Fiscal New Year is only 114 days away and Charlottesville City Council will meet tonight with the Charlottesville School Board at CATEC at 5 p.m. for a work session on the budget that will kick in on July 1.
Last week, Council held a work session to give its priorities for the creation of a budget including the setting of a tax rate. They also heard from interim City Manager Michael C. Rogers on budget guidelines including one that’s been in place for some years. (view the meeting) (view the presentation)
“We continue the strong commitment to education by allocating up to 40 percent of new city real estate and property tax revenues to schools,” Rogers said. “Now, this is a policy, this is a guideline. This is not written in stone except through the adoption of the budget.”
One of the main items in the presentation Superintendent Royal Gurley made to the School Board last week was a push to get Council to stick to the policy for this year. The increase in real property assessments as well as projections for other taxes will mean new revenue.
“Between the assessments and increase in other key other revenue areas like lodging and hotel taxes, we have a $13.9 million increase,” Rogers said.
The school system’s share of those new revenues would be $4.2 million.
The adopted FY23 budget is at around $212.9 million. The anticipated additional revenue would bring that to $226.7 million if the tax rates are kept the same. But let’s focus first on the amount that comes from the assessment increase.
“That accounts for $9.9 million of that $13.9 million,” said Krisy Hammill, the city’s director of budget and performance.
Some other projected changes:
- Albemarle’s payment to Charlottesville for the revenue-sharing agreement will increase by $170,513 to a total of $15,715,740.
- Fees from building permits are projected to bring in $381,000 less in FY24 for a total of $949,000.
- Revenue from EMS billing is projected to decrease by $135,000 to $765,000 for FY24
But back to that $13.9 million. First, Hammill subtracted the $4.2 million for schools, and shared another $3.3 million in known new expenses such as paying for new city positions that were initially funded by one-time money, as well as pay increases for bus drivers for both the school system and Charlottesville Area Transit.
“People may think that you’ve $13.9 million, but $8.8 million is already gone but the remaining amount, the $5.5 million, is the margin that we’re dealing with,” Rogers said.
And that’s before factoring in anticipated increases in salaries for city staff. A four percent merit increase would cost $2.4 million. That does not factor in what might come out of the compensation study that will be published later this month. Nor does it take into account collective bargaining.
Retirees would get a two percent cost of living increase for a total of $1 million. The city’s cost to cover increases in health care is $277,905 with no increase expected for employees. That’s a total of $3.7 million.
Staff has also added $200,000 to the Vibrant Community Fund based on feedback from Council at a December work session. (Council discusses additional funding for Vibrant Community Fund, December 31, 2022)
Rogers ended the presentation with a question to Council.
“So the question is, what else is on Council’s mind?” Rogers asked.
Councilor Brian Pinkston said he would be willing to tweak the school formula to provide more funding for general government.
“For me, that is not something that is sacrosanct,” Pinkston said. “We are investing in our schools to the tune of $80 million and if you include the escalation, we are making a major contribution to get our schools to the place that they need to be.”
For instance, Pinkston said the funding could help increase the amount available for housing initiatives. The Affordable Housing Plan adopted in March 2021 commits the city to invest $10 million each year in housing, including administration. All of the city’s housing initiatives are now running through the Office of Community Solutions. Deputy City Manager Sam Sanders said even if there is more funding available, it won’t meet the level of requests that have been submitted this year.
“Every housing pot that we have is oversubscribed,” Sanders said. “I think we received three times as many applications, the amount exceeded three times of what we have available.”
For instance, there are 10 applications for “Housing Development Project Investments” for a total request of $33,364,535 million. Eight of them come from the Piedmont Housing Alliance. (Charlottesville seeks proposals for affordable housing fund, January 4, 2023)
The city has not had a housing program manager since the summer of 2020 when John Sales left the position after one year to run the Charlottesville Redevelopment and Housing Authority.
Councilor Michael Payne noted that the inclusionary zoning provisions anticipated in the new zoning code and said that staff will need to be in place to monitor the situation.
“However we structure it, that means that for every large new development, if it’s successful, the city will need a process to verify that the developer is actually following through on that commitment and then no one ever checks,” Payne said.
