Council briefed on FY21 audit; staff recommends spending $5.5M surplus on employee bonuses and salary increases
At a work session on December 6, 2021, Charlottesville City Council learned how the city fared as the books for fiscal year 2021 closed. Readers and listeners may recall there had been a concern the city would have a shortfall. Chris Cullinan is the city’s director of finance.
“I’m pleased to report that we finished fiscal year 2021 in the general fund at surplus revenues of $5.5 million,” Cullinan said.
Cullinan reminded Council that the pandemic hit just as the budget for fiscal year 2021 was being finalized. At the time, there was uncertainty about the long-term financial impact but the shutdowns immediately affected the city’s meals and lodging tax collection. Property and sales tax collection performed a bit better than expected. The city also didn’t spend as much as expected.
“Several of our larger departments had vacancy savings over the course of the year as well as reduced levels of service or closed facilities during COVID and that resulted in expenditures being less than expected,” Cullinan said.
Cullinan said the $5.5 million does not include any federal funding through the CARES Act or the American Rescue Plan. Those funds are accounted for separately.
“But what it did allow us to do was instead of utilizing our general fund projects or eligible activities, we were able to use the CARES money instead so that CARES money stepped in the place of the city’s own revenues,” Cullinan said.
Staff will return to Council on December 20 with a suggested year-end appropriation. Cullinan said they will make two recommendations that will affect the next year’s budget preparation. One involves a $6.7 million economic downturn fund that was set aside for a reserve fund at the beginning of the pandemic.
“We didn’t have to tap into that money through the course of the fiscal year, and so that $6.7 million is outside of the $5.5 million,” Cullinan said.
Cullinan said the $6.7 million had been taken by withholding cash funds to the capital improvement program. Now staff is recommending returning that money back to the capital budget.
“Obviously as we all know there are several large capital needs both in the upcoming year but also in the five-year plan,” Cullinan said.
Outgoing Charlottesville Mayor Nikuyah Walker said she wanted would prefer the money be used in some other way, especially if there is the possibility of funding coming from the Infrastructure Investment and Jobs Act as well as future federal legislation.
“And I don’t know if CIP is where we should be considering allocating that with the fact that there may be funding coming in the future,” Walker said.
Outgoing City Council Heather Hill said Council has agreed to proceed with a $75 million investment in upgrading Buford Middle School and would support Cullinan’s recommendation.
“I think that any contributions we can put into the CIP right now are going to be needed if we’re going to do any of our other priorities,” Hill said. “And again, this is where those funds were intended to be when this fiscal year began.”
For the second recommendation, said staff proposes that the $5.5 million be used for employee compensation adjustments including a one-time bonus related to the pandemic, as well as a six-percent mid-year salary increase to try to retain employees in a tight job market. Deputy City Manager Sam Sanders said the bonuses will cost $3 million and the salary increase will cost $2.5 million.
“The plan is to make it effective in January so this would be immediate relief to folks seeing an increase in pay beginning January of 22 and we are already looking forward to how we sustain this going forward and feel comfortable that the projections for revenues are such that we can sustain this as a permanent increase,” Sanders said.
Before the meeting, Walker had directed staff to see if they could find a way to vote to approve this before January 6, 2022 when a potential second reading would be held. Walker will not be on Council at that time.
Sanders said did not know yet but staff would be looking on whether they could do so under Virginia law.
“It’s based on the size of the appropriation that dictates how many days we’re required so we’ll be able to take a look at that in the morning as I did get that later today and we need to dig into that to figure out if we can move faster,” Sanders said.
Under state code, localities that make a budget amendment in excess of one percent of the total budget must hold a public hearing, which must be advertised seven days in advance. Take a look at § 15.2-2507 yourself and let me know your interpretation. The FY21 budget was $192.2 million.
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