DATE: March 19, 2004
SUBJECT: City Manager's Budget Message - Fiscal Year 2005
INTRODUCTION
Effective, steady leadership by the Williamsburg City Council over many years has resulted in a noticeable lack of crisis or angst at budget time. This has been true in the recent past, and it is true again this year. It is true even when the seas are rough due to an unresolved state budget, a strained tourism economy, and a hurricane recovery.
Williamsburg ’s history of relatively smooth budget processes is not accidental. It comes from City Council setting clear goals and priorities – through its Comprehensive Plan and through its Biennial Goals and Initiatives. It comes by keeping spending in check, by looking for ways to increase revenues without raising tax rates, and by anticipating how decisions today will have serious financial consequences tomorrow.
So, the city government has been able to continue to accomplish many meaningful things of late while maintaining a very low property tax rate. Next year should follow that tradition as city government presses on to fulfill the City Council’s vision for Williamsburg .
Looking at Fiscal 2005, city staff projects both revenue growth and spending growth under 2%, which happens to be in line with the general rise in prices in 2003 as measured by the Consumer Price Index. The greatest spending pressure is coming from personnel related costs (Virginia Retirement System, Health Insurance, and merit pay).
For FY 2005, the Proposed General Fund Operating Budget can be summarized by:
- Projected Revenues of $25,993,357, up by 1.96%.
- Planned Spending of $26,093,721, up by 1.84%.
- Use of Reserves to Balance of $100,364, down 21.9%
- Calendar Year 2003 CPI up by 1.9%.
- No Change in Tax Rates.
- Pass through of $2.00 room tax for additional tourism promotion.
- Personnel increase of one position to 185.5.
- Allowance for merit pay increases of 3.5%.
- Increase in Virginia Retirement System contribution rate from 10% to 14.25%.
In the Utility Budget, recommended is a 2.0% Water and Sewer rate increase, from $2.55 to $2.60 per one thousand gallons, beginning July 2004, per the Five Year Water and Sewer Rate Analysis.
In the General Fund Capital Improvement Program, a total of $6,672,193 is projected in new capital spending, including debt service. Several important capital projects are now under construction and continuing into the coming year, including VDOT’s Richmond Road reconstruction, permitting and right-of-way acquisition for the Treyburn Drive extension, and underground wiring on Monticello Avenue .
With the above as an overview, here are a number of issues that are particularly relevant in understanding and reviewing the proposed budget, beginning with General Fund revenue projections.
REVENUE PROJECTIONS
Next year (FY 2005) we forecast General Fund revenues of $25,993,357, a 1.96% increase over the current year (FY 2004) budget amount. Behind the Budget Guide tab is a detailed explanation of revenues, revealing the legal basis and ten year trends of all revenue sources. The following is a summary of significant revenue changes in next year’s budget:
- 1. Property Taxes. Property tax projections are based on a total anticipated value of real estate of $1,155,900,000. Assuming no change in the tax rate of $.54 per hundred dollars of assessed value, we estimate real property tax collections of $6,330,000 next year, an 8.6% increase from current year budget estimates. Property taxes continue to be among the faster growing revenues due to reassessment and new construction.
- 2. Other Local Taxes . Other local sources of taxation include various consumer utility taxes and franchise fees, business licenses and prepared food and lodging or "room and meal" taxes. The estimate for room and meal tax collections is projected to total $4,040,000 for room tax, a 6.1% decrease; and $5,430,000 for meal tax, a 1.0% increase, over last year’s estimates. These estimates assume no growth in the tourism economy, reflecting neither our better hopes nor our worst fears. Further, the room tax estimate does not include the proposed $2.00 surcharge for additional tourism promotion. As explained under “Outside Agency Issues” below, this pass-through charge will not change the city’s budget materially.
- 3. User Fees. User fees include various license and permit fees, and various charges for service. Licenses and Permits are projected to increase by 13.3%, including commercial and residential building permits. Charges for service and miscellaneous (which includes Park and Recreation fees, cemetery fees, and royalties) are projected to increase by 13.0%.
