Chart depicting projected budget shortfalls Credit: Credit: City of Charlottesville

Charlottesville officials will not adopt next fiscal year’s budget for another four months, but the City Council has already begun a debate on how to make ends meet.

“This is the start of a new season for budgeting,” said Mayor Satyendra Huja. “We will soon find out there is less money than desired.”

The council was presented Monday with a projected $4.3 million shortfall at a work session designed to get their general direction on how staff should proceed.

Though City Manager Maurice Jones will not recommend a budget until late February, budget staff members are forecasting projected revenues of $152.4 million for fiscal year 2016.

However, they are also projecting expenditures of $156.7 million for next year, resulting in the $4.3 million deficit. Virginia law requires localities to balance their budgets, which means the council must either raise more revenue or plan to cut spending.

The projected budget assumes that the city will maintain its property tax on real estate at 95 cents per $100 of assessed value.

“These numbers are not firm by any means,” said Leslie Beauregard, the city’s budget director. “We have a lot of work to do over the next several months to get to a balanced budget.”

The numbers will become a bit firmer when Gov. Terry McAuliffe releases his recommended state budget on Dec. 17. That will tell city budget staff how much to expect in reductions of state funding.

In the meantime, the council debated various ways to close the shortfall.

An additional penny on the real estate tax rate would bring in nearly $570,000. Raising the meals tax by one cent would yield an additional $2.1 million and adding a penny to the lodging tax would bring in $514,000.

Councilor Kristin Szakos said she could support a property tax increase.

“All of the other cities [in Virginia] have recognized that federal and state funding isn’t what it used to be and our citizens expect certain services from us,” Szakos said. “They expect us to be looking at how [we] help people out of poverty.”

However, Huja said he was “totally opposed” to any increase in the real estate property tax, but would be open to increasing the meals tax if the additional revenue would be transferred to the schools.

“Especially for the schools if I can see some return for that extra money like an improvement in the student drop-out rate,” Huja said.

Councilor Dede Smith said the city should not generate any additional revenue through taxes without carefully examining how it would be spent.

“We have the responsibility to ask for some accountability,” Smith said. “I am very weary of increasing the meals tax just because of conversations with restaurant owners. I believe them when they say their margins are small.”

Councilor Bob Fenwick said he felt the meals tax would hurt low-income residents more than higher-income residents.

Szakos said she could support a meals tax.

“I think a meals tax when we’ve seen it working in other cities that it really can benefit not just schools but the restaurants themselves,” Szakos said, referring to marketing campaigns in other communities that encourage citizens to eat out to support education. She added that both the Blue Ribbon Commission and the Youth Council have endorsed the idea.

City Councilor Kathy Galvin said she believes the council has to take a look at tax increases to help pay for the school system’s growing needs, such as replacing aging buildings and investing in preschool initiatives the city doesn’t currently offer.

“We can’t do all these things that we know we need to do without resources,” Galvin said. “The achievement gap is persistent and it is tied to that preschool gap.”

The city’s budget will be augmented by an anticipated $16.2 million in revenue-sharing funds from Albemarle. The two localities have had an agreement since 1982 when Charlottesville agreed to stop annexing county land in exchange for a payment.

However, the General Assembly placed a moratorium on annexations in 1987. Changes to the city-county revenue sharing agreement require agreement by both parties.

The city planning commission is scheduled to have a public hearing on the capital improvement program on Tuesday night.

The city manager’s budget is slated to be formally presented to Council on March 2. The elected officials plan to hold budget work sessions on March 5, March 12 and March 26 before adopting the budget on April 9. Additionally, a community budget forum is set for March 18.