Mayor, Vice Mayor Propose Budget Alternative: Hold the Line on Real Estate Tax Rate, Increase FY12 School Funding

Council Agrees, and Eliminates Proposed Hike in Personal Property Tax Rate

Tuesday, May 03, 2011

To maintain the city’s real estate tax rate – the lowest in Hampton Roads – Mayor William D. Sessoms Jr. and Vice Mayor Louis R. Jones today proposed using portions of sizeable school reserve funds which have gone unspent over the last few years.  The City Council agreed with the alternative as presented.  In addition, the Council decided to maintain the city’s personal property tax rate at its current level.


These decisions eliminate a proposed 2-cent increase in the real estate tax rate and a 20-cent personal property tax increase while fully funding school operations.


The recommendation gives the school system nearly $2 million more than the City Manager had proposed for school operations. This extra money will come from delaying the start of a tax reduction on new businesses, and from better-than-expected revenues from personal property taxes.


The City Council is scheduled to officially adopt the final FY12 budget at its meeting Tuesday, May 10, in the council chamber at City Hall. The meeting will start at 6 p.m.


“I am a huge fan of our Virginia Beach public schools,” Mayor Sessoms said. “Our outstanding school system is a major draw for new residents and businesses. But it doesn’t make sense to keep money in large reserve funds while the city is struggling to choose between cutting services and raising taxes.”


“We have got to balance the needs of the schools with those of the rest of the city,” Vice Mayor Jones said.  “This move will not impact the quality of our childrens’ education – it gives the schools more money than they expected for the coming year.  In this economy, it’s tough to rationalize raising the real estate tax when that can be avoided by drawing on funds the schools have not used.” 


Sessoms and Jones also recommended fully funding changes requested by the school system for its six-year building plan. That includes additional debt capacity to build the Old Donation Center/Kemps Landing Magnet School starting in fiscal year 2015, providing $2.5 million in energy performance contracts for three years, and restoring funding to John B. Dey Elementary School and Princess Anne Middle School in fiscal 2016 and 2017.


The mayor and vice mayor made these recommendations in a letter to the City Council regarding the budget, which is scheduled to be adopted next Tuesday.  The Council agreed with the recommendations and decided to also hold the line on personal property taxes.  The $5.2 million that would have been raised by increasing that tax will be taken from the City’s reserve account for contingencies.


Virginia Beach spends more per pupil on local funding for schools than any other city in Hampton Roads – nearly $5,000 per student. By comparison, Norfolk spends about $3,000 per pupil in local school funding.


During the past two years, Virginia Beach has spent its own city reserves to preserve vital services far more than it has used school reserves. For example, in FY10 Virginia Beach used $23.5 million from city reserves and $8.8 million from school reserves. In FY11, Virginia Beach used $22 million from city reserves and $8.8 million from school reserves.


City Manager James K. Spore presented his proposed budget to the City Council on March 29. It included a 2-cent increase in the real estate tax rate. The manager also accepted the School Board’s offer to use $14.5 million from the schools’ Risk Management Fund to help preserve vital city services.


In their proposal today, Sessoms and Jones wrote that the 2-cent tax increase is modest, but “even a modest burden may prove too much” during the recession. To eliminate this increase, they recommended lowering local funding of schools by $9.2 million, which would be replaced by using an additional $5.5 million from the schools’ Risk Management Fund and $3.8 million from the schools’ Instructional Technology Fund. That would leave $7 million in the technology fund.


In their letter today, Sessoms and Jones also recommended:


  • Taxes and fees: Adopting all other proposed tax and fee increases, except for a proposed 20-cent increase in the personal property (car) tax rate. A $10-a-month trash fee will be put in place. This is especially important, they said, as the Southeastern Public Service Authority (SPSA) begins to wind down operations and the city’s garbage costs start to climb.
  • Pay: Giving all employees a 2.5% pay raise. Spore had proposed an across-the-board 1.5% pay raise, plus an additional 5% for about 1,500 employees whose jobs are paid substantially less than comparable jobs in neighboring cities. Sessoms and Jones proposed using that extra money for the entire city workforce, to help attract and keep quality workers. Virginia Beach city employees have not received any raises since 2008.
  • Fire and EMS: Building a new fire and rescue station in Blackwater.
  • Developmentally disabled: Funding community employment slots for the developmentally disabled.
  • Human Services: Funding the city’s Therapeutic and Medication Services by using the sheriff’s fund balance.