Charlottesville officials seek to pin down solid budget plan

By Rachana Dixit

Published: November 18, 2008

It remains fairly evident to Charlottesville officials that the city’s major sources of revenue are not likely to increase much in coming years, but the nation’s economic woes make for a hazy fiscal forecast.
“Clearly, we don’t know where the bottom is going to drop at this point,” said Leslie Beauregard, the city’s budget manager.
City councilors discussed the current budget’s projected deficit, fiscal 2010’s budget guidelines and five-year projections during their Monday meeting. The city is projecting a $1.8 million deficit by the end of June, but ever-changing circumstances make a solid number exceedingly arduous for staff to pin down.

“It’s really difficult to plan in this volatile economy,” Beauregard said. She added, “We still have a lot of work to do to get the budget balanced for 2010.”
City staff is required to submit a balanced budget to the City Council in February. But if the city’s spending and revenue situations do not change, preliminary projections show that by fiscal 2014 the deficit could climb to nearly $9.3 million. The amount would be 5.7 percent of Charlottesville’s $162.8 million in projected spending.
This year, City Manager Gary O’Connell said, energy costs are up nearly 18 percent since the current budget was approved in April, and that’s despite recent price decreases. Additionally, the release of Virginia Gov. Timothy M. Kaine’s budget in December will almost definitely stack further reductions onto local government’s budgets, but those effects also remain vague.

“We have no idea what that means at this time,” Beauregard said.
If the city does not raise its tax rate, declining real-estate revenue would be one of the major causes for the shortfall in city coffers — this fiscal year, the city now projects to garner $572,908 less than expected when the budget was approved in April. Real-estate tax revenue is the largest source of revenue for Charlottesville’s budget, at 35.7 percent.
Preliminary estimates show a 2.66 percent increase in assessments for 2009, with growths of 1 percent and 5 percent, respectively, for residential and commercial properties. The final figures will be available at the end of the year.

After fiscal 2010, the real-estate financial returns are expected to go up by only 1.5 percent each year. Other sources of funding may also nearly level off at that time. The city is expecting a roughly 32 percent increase in funds for next year’s budget from its revenue-sharing agreement with Albemarle County, totaling more than $18 million, but the amount is expected to climb a mere 1.5 percent per year beginning in fiscal 2011.
In the rough times ahead, however, it will be essential that the city’s crucial infrastructure maintenance not be shoved aside, Councilor David Brown said. In recent years, he said, the city has frequently talked about how it has fallen behind on infrastructure spending.
“But those issues are the ones that are easiest to cut when it’s time to balance the budget,” Brown said. “It’s important that we don’t sacrifice our deferred maintenance needs.”
Repairing the city’s ailing infrastructure is listed as the City Council’s second-most important priority, next to providing more affordable housing.
The city manager’s budget guidelines for fiscal 2010 recommended several measures to curtail the economy’s negative effects on Charlottesville’s budget — including that the city not fund new programs or the major expansion of existing programs without fully offsetting the cost with revenues or reductions in spending. Also, 30 percent to 50 percent of the funding increase from city and county revenue sharing would be put toward the next operating budget, while the rest would be put in reserve for the next two to three years.

Councilors were generally in agreement about the 15 criteria, but Councilor Satyendra Huja said he would like to see more of the revenue-sharing funds used for capital improvement projects, which are likely to take a sizeable hit from the budget shortfalls.
But, O’Connell said, “we might need to use that for more than the next two budget years.”
“We don’t know what’s going to happen with the real-estate economy,” he said. “We don’t know what’s going to happen with the economy in general.”