Charlottesville City Council briefed on financial headwinds at annual retreat

There are about five months until Charlottesville City Manager Sam Sanders will recommend a budget for fiscal year 2027, a document that will be based on whatever revenues are available at the time and what priorities have been established by City Council.

In order to get a sense of what the elected officials want, Sam Sander held a retreat with City Council on August 15 and August 16 at the Wool Factory in Albemarle County.

“I think this is an important moment for Council in being able to talk about priorities and strategizing together,” said City Manager Sam Sanders. “It’s important for us to do that as we move into a transition as we start the new year.”

That transition refers to the almost-certain election of Jen Fleisher to City Council. Vice Mayor Brian Pinkston failed to secure one of three nominations in the June primary so Fleisher and Juandiego Wade are the only candidates on the ballot. No one has announced a write-in campaign.

The retreat was facilitated by Joshua René with the firm Spill Team.

“At the end of the day, it’s about direction setting to help inform decision-making,” René said.

Council adopted the current strategic plan framework in September 2023 and there are nine outcome areas.

“Just to remind you that the Council’s vision is to be a place where everyone thrives,” Sanders said. “We are saying that often. We are saying it everywhere. We are putting it up in the buildings so that people can gravitate to it, that they can appreciate it.”

Sanders said the three top areas for spending in the city are on housing, transportation, and education. About two hours into the retreat, Council had a financial check-up from Vieen Leung with the firm Public Financial Management.

“I think we all know here that there’s a lot of recession risks as of today and more to become,” Leung said while showing Council the latest version of the Leading Economic Index (LEI) from the Conference Board.

Since the presentation in August, the LEI has decreased even further according to a September 18 press release.

“In August, the US LEI registered its largest monthly decline since April 2025, signaling more headwinds ahead,” said Justyna Zabinska-La Monica, Senior Manager, Business Cycle Indicators, at The Conference Board.

The last two recessions were in 2008 and briefly in 2020 due to the pandemic. Leung said Charlottesville weathered both through good financial planning. Emergency federal spending related to COVID-19 also contributed to the last recovery.

Charlottesville has also experienced four consecutive years of growth in general fund revenue going from $185 million in FY2021 to a projected $253 million for FY2025. Half of that comes from the real property tax.

“The fact that you have 50 percent of your revenue that comes from this very stable source, even in economic recessions, that is your biggest strength,” Leung said.

The taxable property in Charlottesville increased by an annual average rate of 3.4 percent from 2007 to 2017. That rate jumped to an average rate of 5.7 percent from 2017 to 2021.

In 2022 the tax base jumped 10.5 percent and 10.3 percent in 2023. The rate dropped to 4.4 percent in 2024 and 7.4 percent in 2025.

Leung told Council they have to be ready for what happens if the growth rate stops or even turns negative.

“Oftentimes if your revenue comes down, you know, you always need to adjust, maybe look at the tax rate to bring more revenue given the expenditure side of the equation here,” Leung said.

Unlike other communities in the area, City Council did not drop the real estate tax rate to lower tax burdens. That’s paid for additional spending including additional benefits for unionized city employees through collective bargaining. Leung was part of the negotiations as a financial advisor.

“There’s a lot of good investments there, but over time you do have to manage that role in the company,” Leung said.

In 2014, the city contributed $6.9 million to employee pensions and that has more than doubled to $13.9 million in 2023. That jumped to $25.1 million in 2024.

Even with that amount, the city is not paying enough to cover the full costs of the pension with a “funded ratio” of 69.1 percent. There is a goal to increase that to 80 percent by 2028, meaning a need to increase expenditures.

Salaries and health care costs are also expected to rise, increasing the cost of local government services across the board.

“Unfortunately, the revenue growth is slowing down and unfortunately the pension costs and health care costs, they will continue to increase even if you don’t increase head counts,” Leung said. “We didn’t even talk about political bargaining where those contracts will be in place. You will be committed to provide those wage increases under those agreements, regardless of your economic conditions.”

Leung said local governments will have to conserve and prioritize resources given the likelihood of a downturn.

Before you go: The time to write and conduct research for this article is covered by paid subscribers to Charlottesville Community Engagement. In fact, this particular installment comes from the September 25, 2025 edition of the program. To ensure this research can be sustained, please consider becoming a paid subscriber or contributing monthly through Patreon.