- 4. Fines and Forfeitures. This category covers court fines – mostly for traffic violations, parking fines, and code violation fines. It is expected to remain level at $256,000.
- 5. Revenue From Use of Money and Property . The interest earnings estimate, in the General Fund of $400,000, and in the Utility Fund of $60,000, based on assumed earnings of 1% on daily accounts, and 2.5% on longer-term accounts. Additionally, the property rental estimate is $341,560, covering the Community Building , Transportation Center , City Square , and the Prince George Parking Garage.
- 6. Revenue From the Commonwealth. Revenue from the state government in the amount of $2,273,781, which includes support for constitutional officers and both categorical and non-categorical aid, are estimated to increase by 5.5% based on the Governor’s proposed budget. Given the very uncertain budget situation, this category of revenue could be about $50,000 less if the House budget is approved. State support amounts to only 8.5% of the city budget. The estimate of Sales Tax for Education of $566,072 shows a 7.0% increase.
Other property taxes include personal property and business property. These categories are showing growth, but not as much as real estate taxes. All property taxes (real and tangible) taken together are expected to generate $8,953,100, a 3.1% increase. Property taxes only account for 34% of general fund revenue compared to an average of about twice that in most jurisdictions in Virginia.
Last year City Council adopted a 25¢ per pack tax on cigarettes. We expect this tax to generate $275,000 next year. Taken together, all local sources of taxation are expected to generate $21,402,100, a 1.9% increase over the current year budget.
This year I am recommending a daily entrance fee of $2.00 per vehicle for Waller Mill Park (or $25 annual entrance pass), as detailed under “Parks and Recreation” below. An estimated $50,000 in new revenue is in the proposed budget and, if approved, will be used to fund the startup improvements needed to collect the fee.
EXPENDITURE ISSUES
Next year we have proposed General Fund operating expenditures of $26,093,721, an increase of 1.84% over the current year adopted budget. Broken down in four large categories:
|
FY 2004 Adopted Budget |
FY 2005 Proposed Budget |
Percent Increase/ (Decrease) |
City Departments |
$13,523,905 |
$14,401,126 |
6.5% |
Constitutional Officers and Judicial |
$ 1,582,507 |
$ 1,470,758 |
-7.1% |
Education and Library |
$ 7,492,730 |
$ 7,097,993 |
-5.3% |
Outside Agencies and Health |
$ 3,073,366 |
$ 3,123,844 |
1.6% |
The Proposed Budget recommends a net increase of one personnel position. Total full time equivalent city positions will stand at 185.5. Changes in expenditures worthy of note are:
1. Salary Ranges and Pay. The city’s Merit Pay Plan gives management the flexibility to target increases where most needed. I believe we can remain reasonably competitive on compensation within the limits of modest revenue growth. Therefore, I am recommending the following:
- Increase in Pay Ranges of 2.0%, in order to account for the rise in wages and the rise in the Consumer Price Index in calendar year 2003 of 1.9%. The range increase does not in itself change anyone’s salary and therefore has no direct impact on the budget.)
- Average Merit Increase allowance of 3.5%, costing $260,000 in salary increases, to be applied per the city’s Merit Pay Plan as detailed in the Personnel Manual.
- The merit increase will hold our employees on average to 97.0% of the middle of their salary ranges.
- An increase in the supplement for firefighters who are qualified paramedics from $2500 to $3500 annually.
2. Sick Leave Policy . Controlling the use of sick leave is a management responsibility. While most city employees use sick leave properly, we need to ensure our policies reward appropriate use of sick leave and discourage abuse of sick leave. I propose several changes to Section 403 governing sick leave be approved with adoption of the budget. These are: 1) a new request form for sick leave to improve accountability; 2) reducing from 3 to 2 days the amount of time taken without a doctor’s statement; 3) an annual leave credit of 1 hour for every 3 hours of sick leave not used each year once an employee’s sick leave reaches the cap of 960 hours. This last provision encourages employees who can no longer accrue sick leave to conserve it.
