Charlottesville and Albemarle County joined municipalities across the country in having their financial coffers running over.
The city ended fiscal year 2021 with a $5.5 million surplus, voting to use the surplus funds to give bonuses and 6% raises to all city employees in December.
Albemarle County made a similar move, approving a 6% raise for all full- and part-time county employees with surplus funds from the fiscal year.
The county ended the year with a $13.2 million surplus. The county Board of Supervisors also voted to add 16 new positions, give $10.3 million to the school division and have $6.6 million in cash for capital projects.
City officials said real estate revenue for 2021 was higher than projected. Reduced levels of service from some city departments and closed facilities during the pandemic also resulted in expenditures being less than expected.
City officials said sales tax revenues were up because tax is applied to online purchases made within the city and that people still bought groceries and other necessities during the pandemic.
County staff said their surplus was a result of higher-than-projected real estate tax collection rates; higher consumer-driven taxes such as sales, meals and transient occupancy and increases in new construction.
The U.S. Department of the Treasury used lost revenue to determine how much flexibility to give governments in spending American Rescue Plan Act funding. Under guidelines issued last May, governments that showed a loss were free to spend an equal amount on almost any government services, including roads and other projects not otherwise allowed under the rules.
A final rule released in January expanded that flexibility by allowing governments to claim up to $10 million of revenue losses, even if actual losses were less.
Albemarle did not report 2020 revenue loss, saying it was waiting on final guidance from the department to complete its calculation.
County CFO Nelsie Birch said Albemarle is finalizing the recommended use of its ARPA funds and will present it to the Board of Supervisors as part of the county’s next fiscal year budget.
Chris Cullinan, director of finance for the city, said the city has not decided whether to pursue revenue replacement. Cullinan said the city was in the midst of doing their audit in early fall when the interim report and rules about revenue replacement were released by the U.S. Treasury.
“We were still waiting to get the final rules as to what the allowable uses, eligibility, and etcetera would be for using ARP money. At that time we were just going to wait and see what our actual results were and what the final rules were going to be,” Cullinan said.
The city received direct funding from the American Rescue Plan in one payment of $9,804,854 in May 2021 and will receive a second of $9,804,854 in May 2022, for a total of $19,609,708.
Cullinan said because of the unique nature of one-time funding, the city will have to be careful.
“[We need to be] very, very strategic in how we use these, because it is an unprecedented amount of money. But it’s also a sufficient amount that if you’re not careful with it, you could create some structural deficits in your budget,” Cullinan said. “So we want to be very thoughtful about how we use those both from a strategy standpoint but also from a financial standpoint as well.”
There’s also a deadline.
“When they talk about revenue replacement, you have to use it. You can’t just put it in your reserve, you can’t just sit on it. You have to actually go out and spend it,” Cullinan said. “You have to obligate it before the end of calendar year 2024. And you have to spend it by the end of the calendar year 2026.”
The city plans to use about $7.3 million between the two payments to replenish lost revenue. The city appropriated about $1.1 million in October 2020 and $1.9 million in July 2020 to address community and organizational needs related to the effects of the pandemic.
Major allocations included $500,000 to cover the costs of about six months of COVID-19 testing for city employees, $400,000 to renovate vacant office space at the Market Street Parking Garage for socially distanced services for the Office of Human Rights and other departments; $300,000 for an eviction prevention initiative with the Legal Aid Justice Center, as well as over $175,000 in IT expenses related to online business.
The city also received a total of $8.25 million in two rounds of federal Coronavirus Aid, Relief, and Economic Security Act of 2020 Coronavirus Relief Fund (CARES) funding.
Albemarle County was allocated $21.2 million in American Rescue Plan Act money.
Last March, the board endorsed a county staff-recommended framework for how to spend the first $10 million, which allocated $2 million toward economic development, $2 million to human services, $3 million to broadband and $3 million to help offset lost revenue and workforce stabilization.
Later, that recommendation was updated to exclude the $3 million to help offset lost revenue and workforce stabilization for the time being. Instead, the money would be allocated during the budgeting processes.
In August, an additional $1.5 million was allocated to support the county’s match in a regional broadband expansion effort through Firefly.
The county also received about $19 million of CARES Act money in 2020, of which about $9.1 million went to general county services and obligations; $1 million to technology, including broadband internet; $3.4 million to human services; and $5.4 million toward economic development.
When the pandemic began, the county cut back spending at the end of fiscal year 2020. It froze positions. It paused capital projects. It asked departments to cut about 10% of their operating budgets and modified its 2021 budget.
At the time the fiscal year 2022 budget was proposed, the county was not overly aggressive with its revenue estimates, staff said.
In early 2021, Albemarle began to see improvements in its locally collected revenues. Last March through June, the county began to see its sales, meals and transient occupancy tax revenues increase to levels higher than pre-pandemic levels.
Those have remained above pre-pandemic levels. Local sales and use tax collected by the county in July 2021 through September 2021 was up 21.5% compared with pre-pandemic revenue collected during those three months, according to numbers provided by the county.
Meals tax revenue was up 3.7%, while transient occupancy tax was up 2.5% compared with pre-pandemic revenue collected in those three months.
“This is pretty dramatically improved, so when you take the projections and the formula that we work through to look at our revenue structure, it is absolutely prudent that we amend the budget,” Birch said in November.