Council urges caution on budget
Published 9:16 pm Wednesday, April 15, 2020
Though Suffolk’s proposed city budget has already gone through a revision due to the coronavirus pandemic, some council members called for further changes during a virtual council meeting Wednesday afternoon.
City Manager Patrick Roberts unveiled a $651.3 million budget that keeps the real estate tax level at $1.11 per $100 of assessed value, with general fund revenue projected to increase by $6 million to $225 million for the next fiscal year. The city reduced revenue estimates by about $5 million. The current overall budget is $639.4 million.
“We have made the assumption that a number of businesses that are impacted right now will be able to return to some normalcy of operation perhaps as early as the second quarter of the upcoming fiscal year (October through December),” Roberts said in an interview Wednesday. “We really only anticipate a reduction in revenue for the first few months of the upcoming fiscal year.”
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While the budget proposed increases to water, sewer and refuse fees, and there are increases in other areas, several councilmembers urged caution.
Councilman Roger Fawcett said that with many residents losing their jobs, the city should “tighten down even more” and not place any more burdens on them.
“Anything that we can freeze and hold right now, at the present, I would prefer to see that,” said Councilman Roger Fawcett. He said he appreciated the work on the budget, “but it’s not good enough for me.”
The city has proposed $55.6 million for its capital projects fund, which would pay for all projects included in the first year of the adopted Capital Improvements Program and Plan. That includes $23.8 million in general obligation bonds, $3.6 million public utility bonds, $1.25 million in information technology bonds and $500,000 in stormwater bonds.
In that first year of the CIP, there is $44.1 million in general government spending proposed.
However, Finance Director Tealen Hansen, who presented the budget to council, said the city would delay and freeze spending on capital projects to allow for the market to recover enough for it to issue bonds.
“We won’t be making any commitments on these projects until we know for sure that we have the funding in place to pay for them,” Hansen said.
Hansen said property tax revenue is rising due to a combination of reassessment values increasing by an average of 1.87 percent and a 2-percent increase in assessed values due to new construction.
Hansen and Roberts said the city factored in a recent Old Dominion University study, “An Incoming Shock: A First Estimate of the Impact of COVID-19 on Virginia’s Local Governments” by Robert M. McNab and Ron Carlee.
Using data from the Virginia State Auditor of Accounts for fiscal year 2018, it estimates that local governments across the state are losing about $60 million per month in local tax revenue and “face the possibility of draconian cuts to local expenditures in (fiscal year) 2021.”
“Without immediate state and federal aid, local governments in Virginia will face a revenue shock in the coming months that will lead to significant budget cuts in FY 2021,” the study states.
It noted that internet sales, grocery stores and pharmacies have seen sales increases, but other areas of the economy have seen significantly reduced activity. It said hotel and motel taxes around the state would drop by 50 percent in the short-term and up to 75 percent if social distancing measures continue.
In the city, revenues from meals and sales taxes are expected to take a hit, with the city projecting a $750,000 drop in local revenue, from $45.85 million in the current budget to $45.1 million proposed for the upcoming fiscal year.
“The city of Suffolk historically budgets very conservatively,” Hansen said in an interview Wednesday, “and so the initial reaction might be that that number should be bigger than a $750,000 drop. We feel good about that number based on some information that came out of ODU a couple of weeks ago as well as what we’re seeing in collections and what we’re anticipating.”
There’s a nearly $1.1 million drop projected in fees and collections — from $9.5 million to $8.4 million — which Hansen said is due to interest earnings that had been “remarkably high” over the past two to three years, but have dropped in the last quarter.
Hansen said the city is also projecting small decreases in rental fees for Parks and Recreation facilities as they are closed now.
The city is proposing to fund Suffolk Public Schools at $62.3 million, $1.5 million more than last year, but less than the $64.8 million the school division has requested.
Big drivers in the city budget include a $1.7-million increase in personnel and benefits costs due to a Virginia Retirement System rate increase and the addition of five new positions, as well as a $1.2-million increase in information technology due primarily to an increase for maintenance contracts and replacing public safety mobile radios.
The city has proposed a 26 cent increase in the water rate, 27 cents to the sewer rate and a $1.50 per month increase in the meter service charge. Not counting Hampton Roads Sanitation District adjustments, the city projects water and sewer customers will see a $4.15 per month increase. The refuse fee is slated to increase $3.95 per month, from $21.30 to $25.25, though that is billed semi-annually.
Council voted unanimously to set a public hearing on the budget for May 6, and a public hearing on an effective real estate tax increase due to reassessment for May 20.
A copy of the proposed budget is available on the city website and can also be viewed, by appointment, at City Hall. Anyone with questions about the budget can email the city at firstname.lastname@example.org or call 514-4016.