For two months, Wise County supervisors have wrestled with the question of how to close a multimillion-dollar cash flow gap between now and the end of the fiscal year next June.
Meanwhile, County Administrator Michael Hatfield is headed out the door and into retirement effective at the end of December, after seven years on the job.
But Hatfield says the timing of his departure is about personal factors that have come together now and is unrelated to the cash crunch.
Departments asked to find spending cuts
In June, supervisors passed a fiscal 2025-26 total budget of about $83.3 million — a decrease of more than $788,000 compared to the previous year.
The current general fund budget is $73.4 million, an increase of about $1.2 million compared to the previous year.
The revenue and estimated spending numbers were brought into alignment by plugging in money from a fund established in 2019, Hatfield explained via email. The revenue from 5 cents of the real estate and personal property taxes was placed in a fund, with 3 cents going to pay school construction debt and 2 cents toward economic development initiatives. It is separate from the county’s unassigned fund balance, he noted.
But during a Nov. 13 meeting, county Treasurer Delores Smith told supervisors that the county was about $6 million short on cash relative to budgeted spending for the rest of fiscal 2025-26. All departments should be instructed to spend only what they must, she said.
Almost all tax revenue collected in May and June has been spent, Smith said.
At a Dec. 3 meeting, Smith provided an update. As of June 30, when the previous fiscal year ended, the county had nearly $17.3 million in its accounts. The calendar year’s second round of tax bills went out in October, collecting about $12 million, but since then, the balance has dropped to about $18 million. In three months, the county spent an amount of money that should have lasted six months, Smith explained.
The county’s general fund balance was about $25 million at the end of June 2023, according to Smith. At the same time in 2024, it was about $21 million. This year, it was slightly more than $17 million.
The county has spent about $4 million more each year than it has taken in, Smith said.
Only about $4.6 million remains in the county’s general fund balance, but the county’s policy is to maintain about 15% of the county’s operating budget, which would be about $11 million, Smith explained. That means the county is short $6.4 million on its fund maintenance policy, she said.
If the current pattern continues, she noted, the county will run out of money before the next tax billing in the spring. The county is at least $5 million short of where it needs to be, she said. “I’ve never seen it like this in 18 years.”
The county received a lot of federal funds in response to the COVID-19 emergency and used them to expand several departments, but the increased spending was not reduced once the COVID dollars stopped coming, Smith explained.
In this fiscal year, the county over-budgeted by $7 million, in Smith’s opinion. By April, she’s unsure county schools can be paid their local funds and other county offices will be able to make payroll, she added.
The county probably will have to raise taxes, but meanwhile, departments have to examine what they can live without at least until June, Smith said.
One problem, Hatfield said, is that supervisors have to set tax rates in the spring, but they don’t know what they need to budget for the next fiscal year until June.
The board chose around June to restructure some debt, making interest-only payments for four years. The schedule saves $6.9 million during that time frame but will raise bond payments over 10 years, increasing the overall debt, Hatfield said.
For the long term, Hatfield suggested raising real estate taxes gradually. Tax rates have not changed in years.
The county’s current rate is 69 cents per $100 of value. By comparison, the rates in neighboring counties are: Lee, 69 cents; Dickenson, 52 cents; Russell, 57.9 cents; Scott, 77 cents; Washington, 43 cents.
An increase of 3 cents per $100 of value in the spring would give the county a one-time cash bump of about $567,000, and about $1.13 million more annually, Hatfield said. A 2-cent increase in fiscal 2026-27 would provide a one-time bump of $378,000, and about $756,000 more annually. In fiscal 2027-28 and years beyond, annual 1-cent increases would translate to an extra $378,000 each year.
A property reassessment will add about $1.65 million to the coffers in the first half of 2026, but the county has already budgeted spending about $941,000 of it, Hatfield said, meaning the actual revenue bump will be about $709,000.
Other steps include looking for ways to cut spending, he noted.
Supervisor Steve Bates said avoiding tax increases for years has gotten the county to this point, calling tax hikes a “necessary evil.”
Supervisor Fred Luntsford said he was unclear about the target amount of spending that needs to be cut. Hatfield said he didn’t know if officials had enough information at that moment to set a specific spending cut goal, other than the maximum amount possible.
Near the end of the meeting, supervisors agreed to pay a $500 end-of-year bonus to each county employee, noting that it was part of the approved budget.
The board met again Dec. 10 for roughly six hours, during which department heads came in, one by one, and discussed what spending they might be able to postpone between now and June.
Hatfield reiterated that Wise County arrived at this point in large part because it was spending COVID-related American Rescue Plan Act dollars to balance the budget in fiscal 2021-22, 2022-23 and 2023-24. In fiscal 2024-25, the ARPA money was gone, so the county pulled $4 million from its school debt/economic development fund to make ends meet. In the current budget, another $7 million was taken from that fund to make the numbers work.
For the last five years, the county has mostly budgeted level funding in all departments, Hatfield said.
Discussions with department heads identified little more than options to make relatively small spending cuts or defer some spending for now.
Supervisors met again Dec. 11 in regular session, including a budget update. Hatfield said that the previous move to restructure debt would save about $1.9 million in the current fiscal year. Changing the personal property tax billing cycle from once to twice annually provides a one-time cash flow bump of about $3.9 million to the good, but it won’t come until the end of the fiscal year.
Later, Chair J.H. Rivers noted that a 7-cent tax increase was approved in 2019. He asked when revenue from it goes into the general fund.
Rivers was referring to the special fund where money was found to balance the current budget — at least on paper.
Hatfield explained that of the 7 cents, 3 cents were designated to cover school construction debt, 2 cents were dedicated to economic development spending and the remaining 2 cents would go to the general fund. However, that money doesn’t actually go into the general fund until the end of the fiscal year, when the firm that does the county’s audits reconciles the books, Hatfield said.
Near the meeting’s end, Hatfield announced that it would be his last board meeting, unless another is scheduled before the year’s end. He said he looks forward to peace, quiet and relaxation.
Change of leadership is set in motion
On Dec. 18, the board appointed county attorney Karen Mullins to serve as interim administrator until the job is filled.
In a Dec. 19 phone interview, Mullins — who became a part-time county attorney in 1992 and has served in the role full-time since 2006 — said Hatfield is moving to neighboring Dickenson County to be closer to family.
Hatfield, an engineer by training, worked for an architectural and engineering firm based in the town of Wise before leaving Virginia for several years. After returning to Virginia, he was hired as county administrator in late 2018.
Hatfield’s salary is just short of $195,000, plus use of a county-owned vehicle.
Reached by phone Dec. 19, Hatfield said the timing of his departure is unrelated to the county’s cash flow troubles. He was already planning to retire soon, and doing it now was triggered by the fact that his house in Wise recently sold, making this the right time to relocate, he explained.
His retirement in the middle of the fiscal year will contribute to cash savings, Hatfield noted.
However, under the terms of a settlement agreement supervisors approved Dec. 10, the county will continue to pay Hatfield’s salary and benefits for six months. He will be paid half the value of accrued vacation and sick leave on June 30, 2026.
“This was an incentive to retire early,” Hatfield wrote.