VIRGINIA BEACH – The city has slashed a projected $33 million budget shortfall next year by more than half by planning to forego employee raises and by using savings to fund a one-time payment for trash expenses, its budget director said Tuesday.
Budget Director Catheryn Whitesell said the city would use savings instead of general funds for a $10 million payment to the Southeastern Public Service Authority, which collects the region’s trash. A pay increase for city workers was also removed from the upcoming budget, she said. Those new assumptions in the upcoming budget reduced the anticipated shortfall to about $15 million, she said.
A five-year forecast showed no proposed changes to the city’s real estate tax rate.
Mayor Will Sessoms said after a briefing on the forecast that he was pleased with the potential reduction in the shortfall, but he stressed that it is still early in the process and that the city may have to use reserves to balance the budget. The city began a hiring freeze in late September in response to its previously estimated $33 million shortfall.
The city manager’s budget proposal is scheduled to be presented to the City Council in March and adopted later in the spring.
The briefing Tuesday included the schools’ budget outlook for next year. When combined with the revised city budget, the two spending plans showed a combined deficit of $31.3 million.
About half of the schools’ projected gap could be filled by putting $8.3 million of its so-called reversion funds from its current budget toward next year’s shortfall. The School Board voted unanimously Tuesday to do that, but the move still needs City Council approval.
School Board Chairman Dan Edwards said later that the forecast seemed less bleak than in previous years.
“Normally you sit down and it was like, ‘Hey, this is as bad as it gets,’ ” he said.
The forecast did not include raises for faculty and staff, a fact that Edwards anticipated will have to be addressed during the upcoming budget process.
Sessoms said the city has overcome worse deficits.
In Fiscal Year 2011-12, Beach officials forecast a $90 million shortfall. The city solved that in part by raising the real estate tax rate by six cents.
Whitesell’s presentation showed city revenue growing by 1.5 percent in the second half of this decade, after a period of .01 percent negative growth for the past five years. It had been growing by nearly 5 percent in the 2000s, by more than 9 percent in the 1990s and by nearly 14 percent in the 1980s, according to her figures.
If revenues flatline rather than grow over the next several years, the city’s potential budget gap will swell by $21.6 million, to $53.1 million, Whitesell said. Conversely, if the revenue growth rate jumps to 3.5 percent, the deficit “will essentially be eliminated” in next year’s budget, she said.
The city has begun several cost-saving measures, according to a summary of Whitesell’s forecast. They include the hiring freeze, ending a D.A.R.E drug program and reevaluating tax programs and department expenditures.
Sessoms said using reserves might be an unwelcome but necessary measure.
“We’ve been doing this for six or seven years and we don’t have much fat left in this city budget,” he said. “If there is some, we’re going to find it, but I don’t want to sit back and tell people that we’re going to find resources through cutting.”
In their five-year forecast, staff assumed no changes in tax rates, no use of fund balances, a slowly improving economy and a minimal impact from swings in federal revenue.
Like Edwards, School Board Vice Chairwoman Beverly Anderson expressed cautious optimism.
“I didn’t leave there with the feeling that it was hopeless,” she said.
Southside Daily reporter Kelly Kultys contributed to this article.