Charlottesville has made deep cuts to departmental budgets to cover a $7.5 million budget gap and likely can’t cover the proposed increase in funding for the school division without a tax increase.
The City Council discussed the budget for fiscal 2021, which starts July 1, during a work session Thursday.
The council directed staff to advertise a two-cent increase in the real estate tax rate, although councilors said they want to try to avoid it.
In initial estimates compiled in November, the city expected to spend $202.7 million in the next fiscal year, but only expected $195.2 million in revenues.
The city is expecting revenues to increase by $7.7 million from last year if tax rates remain steady. Expenditures, however, were expected to rise more than $14 million.
Revenue estimates have since increased by $1.4 million, and $6.1 million in requested expenditures have been cut.
The majority of the cuts came in departmental budget requests, which were slashed by about $4 million.
“No department has a budget less than what they were in FY20,” said Krissy Hammil, a senior budget and management analyst, adding that some line items may have been changed for the departments.
The cost-of-living adjustment for salaries was reduced from 4% to 2%, which saved about $1.5 million. Mayor Nikuyah Walker noted that the school division was considering a 3% increase for its employees and the city should be on the same level. Walker is a city employee.
As the budget stands now, departments received only $213,305 in new requests.
The budget doesn’t include more than $14 million in major initiatives in proposals, and those projects could require a tax increase.
The city is operating on a $188.8 million budget for fiscal year 2020. It included one percentage-point increases to the meals and lodging taxes.
The city hasn’t raised the real estate tax rate since 1981, but rising assessments are expected to contribute an extra $5 million to the city’s coffers. The rate hasn’t been lowered since 2008 so the annual reassessment likely will lead to an effective tax increase.
Walker and Councilors Sena Magill, Michael Payne and Lloyd Snook were in favor of advertising a two-cent increase in the real estate tax rate, although each expressed a desire to balance the budget without a tax hike. Councilor Heather Hill didn’t support the advertisement because she doesn’t want to raise the rate.
The biggest question mark is how much extra money City Manager Tarron Richardson will recommend for the school division — a large driver in the budget process.
Last week, during a joint meeting between the School Board and City Council, the division presented a preliminary funding request of $4.95 million in new expenses, which would require an additional $4.5 million from the city. That would be about $61.5 million total from the city.
Richardson called the request “above and beyond” what the city planned to allocate.
While the council was discussing its budget, across town, Superintendent Rosa Atkins’ funding request was submitted to the School Board on Thursday.
The extra school division funding would cover staff raises and rising non-discretionary costs, officials have said.
The $4.5 million increase would require a three-cent real estate tax rate hike.
Richardson had planned a $2.1 million increase in funding for the division, or $59.1 million total, in accordance with existing city policy.
Last year, the city allocated $57 million to the school division, a $3.3 million increase over the previous year.
This is the first budget Richardson has crafted that has a large portion of expenditures dedicated to a local school division. DeSoto, Texas, where Richardson spent 10 years as city manager, has an independent school district with its own taxing authority. Virginia school boards are reliant on funding from their corresponding locality.
The $7.5 million budget gap discussed Thursday only factors in a $2.1 million increase in funding for the school division.
The proposal doesn’t include $8 million in new department requests or about $4 million in recommendations from Walker.
Walker’s proposals include increases in the Housing Affordability Program, a pay boost for city government employees making less than $50,000 and a participatory budgeting program.
The budget does include $150,000 for operating costs for the Police Civilian Review Board, which would be combined with any leftover funds from the $50,000 allocated from the surplus. It also includes $197,181 for an office of equity and inclusion.
Walker said the allocation for the CRB didn’t seem like enough to cover salaries and benefits for an executive director plus an auditor to study police department data.
Richardson said the city hasn’t determined how much will be needed for both because he doesn’t know when the executive director will be hired, how much they’ll be paid or how much will go toward the auditor.
The city and school division budgets will be presented to the City Council on March 2. Public hearings are planned for March 16 and April 6, with final approval planned for April 14.