Ya know, last year I swore to myself that I wasn’t going to pollute my blog with budget information this year.  I’m about to fail on that oath….more than once.

So, the City Manager’s (CM) budget calls for average property tax bills to be flat.  Last Wednesday night the Council had to choose a tax rate to advertise.  Now, the law requires localities to advertise a tax rate if bills increase more than 1%.  Ours isn’t going up by more than 1% but I insisted in that meeting that we advertise a rate regardless of what we could or couldn’t do.  We elected to advertise a rate of $1.375 and that’s 1 cent higher than the City Manager proposed and 2 cents less than last year.  If the Council elects to set that rate, average real estate tax rates will go up $32/year.  I don’t expect this will happen but we did that to give ourselves some room in case something happens….something like what follows:

We found out at that meeting that the General Assembly appears to have passed a law that requires localities to give employees a 5% raise (decent article here).  That raise will then be dedicated to the Virginia Retirement System (VRS).  What that means is that after years of neglegence, the GA is filling the hole in the retirement system with a lot of local money.  The other implication of a 5% raise where the entire amount goes to VRS is that employees take-home pay will go down because that 5% increase is taxable social security income.  It’s a surprisingly poor solution but the longer you wait to fix problems the fewer options are available.  Now this last minute lash-up in combination with VRS rates that were increased will cost the City A MILLION DOLLARS this year.  And your taxes probably won’t go up.

Now, this isn’t accomplished by magic.  Last year the Council tasked the staff with cutting the cost of benefits and they did it.  Staff wasn’t exactly happy about it but they made it happen.  They cut more than a million dollars from that cost.  It’s essentially the same million we’re filling this hole with.  Of course, at the time nobody knew that.  I think that’s pretty amazing.  We’ve also had to remove pretty much all of our salary contingency to make it happen.  That’s not the end of the world but it does remove some flexibility during the course of the year.  Keep in mind that the General Assembly hasn’t passed a budget so we will likely have more challenges.

UPDATE: We have more challenges.  We recieved last night (21MAR) and updated estimate from PWC for our shared services.  It has gone up over $400k.  Major increases in Courts and Sherrif.  Without being able to judge the impact of the final state budget, Council decided to advertise a rate of $1.385.  1 cent higher than above.  Even if we were to adopt that higher rate, we’ll still be cutting the budget again….