As Lynchburg City Council held its first budget reconciliation meeting Tuesday — an opportunity for council to parse through the city manager’s proposed fiscal year 2024 budget — the city’s unassigned general fund balance and pay-as-you-go capital projects were the focal points of discussions.
Last week, City Manager Wynter Benda unveiled his proposed fiscal year 2024 budget, which features relief from several city taxes, including a six-cent reduction in the real estate tax rate, a personal property tax ratio to reduce the amount of vehicle tax residents would pay, and the waiver of refuse collection and motor vehicle license fees.
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Benda’s proposed general fund budget comes in at $248.4 million, an increase of $25.3 million, or 11.3%, over the adopted fiscal year 2023 general fund budget of $223.1 million.
On Tuesday, for Ward III Councilor Jeff Helgeson and At-large Councilor Martin Misjuns, there wasn’t much to reconcile.
“I don’t feel like there’s really anything to reconcile here until we reconcile the real estate tax rate. That’s it,” Misjuns said.
In the city manager’s proposed budget is a real estate tax rate of $1.05 per $100 of assessed value.
Helgeson agreed the only thing to focus on in the proposed budget for now is the real estate tax rate.
“That’s got to change,” Helgeson said. “... We need to set the tax rate and say, ‘Wynter, come back with something that is actually something that can pass, something that is actually competitive for our citizens, something that is good for our citizens.’”
“I thought that’d be a better use of our time,” Helgeson said.
With four councilors — Helgeson, Misjuns, Vice Mayor Chris Faraldi and At-large Councilor Larry Taylor — making it known during council’s March 14 meeting that the rate should be at or near the equalization rate of 92 cents, a majority is prepared to take the rate lower than the proposed $1.05, which would likely remove any new priorities from the city manager’s proposed budget.
An equalization rate is one that would bring in the same amount of real estate tax revenue as last year, with the lower rate offsetting recent increases in property assessments.
“I proposed a budget that looked at reducing the real estate rate ... and then other ways in which to relieve folks in a broader sense,” Benda said about the personal property tax ratio and fee waivers, which he said affect more than just property owners.
Explaining the equalization rate would mean status quo for the city compared to the prior fiscal year, Benda added, “So realize, any of [the] things that have been proposed in the budget ... it’s not cutting anything, it’s just that those things will not happen.”
“We’d have to look at whether you could get a [general wage increase], because you also ... made a promise to the police officers about a pay progression plan. So, in that 92 cents, if there is a GWI, it’s just a flat across-the-board [raise]. Not necessarily an ongoing expectation to meet that thing that you promised. Doesn’t begin to touch what we’ve proposed for [the fire department],” Benda continued.
Faraldi focused on the end-of-fiscal-year 2022 fund balance, which totaled about $66.4 million, as the spot to offer more relief.
City staff prepared an analysis of the fiscal year 2022 year-end fund balance, of which council already has allocated a majority. Of the nearly $66.4 million, council has previously allocated all but $22.8 million to fiscal year 2023 items such as pay-as-you-go capital funding, real estate tax rebates, transfers to fleet funds and other adjustments.
Of the remaining $22.8 million, about $21.3 million has been proposed to be used in the fiscal year 2024 budget for items such as covering for the waiver fees and personal property tax adjustment, fire and police equipment, and a slew of other line items, most notably a transfer to the city’s pay-as-you-go capital fund for this fiscal year for almost $11 million.
The “pay-go” fund, Benda said, is a way the city addresses needs across the city without taking on any more debt in the city’s capital improvement plan.
Faraldi said he wants the city to look at reducing the money it transfers into the pay-as-you-go capital fund to create more money in the budget, while Benda said transferring monies to this fund is “how you balance” taking pennies off the real estate tax rate.
“Those projects are still going to be on my ledger that I have to perform at some point. I just then have to borrow for them,” Benda said.
“Or we don’t do them,” Faraldi said, after which Benda echoed, “Or we don’t do them.”
Ward II Councilor Sterling Wilder said during the meeting that he is “afraid we’re going to get to the point where we’re so focused on the tax rate that we’re not worrying about anything else.”
“When I go to meetings in Diamond Hill with the neighbors, they want to know about the trash pickup more than anything else. They want to know about potholes being fixed, want to know about streetlights ... in my neighborhood, they just don’t talk about the real estate tax that much. I don’t think any of them have mentioned it,” Wilder said.
Ward I Councilor MaryJane Dolan, who said last week council needs to “do something” in relation to the tax rate, continued to question the practicality of lowering the rate as much as 13 cents.
“I can tell you, I have people who come up to me and just shake their head about lowering this rate to 92 cents, and they’re saying, ‘That can’t happen. Our city is just going to die if that happens,’” Dolan said.
“I think this whole focus just on cutting the tax rate is really irresponsible, myopic, and I think we really need to look at what’s going to happen to our city, not next year, but in the years to come,” she added, citing “a really artificial property inflation that is not going to continue.”
Helgeson pushed back against what he called Dolan’s “dire prediction,” saying, “If we do 90 cents, you know how much this general fund budget grows? Five-point-eight percent, still $12 to $14 million more than last year.”
Helgeson was referring to what the general fund budget would be proposed at — around $237.1 million — should the real estate tax rate be lowered to 90 cents per $100 of assessed value. That would subtract around $11.3 million from the proposed general fund budget, as one penny on the real estate tax rate is equal to about $750,000 in revenue for the city but still would leave a proposal higher than last year’s general fund.
At 90 cents per $100 of assessed value, the owner of a $200,000 city property would save roughly $300 annually on their real estate tax bill compared to the proposed $1.05 per $100 of assessed value.
When Helgeson said the city still can fund a general wage increase and some investments in public education even with the 90-cent rate, Dolan said, “You can say you can do that with your five percent or whatever, but the numbers don’t show that.”
Again citing the increase in the general fund budget, Helgeson rebutted, “They absolutely do.”