Here’s a reminder that the city has previously lost track of how the existing Charlottesville Affordable Housing Fund has been used since it was created in 2007. There was a review last year. (Deputy City Manager Sanders reviews recent audit of Charlottesville’s housing fund, April 6, 2022)
Payne also put in a plug for at least $50 million in investment in public housing projects operated by the Charlottesville Redevelopment and Housing Authority.
“I think it’s important for the city now to begin planning for the Westhaven phase of public housing redevelopment,” Payne said. “I know that’s not for this immediate fiscal year or even the one following that but I think the scale of that project I think we really need to begin planning out how we’re going to afford it now.”
The first occupants have moved into new CRHA units at South First Street, according to a report given to the Board of Commissioners in January. Renovations at Crescent Halls are also nearing completion. The organization also spent nearly a million to buy three properties in 2022 to serve as sites for subsidized housing.
Pinkston said he would like to see funding to pay for a study of what the city would need for a permanent shelter for the unhoused.
“I think that we need to get really serious about a shelter for the unhoused that’s one that we can really count on and that we’ve got access that meets the community’s needs,” Pinkston said. “I’m not saying we need to budget a million dollars for it next year but I really think that we need to make some investments in planning for that so that we’re not just continuing to chase that topic.”
Vice Mayor Juandiego Wade said that he wants the city to able to address what he said was an increase level of gun violence in the community. He referred to the murder of Eldridge Vandrew Smith on January 28, 2023 on Grove Street.
“The last shooting was particularly close because it was a young man that I knew very well so I think that more and more people are starting to feel like it’s not safe,” Wade said.
The next major decision for this cycle is to determine what tax rate to advertise for the public hearing on March 20.
Last year, they agreed to advertise a ten cent increase on the real property rate but settled on a one cent increase. Under Virginia law, a locality must advertise the highest maximum rate it may consider for the budget 30 days before the public hearing, but that does not compel that rate to actually be adopted.
Every penny increase on the tax rate would yield an additional $1,035,452 in new revenue. Again, 40 percent would go to the schools.
Where do Councilors currently stand?
“I’m in the camp right now that I wouldn’t want to see any increase at all,” said Vice Mayor Juandiego Wade. “I think that the increase in assessment has been hard on a lot of property owners and I wouldn’t want to see any increase.”
Payne said he felt advertising a higher rate of one or two cents would give Council more flexibility.
“I’m a little bit more in favor of publishing something, or advertising something, so we can at least discuss even if our preference is not to increase anything,” Payne said.
Payne said he would favor increasing the lodging tax over the real property tax rate. The rate is currently at eight percent of the total bill, according to the city’s website. A potential change in that rate does not need to be advertised 30 days before the first public hearing. Only seven.
Payne also hinted that the city could increase the property tax rate as long as there is funding to provide relief to those who qualify. Commissioner of Revenue Todd Divers cautioned against using that tactic.
“I don’t think you can ever relief your way out of an assessment increase or a rate increase in Virginia,” Divers said.
More on that theoretical exercise another day and perhaps in another budget cycle. For now, we still have this one to get through.
Charlottesville Mayor Lloyd Snook voted against the one cent property tax rate increase last year and would not be willing to further it this time around.
“I’m feeling at this point that we will have had basically had back to back 12 to 13 percent increases, effectively 25 percent over two years that the logic is basically the same for me that I don’t think that we should be raising the taxes,” Snook said.
Pinkston said he also was not supportive of increasing the real estate tax rate this year.
“Last year it felt like to me that I could justify doing it because we had this whole school thing hanging over our heads,” Pinkston said. “Now even though there’s lots of needs, I do feel like the budget that we’re seeing is a responsive budget, it’s a thoughtful budget.
Pinkston then sought his colleagues on the formula for schools. Snook explained why he supported keeping it in place.
“We know that the largest percentage of the schools budget is personnel,” Snook said. “In other words, teachers. We know that teachers are not overpaid. If anything, they’re overpaid. And we also know that they’ve just approved, or are moving toward approving, collective bargaining. It would not be wise, I think, to assume that in this year of all years as they are about to move into collective bargaining that we’re somehow going to be able to convince them to find a way to economize on teacher salaries.”
Payne agreed with Snook that this was not the year to change the formula, particularly regarding a consequence of the repeal of the grocery tax that did not find replacement funding for revenues lost at the state level.
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