3. Health Insurance . The city's health plan is largely self-insured. Anthem is paid a set amount to administer the plan, but the city keeps savings when actual costs fall below the "premium,” and pays more when costs exceed the premium. That liability, however, is capped at 125% of premiums through excess insurance. Savings to date have created a reserve, $271,764 as of the end of FY 2003, to fund losses should losses exceed the amount budgeted in any given year. Therefore, we budget for the expected loss only. Based on experience so far this year, we have included a 10.0% increase in funds budgeted for health insurance over the current year budget in the total amount of $913,000.
4. Retiree Health Insurance Supplement. In 2002, the city began providing qualified retirees with a supplement to help with the cost of health insurance up to $90.00 per month. This program now costs $19,332 annually. I recommend increasing the benefit from $3.00 to $4.00 for each year of creditable service, not to exceed $120.00 per month.
5. Virginia Retirement System . VRS sets the contribution rate for the city based on annual actuarial studies. Our rate beginning July 1, 2004 will increase dramatically from 10.0% to 14.25%. In fiscal 1999, the rate was 14.8% and then dropped over several years to the current 10%. Due to assumptions and valuations in the latest study, we are returning to the range of contributions we had known five years ago. Still, VRS will require $322,000 additional dollars in FY 2005.
6. General Administration. The City Council, Clerk of Council and City Attorney’s budgets for next year reflect little change from the prior year. The City Manager’s budget has been increased 10.4% mostly to fund the VRS increases discussed above. The Operating Contingency is recommended at $100,000. Transfer of a position from Finance budget to the Assessor account for the 21.8% increase in the latter, and only a 1.0% increase in the former.
7. Constitutional Officers. The Commissioner of Revenue and Treasurer budgets show moderate net change from the prior year, except for the VRS increase, but the level of State support for these State mandated offices continues to be a problem. The Registrar’s office shows a substantial decrease as the office assistant position will be reduced from full time to part time.
8. Joint Courthouse and Judicial Functions. The Joint Courthouse Agreement, dated December 1996, between the city and James City County, governs cost sharing not only for taking care of the new courthouse, but for judicial functions related to the Courthouse, including: Circuit Court, General District Court, Juvenile and Domestic Relations Court, Clerk of the Circuit Court, Commonwealth Attorney, and City/County Sheriff. The Courthouse Agreement provides that the city and county will determine population based on the annually updated Hampton Roads Data Book published by the Hampton Roads Planning District Commission. The estimate of city cost is $310,000, down from the current year estimate of $325,000.
9. Public Safety. Police and Fire Department budgets are up from the current year with a 6.4% increase in the Police budget totaling $3,352,861; and an 8.7% increase in the Fire budget totaling $2,626,076. These increases are due primarily to the VRS increase, and increases in “discretionary leave” which reflects payments in lieu of time off for working holidays.
10. Parking Garage. Expenses of $129,355 for a full year of operation of the new Prince George Parking Garage are offset by $150,000 of projected revenues. I believe this to be a conservative estimate of revenue.
11. Regional Jail. Funding for the city’s share of the regional jail is expected to be $647,743, a decrease of 15.4% from the current budget. This is based on an assumed average daily population of 60 inmates, at a local cost of $29.58 per day, per inmate. Inmates are charged to the city based on the location where the offense occurred and when the city police is the arresting authority. Local costs have climbed as State contributions have been stagnant, but our costs are down because of fewer city inmates. Other detention related expenditures are the Middle Peninsula Juvenile Detention Commission, which is projected to increase 19.0%; and Colonial Group Home Commission which should remain near level.
12. Building Inspection . The Building Inspection budget of $402,102 is up 16.7%, continuing to be driven by a high level of building activity and, especially, increased staffing for property maintenance and rental inspection programs. Fees to offset these program costs are compared to market and increases recommended when appropriate.
13. Information Systems . The budget covers the contracts for hardware and software maintenance for the city’s information systems, copiers, and video system (including Channel 48). The budget includes funding for an annual PC replacement program, and development of our GIS system, for a total of $288,300, a 16.4% increase.
