Three months into the fiscal year, financial planners for the city of Charlottesville are now expecting a $7.7 million budget surplus, according to projections that will be presented to City Council Monday.
The biggest drivers of the estimated 3.6% gain over the general fund’s budget are real estate tax revenues and earned interest, each running about $2.6 million above estimates.
“Market values for real estate have continued to rise throughout calendar year 2023,” City Manager Sam Sanders wrote in a memo accompanying the numbers. “Rising interest rates have also led to an increase in interest income.”
Additional revenue lines indicating sizable gains are personal property tax at $600,000, sales tax at $500,000 and meals tax at $700,000 above the approved budget. Additionally, the city stands to reap about $836,000 more than budgeted from state highway assistance.
Among taxes, the meals tax showed the highest rate of increase as proceeds appear to be running 4.5% above budget. Nearly two years ago, City Council increased the meals tax rate from 6% to 6.5%, and its revenues now exceed those of the sales tax and are second only to the real estate tax.
As for expenses, Sanders noted in his memo that they are “tracking well with the budget,” a factor that could allow any surplus to translate to the bottom line. Such a scenario would create the potential to launch tax cuts or to spend the nearly $8 million in unexpected revenue. Still, Sanders downplayed the surplus as “modest” and urged caution on the July-September numbers.
“These early projections are offered only as a reference for discussion today,” Sanders wrote. “The revenue team meets monthly and continues to closely monitor revenue collections for FY 24 and is beginning work to refine projections for the development of the FY 25 budget.”
These higher revenue projections come atop what was already a growth year for city spending. When City Council finalized it in April, the total budget — driven by a nearly $90 million rebuild of Buford Middle School — was set at $633.4 million, a 22% increase over the prior budget of $518.2 million. Those figures include special purpose funds such as the city’s utility division, which is the largest of the earmarked funds and got an upward spike of its own this year.
In June, City Council voted to hike utility rates such that the average ratepayer would pay 9.49% more for water, 7.23% more for wastewater and 7.11% more for natural gas.
The only significant slumps in the newly released budget picture are recreation income, which appears down about $453,000, or 30%, and the tax on wills and deeds, which — likely owing to the recently reported paucity of home sales — was off $225,000, or 31% below budget.
Including about $2 million unspent from the prior year, the city was looking at a 2024 general fund of $230.4 million, an 8.2% increase over last year’s general fund.
Sanders plans to present the projections Monday, but the council is not expected to take any immediate action.