Manager’s proposed budget calls for 3.5 percent raises; no change in tax rate

Published 12:00 am Thursday, April 22, 2004

Suffolk News-Herald

Despite skyrocketing real estate assessments that are filling coffers, Suffolk City Manager Steve Herbert thinks any effort to reduce the tax rate would be shortsighted.

Herbert on Wednesday presented City Council with his proposed $277 million budget for the next fiscal year, a 10.8 percent increase over the current budget.

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The budget anticipates a 16.5 percent increase in real estate values, including growth and reassessment. But Herbert warned that the city can’t rely on such a high rate of growth forever.

&uot;Because of extremely low interest rates and the fact that Suffolk is a desirable place to live, work and play, the city has seen large increases in real estate values the past few years,&uot; Herbert wrote in prologue to the budget. &uot;It is important to understand that this trend won’t last forever.

&uot;As interest rates begin to climb, assessment growth will return to normal levels. Therefore, any consideration to make structural changes to the tax rate would be shortsighted.&uot;

That increasing costs to provide services, coupled with an increasing demand for the services outlined through City Council priorities, will eventually outpace revenue growth.

Suffolk’s current tax rate is $1.08 per $100 of assessed values, the lowest among major cities in the region. Other rates range from a low of $1.22 in Virginia Beach, to a high of $1.42 in Portsmouth. The typical annual residential tax in Suffolk is also the lowest in the region at $2,258. The highest is in Portsmouth at $3,200.

Virtually all of the increased revenue from real estate taxes in the proposed budget has been earmarked for schools. The budget, referred to by Herbert as &uot;the Education Budget,&uot; fully funds Superintendent Dr. Milton Liverman’s request for a more than 19 percent increase in local funding.

Four percent average pay raises for teachers, 3.5 percent average raises for all other employees, and costs associated with bringing the new Kings Fork High School online in the fall are driving the increase in school funding. Liverman had requested a 6 percent average raise for teacher in his proposed budget.

Local funding for education has grown from $22.9 million in fiscal year 2000-2001 to nearly $36 million in Herbert’s proposed budget.

The other main City Council priority addressed in the budget is public safety.

&uot;City staff has been working diligently to get our numbers of public safety personnel up to complement and I am pleased to say were nearly there,&uot; Herbert wrote. &uot;Our goal is to continue to maintain this level of recruitment and concentrate on the retention of our public safety employees.&uot;

Herbert said there are currently 19 recruits enrolled in the academy and the budget calls for four additional police officers – one school officer and three patrol officers – and a clerical support position. The budget also provides funding for the continuation of the new K-9 program initiated this year.

He noted that staff will initiate a &uot;manning&uot; study for both fire and police in the coming months.

The budget recommends an average 3.5 percent pay increase for all city employees, including administrators. Herbert noted that it’s a merit pay system and that some employees will get more than 3.5 percent based on merit and some less.

Finance Director Christine Ledford said Wednesday morning at a press briefing on the budget that because of the failure of the General Assembly to come up with a state budget, the budget presented to Council Wednesday included no increase in state funding. In addition, Ledford noted that the city’s contribution to the Virginia Retirement System is increasing 50 percent, up to $1.7 million.

She said those factors should also be considered when it comes to setting the tax rate.

&uot;We massaged everything that we could,&uot; Ledford said, noting that no services have been cut.

While the budget recommends that the tax rate remain unchanged, Ledford noted that the good times aren’t likely to last.

&uot;I think in future years there will need to be a strategic move to raise taxes if Council continues on its present plan,&uot; she said.

A public hearing was held on the tax rate and assessments last night and a second is scheduled for May 5. The budget will be finalized after the May 5 hearing.