "regular, recurring regional jail costs" are not service-district eligible. A capital project for an enhanced facility benefiting a specific geographic area might raise different questions, but it would still face the statutory exclusion for general government services and law enforcement functions.

Does Dillon's Rule apply to all Virginia local government questions?
It applies whenever a Virginia locality claims a power. Localities have only the powers expressly granted, necessarily or fairly implied, or essential and indispensable, and any doubt is resolved against the locality. Sinclair v. New Cingular Wireless PCS (2012) and the cases it cites are the modern statement.

What happens at the public hearing required by § 58.1-3007?
The locality has to give notice and conduct a public hearing before increasing the general property tax rate above the prior year's rate. It is the principal procedural protection citizens have over general property tax increases. The AG saw evading that hearing as a separate independent reason to reject the service-district workaround.

Background and statutory framework

• Va. Code § 53.1-82: Authorizes localities to enter cooperative jail contracts; participating localities establish a regional jail board.
• Va. Code § 53.1-87: Each participating locality pays a portion of the net operating costs.
• Va. Code § 15.2-2400: General authority to create service districts to provide additional, more complete, or more timely government services.
• Va. Code § 15.2-2402: Public-hearing requirement to create a service district.
• Va. Code § 15.2-2403(1): Enumerated permissible service-district services; excludes schools, police, and general government services.
• Va. Code § 15.2-2403(2), (11): Transportation services and open-space land preservation, respectively, neither of which fits a regional jail.
• Va. Code § 15.2-2403(6): Permits the annual tax to be imposed on real property in the district to pay for the authorized services and facilities.
• Va. Code § 58.1-3007: Public-hearing requirement for any increase in the general tax rate.

The interpretive moves:

• Dillon's Rule means doubt about local power is resolved against the locality.
• § 15.2-2403(1) expressly excludes general government services from service-district funding.
• Targeted, district-specific service is the essence of the service-district mechanism, not relabeling of general taxes.
• Public-hearing requirements in §§ 15.2-2402 and 58.1-3007 must be read in pari materia.

Citations

• Va. Code §§ 15.2-2400 through 15.2-2413
• Va. Code § 53.1-82
• Va. Code § 53.1-87
• Va. Code § 58.1-3007
• Sinclair v. New Cingular Wireless PCS, LLC, 284 Va. 567, 720 S.E.2d 543 (2012)
• Marble Techs., Inc. v. City of Hampton, 279 Va. 409, 690 S.E.2d 84 (2010)
• Bd. of Zoning Appeals v. Bd. of Supvrs., 276 Va. 550, 666 S.E.2d 315 (2008)
• Bd. of Supvrs. v. Reed's Landing Corp., 250 Va. 397, 463 S.E.2d 668 (1995)
• Prillaman v. Commonwealth, 199 Va. 401, 100 S.E.2d 4 (1957)
• 2019 Op. Va. Att'y Gen. 5, 6
• A.E. Dick Howard, Commentaries on the Constitution of Virginia, Vol. II, at 783-784

Source

• Landing page: https://www.oag.state.va.us/annual-reports-opinions/official-opinions
• Original PDF: https://www.oag.state.va.us/files/Opinions/2014/14-026_Edmunds.pdf

Original opinion text

COMMONWEALTH of VIRGINIA
Office of the Attorney General
Mark R. Herring
Attorney General

900 East Main Street
Richmond, Virginia 23219
804-786-2071
FAX 804-786-1991
Virginia Relay Services
800-828-1120
7-1-1

May 1, 2014

The Honorable James Edmunds
Member, House of Delegates
Post Office Box 1115
60 South Main Street
Halifax, Virginia 24558

Dear Delegate Edmunds:

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 Prince Edward County may create a service district pursuant to Chapter 24 of Title 15.2 of the Code of Virginia to collect an additional ad valorem property tax to help pay for the expenses of a regional jail.

Response

A service district may not legally be created to encompass an entire locality where the funds to be raised thereby would replace an existing source of general fund revenues to maintain a regional jail, and where the special service district is not being created to provide additional, more complete, or more timely services.

Background[1]

You report that the Piedmont Regional Jail Board was established in 1986 by the counties of Amelia, Buckingham, Cumberland, Lunenberg, Nottoway, and Prince Edward.[2] Each locality pays a portion of the net operating costs of the regional jail.[3]

In recent years, jail revenues have decreased significantly because of several factors, including a decrease in federal prisoners (a source of net revenue) and a decrease in the state's share of the cost of jail operations. Although efforts have been made to reduce operating costs, including staff reductions, these measures have not sufficiently offset the reduced revenues. In addition, required improvements to medical services for inmates are creating additional costs. As a result, Prince Edward County has had to increase its local funding for the regional jail by approximately $1,400,000 over the last two years.

You indicate that, in order to continue to provide the needed funding, Prince Edward County may have to adopt a sizeable tax increase for the upcoming budget. The Board of Supervisors has sought guidance regarding the ability to create a special service district to help generate revenue to meet the county's share of funding requirements. The special service district would encompass the entire county and impose an additional tax levy for the regional jail in order to reduce or eliminate the proposed general tax increase. The information related to you is that citizens will better understand the overall tax increase if the tax revenues raised for regional jail costs are characterized as a separate tax, rather than as part of the general tax. You relate that the special service district taxes would not be used for debt service on bonds for any capital improvements at the regional jail.