14. Public Works. Public Works divisional budgets (Streets, Landscape, Utilities, Cemetery, Mosquito Control, Facilities Maintenance, City Shop) average close to the current year amounts. They reflect the 3.5% average merit increase, the 10% health increase and the VRS increase, but no increases in staffing. The street resurfacing commitment is held level at $430,000.
15. Planning Department. Planning Department next year will lead the city through the five-year update of the Comprehensive Plan. We are recommending this work be done mostly in-house at a considerable cost savings. A 6.9% increase in the Planning Department budget should be sufficient to cover extra services related to the Comprehensive Plan update now in progress.
16. Human Services. Salaries in the Human Services Department are funded in part by the Commonwealth, but the department is a city operation. Local funding supplements State funding to allow the department to provide a full array of human services. The local budget for next year is estimated at $553,996, up 10.19%. This includes additional funding of one new permanent position needed to carry on the youth achievement and mentoring programs no longer receiving the same level of grant funds.
17. Parks and Recreation. A total budget of $1,294,963 represents a 10.0% increase. The increase is substantially due to added costs associated with equipment and roadway modifications to collect the proposed $2.00 entry fee at Waller Mill.
The city operates a major regional recreation facility, not a “city park,” at Waller Mill. Based on years of boat rental/launching statistics, we know that of the approximately 180,000 annual visitors to the park, only 12% are residents of the City, and about one half originate outside Williamsburg , James City County , and York County . The park costs approximately $200,000 for staff and maintenance. So, it really is a gift of the taxpayers of Williamsburg to the region. A $2.00 daily fee per vehicle (or $25.00 for an annual pass) would offset about one half of the operating costs.
OUTSIDE AGENCY ISSUES
Nearly one-half of the city's General Fund budget goes to agencies and activities not under City Council's direct operational control. Funding relationships are often complex, and vary in degrees of funding discretion possible from year to year. The "Notes on Funding Relationship," contained under the Budget Guide tab, help explain the city's role in providing financial support to these agencies and activities.
Background documentation from outside agencies is contained in the Appendix, or provided under separate cover, as in the case of the School and the Library budgets.
A number of issues concerning outside agency funding requests for the coming year need to be highlighted:
1. Health Services . The four agencies named below provide health services to city residents, workers and visitors. The total recommended funding for FY 05 is $407,590, an increase of 5.2% over the current year.
The Peninsula Health District budget request to the city is $117,655, a 3.2% increase over the current year.
Olde Towne Medical Center (Williamsburg Area Medical Assistance Corporation or WAMAC) has requested level funding of $82,000 for next year.
The Child Health Investment Program (CHIP) has requested $15,937. The Human Services Advisory Board has recommended funding Olde Towne at $82,000, and CHIP at $13,000, which is reflected in the proposed budget.
Finally, the Colonial Services Board, the agency through which the city provides mental health and retardation services to its residents, requests a 4.6% increase in city contribution to $194,935, based on an equitable multi-jurisdictional funding formula.
2. Schools. Based on the School Board's budget at this point in time, and State funding assuming the Governor’s budget submittal, we can expect a city contribution to the operational budget in the amount of $6,282,350, a 6.6% decrease from the current year. The final amount will be determined by formula as set forth in the current five-year city/county Joint School Agreement effective July 1, 2002 , and the final amount of State support. As a result of school agreements, the city's proportional share of funding for the schools over the past decade has declined, and that trend will continue next year. City children numbering 695 now account for 7.81% of the children enrolled in the system, less than last year by 31 children. Under the Agreement, in FY 05 the city will pay a share equal to its enrollment times a factor of 1.28. So, the city still pays a premium to participate in the joint system. Based on the current enrollment split, the city’s contribution will be 10.0% and the county’s 90.0%, of local funding for the schools. The expected local cost per pupil next year will be $9,039.
3. Library . The Williamsburg Regional Library is funded under the revised library agreement with James City County , effective July 1, 1999 . That agreement calls for funding of operational costs based on the proportion of circulation by residency. Based on the library’s figures, the city/county circulation ratio for fiscal year 2003 was 16.84% city, and 83.16% county. At this time the Library has not completed their proposed budget while they wait to see what James City County proposes to do with personnel costs. So, the city’s proposed budget is based on estimated city contribution of $788,000, a 6.7% increase over the current year.
