The Albemarle County budget for fiscal year 2010 (FY2010) is coming together as staff and the Board of Supervisors participate in a series of work sessions. The latest work session was held on November 5, 2008 and Assistant County Executive Tom Foley took the Supervisors through the details of how the five-year financial plan could be balanced. They will not make final decisions until the FY2010 budget is adopted next April.
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The five-year financial plan was first used during the development of the current year’s budget, and Foley reminded Supervisors that the tool gives the County a chance to find out how government services are affected by their decisions on taxation and spending. The Board provided general direction on the County’s priorities for this year at their strategic retreat held on October 24, 2008.
The County has already taken steps to reduce expenditures, according to Foley. There has been a 9% reduction of County staff, saving $3.2 million in FY08 through FY10. Non-personnel operating reductions total $1.7 million between FY08 and FY10. No salary increases or agency increases are factored into next year’s budget. Less money will be transferred into the capital improvement program and some capital projects will be pushed back outside the horizon of the five-year forecast. As a result of the retreat at which the Supervisors said a number of programs could be on the table for potential cuts, staff have now come back with a five-year forecast that does not include any County funding for transportation projects. The formula that calculates the County’s funding for the Acquisitions of Conservation Easements (ACE) program has also been altered so the County will only contribute about $600,000. Additional money will continue to flow to the program through local lodging taxes. County funding for urban infrastructure projects will be cut in half over the period of the five-year financial plan.
For the purposes of the financial plan, Foley said staff are assuming a tax rate increase that accounts for falling residential property values and that keeps the effective tax rate the same as the current fiscal year. The tax rate would be increased by 3.5 cents for a total rate of $0.745 per $100 of assessed value in calendar year 2009. Residential property owners, on average, would not pay an increase in their annual real estate taxes. If commercial properties were included in that calculation, the effective tax rate would be only 2.2 cents higher because commercial assessments have not declined. A one-cent rate increase was already assumed in the five-year financial forecast and the plan assumes it will go up another cent in 2010 to 75.5 cents.
Richard Wiggins, the County’s Finance Director, said that overall, County revenue is projected to decline by 0.7% in FY2010, which begins on July 1, 2009. Wiggins predicts that the on-going slump in the housing market will reduce real estate assessments by 3% in calendar year 2009 and 2% in calendar year 2010. Revenue is also expected to drop because of a reduction in new construction, lower sales tax revenue because of a reduction in consumer spending, as well as reduced collections of personal property taxes.
One major item was missing from this year’s version of the five-year financial forecast. Last year’s model assumed that the County would receive revenues from EMS billing recovery—Collecting fees from insurance companies for ambulance services. However, the County has not made a decision to collect the fee, which is allowed under Virginia law. It is not likely that will occur in the near future.
County Budget Analyst Laura Vinzant took the Board through the expenditure assumptions which will need to be made in order to balance the budget. First, the County’s payment to the City under the revenue-sharing agreement will jump $4.4 million to $18 million due to the way the formula is set-up.
Other mandatory increases that are not subject to Board review include a 9% increase to the Comprehensive Services Act, a 12% increase in funding to the regional jail, and a 2% increase to the Emergency Communications Center. Additionally, the Board’s reserve fund will only grow by $100,000 rather than the $300,000 in FY2009.
Vinzant said the five-year forecast has been altered to include no salary increases for FY10, but they are projected to resume with a 3% increase in FY11, a 3.95% increase in FY12, and up to 4.7% in FY13 and FY14. The County will have 55 empty staff positions in FY2010 which will not be filled. The model assumes that those positions can be filled at a rate of 2 in FY11, 4 in FY13 and 8 in FY14. No new police officers would be hired until FY11, when 2 additional would be hired each year throughout the remainder of the plan.
The County will delay several capital projects. New fire stations in Pantops and Ivy will be delayed until FY2013. A new library for Crozet was expected to open in 2011, but that will now be pushed back to 2013. A new library to replace the Northside library will be pushed back out of the five year plan. Recycling centers anticipated to open in FY2010 will be delayed until FY2013. Western Park in the Crozet growth area, scheduled to open in 2012, will also be moved out of the first five years of the capital plan.
Vinzant said the formula that calculates the amount of money that is transferred from the general fund to the capital improvement program had to be altered because the existing formula could not handle a negative growth figure. Supervisor Dennis Rooker (Jack Jouett) requested to see a dollar figure so he could fully understand the impact of what this means. Supervisor Sally Thomas (Samuel Miller) requested to know what projects could be done by restoring the value of an additional cent of the tax revenues to the CIP.
“Investing in our infrastructure is going to be something that is going to be, fiscally speaking, a good deal in the next few years,” Thomas said. She was referring to the possibility of getting lower bids from contractors while the economy is sluggish.
At the conclusion of the presentation, Foley asked the Board for input so they can continue to tweak the model in advance of another work session to be held on November 12, 2008.
Rooker said the County is in a painful budget year, but that the County can learn to operate on less. “I think what we have to do is recognize what our core functions are and make sure we’re achieving those,” Rooker said. He asked staff to give him a chart that plots out the number of County employees over the last 15 years so he can have an understanding of how local government has grown.
Thomas said she could support the bold step of eliminating all previous Board initiatives, but said she was concerned that the County would not have the resources to provide necessary services that might be required in the next year.
Supervisor David Slutzky (Rio) said he understood the need to protect some general fund revenue by putting it into a lock-box, but said that the County has obligations to its citizens. “There’s a compassion dimension to developing a budget at a time of high need when you have the economically disadvantaged particularly crushed under the weight of a declining economy,” Slutzky said.
Slutzky said the County would be misguided to not spend additional money on affordable housing and transit. He suggested putting those two items back in the plan, and also suggested creating a revenue scenario that would put an additional 1 or 2 cents on the tax rate to pay for unanticipated social programs that may be required.
Chairman Ken Boyd (Rivanna) suggested that staff create a list of all the initiatives that are being cut, with each item next to a calculation of how much the tax rate would need to be increased to put it back into the budget. He also wanted to see a cash flow analysis to see if it would be possible to use the County’s various funds more effectively.
Rooker said he thought the land use taxation should be revisited once again in light of the County’s fiscal crisis. “We have a program that right now is costing us about $18 million a year,” Rooker said. He suggested specifically investigating whether the County should require land to be put in conservation easement before land use taxation can be granted.
“I agree there’s a benefit to the land use program, but I also agree there’s a value to a lot of other programs and things in the County that are not going to get funded because we don’t have the revenues to do it,” Rooker said. “I think the public input would be a lot different if the choice for the general public were between a general tax increase or a more stringent land use program.”
Thomas asked if there were at least two members who wanted to revisit land use this year. Only Slutzky and Rooker responded with affirmative responses. Thomas pointed out that the Board recently decided to implement a revalidation program for property in land use and that there was not support at the time for major changes to the program. Rooker acknowledged that, but said that the alternative might be an increase in the general tax rate to make up the difference.