Applicable Law and Discussion

In determining the authority of local governments, Virginia follows the Dillon Rule of strict construction, which provides that local governing bodies have only those powers that are expressly granted, those necessarily or fairly implied from expressly granted powers, and those that are essential and indispensable.[4] Further, once a power is conferred, that authority exists only to the extent granted.[5] Finally, any doubt as to the existence of a legislative power must be resolved against the locality.[6]

Pursuant to § 15.2-2400, local governments have the express power to establish service districts "to provide additional, more complete or more timely services of government than are desired in the locality . . . as a whole."[7] Once a service district is created, § 15.2-2403 permits an annual tax to be imposed upon any [real] property in such district subject to local taxation to pay, either in whole or in part, the expenses and charges for providing the governmental services authorized by subdivisions 1, 2 and 11 and for constructing, maintaining, and operating such facilities and equipment as may be necessary and desirable in connection therewith[.][8]

Thus, a locality clearly is authorized to create a service district to raise revenue for certain purposes. Such purposes, however, must be those "authorized by subdivisions 1, 2 and 11" of § 15.2-2403, as set forth above.

Subdivisions 2 and 11 of § 15.2-2403 pertain exclusively to transportation services and preservation of open-space land, respectively, and therefore do not provide a locality any authority to create a service district for regional jail purposes.[9] Subdivision 1 of § 15.2-2403 enumerates several services that may be delivered through creation of a service district, including specific services related to utilities, recreation, pest control, roads, and other public works.[10] While maintenance of jail facilities is not expressly cited, the scope of services authorized by § 15.2-2403(1) is not limited to the cited examples, as it authorizes service district funding generally for "services, events or activities that will enhance the public use and enjoyment of and the public safety, public convenience, and public well-being within a service district."[11] Nevertheless, the very nature of the service district revenue model dictates that the service to be funded must be one that can be provided on a targeted basis to benefit primarily taxpayers in a district of the locality. A regional jail is not such a service; it is instead a general government service that benefits a region of the Commonwealth. Section 15.2-2403(1) expressly provides that "an annual tax shall not be levied for or used to pay for schools, police, or general government services not authorized by this section." This language makes clear that a service district is not intended to be a separate funding source for governmental services that benefit the entire locality, nor intended to be a replacement funding source for existing general services. A service district is intended to provide area-specific funding to pay for additional services for a discrete area or region of the locality.

Even given a service permitted to be funded by service district taxes, the service district law[12] is intended to fund possible enhanced governmental services to a specific geographic portion of a locality, with the enhanced services to be paid for by an additional ad valorem tax to be imposed on citizens or businesses within the affected area. The facts provided indicate that the county seeks to raise revenue by creation of a service district only to maintain the level of services provided by the existing regional jail. Section 15.2-2403(1) empowers a locality to create a service district to maintain and operate facilities only as necessary or desirable to provide "additional, more complete, or more timely" services than presently provided to the district. Without a goal or aim to add to or otherwise improve the delivery of jail services on a district basis, the county may not create a service district to fund its share of regular, recurring regional jail costs.

Finally, I also note that a public hearing is required for any increase in the general tax rate.[13] The intent of this statute would be defeated if such a public hearing could be avoided by the device of creating a service district to provide funding for county-wide services.[14] Statutes should be construed in pari materia so as to give effect to both.[15]

Conclusion

Accordingly, it is my opinion that Prince Edward County may not create a county-wide service district to provide needed funding to continue operating an existing regional jail.

With kindest regards, I am

Very truly yours,

Mark R. Herring
Attorney General

[1] The conclusions expressed herein are based on information this office received in an e-mail from your office dated April 8, 2014, supplemented by an e-mail dated April 11, 2014.

[2] VA. CODE ANN. § 53.1-82 (2013) expressly authorizes localities to enter into contracts providing for cooperative jailing and directs the participating localities to establish a representative board "to advise the locality in which the jail facility is located on matters affecting operation of the facility."

[3] See § 53.1-87 (2013).

[4] Sinclair v. New Cingular Wireless PCS, LLC, 284 Va. 567, 576, 720 S.E.2d 543 (2012) (citing Marble Techs., Inc. v. City of Hampton, 279 Va. 409, 690 S.E.2d 84, 88 (2010) and Bd. of Zoning Appeals v. Bd. of Supvrs., 276 Va. 550, 553-54, 666 S.E.2d 315, 317 (2008)). The antecedents of Dillon's Rule trace back to 11th century England. As Professor Howard notes in his Commentaries on the Constitution of Virginia, "Much of what local government has come to be in modern America has its roots in events centuries ago. For example, when William the Conqueror imposed upon England a degree of centralized authority unequalled on the Continent, power was seen as flowing from the Crown, and units of local government had only so much authority as the King might grant them - a concept not unrelated to the modern notion that local governments are essentially creatures of the state." A.E. DICK HOWARD, COMMENTARIES ON THE CONSTITUTION OF VIRGINIA, Vol. II, at 783-784.

[5] See, e.g., 2019 Op. Va. Att'y Gen. 5, 6.

[6] Bd. of Supvrs. v. Reed's Landing Corp., 250 Va. 397, 400, 463 S.E.2d 668, 670 (1995).

[7] VA. CODE ANN. § 15.2-2400 (2012).

[8] Section 15.2-2403(6) (2012).

[9] See § 15.2-2403(2) and 15.2-2403(11).

[10] See § 15.2-2403(1).

[11] Id.

[12] See 15.2-2400 through 15.2-2413 (2012 & Supp. 2013).

[13] See 58.1-3007 (2013).

[14] A public hearing is required by Sec. 15.2-2402 to create a service district, but not for any subsequent increase in the tax rate of the service district.

[15] Prillaman v. Commonwealth, 199 Va. 401, 405-06, 100 S.E.2d 4, 7-8 (1957).