Following suit with neighboring county governments, the City of Richmond is tweaking its previously proposed budget for next fiscal year in response to the coronavirus, reducing revenue projections and expenditures by about 5 percent based on anticipated economic impacts from the pandemic.
Administrators presented the revised plan to City Council in a work session on the budget Monday afternoon. The new plan scraps essentially all new funding that had been included in the initial proposal, including a 2 percent employee salary increase and other pay adjustments for police and fire personnel.
It also cuts funding for new and currently vacant positions, but avoids any layoffs or furloughs.
The plan does not change the real estate tax rate, which was proposed to hold steady at $1.20 per $100 of assessed value, and it retains proposed fee increases and new fees. A proposed utility rate increase that was projected to cost customers an additional $5.56 monthly on average is scrapped, contributing $2.5 million to the revenue shortfall.
The new plan’s general operating fund for fiscal year 2021 totals $744.1 million, a reduction of $38.5 million from the $782.6 million general fund that Mayor Levar Stoney proposed in March, before the pandemic hit Virginia. Most of that reduction reflects decreased projections in tax revenue, primarily from property taxes, including $17.3 million less from real estate taxes and $2 million less from personal property taxes.
Other local taxes also factor in the reduction, with the city expecting $5.5 million less in business license taxes, $1.9 million less in local sales taxes, and $4.7 million less in taxes on meals and prepared foods. Lodging and admissions tax projections are also less by $923,000 and $267,000, respectively.
The reductions in meals and lodging tax revenues correspond to $1.9 million in reduced city funding for operations for the Greater Richmond Convention Center and for new facilities for Richmond Public Schools.
School funding overall is cut $10.3 million, though that cut comes out of a proposed $16 million increase in funding that Stoney had called for in his original proposal. As a result, school funding would remain higher than this year by about $5.7 million.
In addition to cutting employee pay increases and continuing the city’s current hiring freeze, the new plan reduces expenditures in several ways, including the elimination of roughly 13 new positions that had been previously proposed.
Other cuts include $900,000 in cash funding for new sidewalks, $516,000 in new funding for workforce development programming in the parks department, $1 million in public works’ snow removal funding, $250,000 in new funding from the History and Culture Commission, and $150,000 in funding for the health department’s doula program.
Non-departmental funding for outside groups such as Richmond Region Tourism returns to the current funding level, saving $2.6 million in expenditures. The plan would maintain current funding levels for GRTC and Richmond Ambulance Authority.
Administrators emphasized the fluid nature of the circumstances surrounding the pandemic and said they anticipate regular budget reviews with additional amendments likely after July 1, when the budget takes effect. Council is scheduled to vote on the budget May 11, with an initial public hearing scheduled April 27.
During Monday’s work session, councilmember Kim Gray scrutinized some of the updated projections, specifically those relating to meals, lodging and sales taxes. Finance Director John Wack said the projections are based on an assumption of businesses returning to about 90 percent of their levels in mid-June, which Gray dismissed as a best-case scenario.
“If this is based on a best-case scenario, it would make me more comfortable that we adjust it based on worst-case and set up contingencies,” Gray said. Councilmember Stephanie Lynch concurred, adding that such contingency language is used in the state budget.
Councilmember Chris Hilbert defended the projections.
“I appreciate what Ms. Gray is saying. However, we can make adjustments going forward,” Hilbert said. “I think we should be as realistic as possible, but on the other hand, I don’t want to come in here and start cutting jobs and furloughing people and doing more extreme things, and then having to come back and draw that back.
“My concern is we go too far and then have to pull it back,” he said. “This is an unfolding situation. No one could have anticipated this to the degree that it has gone on and affected us.”
The city’s updated proposal follows similarly reduced plans being rolled out in the region. Chesterfield County cut its proposal by $50 million and cut a planned 2 percent merit pay increase for employees after furloughing more than 500 part-time and full-time positions. Henrico County is likewise tweaking its budget, with a hearing scheduled today (Tuesday) at 6 p.m.
Local governments also have been rolling out various programs and initiatives to support businesses affected by the downturn. A $1 million loan program the city established to support small businesses took effect last week.