4. Human Service Agencies. The city's Human Services Advisory Board, as requested by City Council, has evaluated Human Services Agency requests for funding, and made its recommendations to City Council. Their analysis and recommendations are in the Appendix to this document. The proposed budget is a 2.5% increase from the current year in the total amount of $78,447. The proposed budget follows the Human Services Board’s recommendations in all respects, including funding for one agency previously not funded: Big Brothers-Big Sisters.
5. Community and Economic Development Agencies. The city continues to support tourism advertising and promotion through Colonial Williamsburg, and the Convention and Visitors Bureau/Chamber of Commerce. Last year at this time City Council approved a one-time additional contribution of $250,000 to Colonial Williamsburg for promotion.
This year Colonial Williamsburg Foundation has requested near level funding of $1,300,000, and I have recommended $1,295,000. The Williamsburg Area Chamber of Commerce together with the Williamsburg Area Convention and Visitors Bureau have requested level funding of $863,000. In addition, we expect enabling legislation to become law, which will allow James City County and York County to enact a nightly per room surcharge of $2.00 to support tourism promotion. City Council has gone on record endorsing the $2.00 plan, which will result in no net change on the city’s budget. The $2.00 charge has not been included, therefore, as part of this proposed budget, but it will be added to the budget prior to adoption, if needed, for accounting purposes only.
In addition to tourism promotion, the city support is recommended for a number of other agencies that make important economic development and community development contributions to Williamsburg :
Hampton Roads Planning District Commission – $ 7,812
Peninsula Alliance for Economic Development – $14,750
Thomas Nelson Community College
– Hampton Campus – $13,016
– Williamsburg Campus rental – $20,000
– Hampton Workforce Development Center – $10,500
– Technology grant – $ 5,504
Jamestown/Yorktown Foundation – $10,000
Colonial Soil and Water District – $ 2,100
Hampton Roads Partnership – $ 5,325
Williamsburg Land Conservancy – $ 5,000
Heritage Humane Society – $23,000
Williamsburg Farmers’ Market – $ 5,000
Crossroads Coordinating Committee – $10,000
Jamestown 2007 Host Committee – $ 8,000
Total including CWF and CVB – $2,298,007
This year one new community/economic development agency has been added - the Jamestown 2007 Host Committee. This Committee, chaired by Mayor Zeidler, coordinates the Historic Triangle’s activities in support of the Jamestown 2007 Commemoration.
All of these recommendations are for the requested amounts except for Jamestown-Yorktown foundation, which requested $20,374.
6. Cultural. The Williamsburg Arts Commission has again performed the task of receiving, evaluating, and recommending funding for the arts. Their report is copied in the Appendix. They recommend local arts funding of $ 136,300, up 6.2% from the current year. Of this amount, the city contribution would be $ 63,150. This assumes a state arts commission challenge grant of $10,000, and county funding of $63,150. The State grant last year was $10,000.
City sponsorship for the second annual “Festival Williamsburg” is provided in the amount of $50,000. In partnership with the Virginia Arts Festival, “Festival Williamsburg” is a major addition to the Arts Calendar and to tourism.
7. Transportation. James City County has requested $149,000 to support our new, unified transit system, Williamsburg Area Transport. The unified system, as envisioned in the Long Range Public Transportation Plan, combines JCC Transit, Relax and Ride, and the William and Mary systems. Work on governance with an eye toward the possibility of creating a regional authority to own and operate the system is progressing slowly. I recommend the city maintain level funding in the amount of $144,000 pending creation of a new governing structure and a fair formula for allocating cost between localities.
Under Transportation are two additional regional partnerships to promote alternatives to highway travel. These are continuing support for Virginia ’s High Speed Rail Coalition in the amount of $3,500; and new this year, support for the Newport News/Williamsburg Airport Task Force in the amount of $6,000. This new request came from Mayor Frank to Mayor Zeidler for greater regional support for efforts to expand air service for the Peninsula .
CAPITAL IMPROVEMENT PROGRAM
Revenue to fund the CIP comes from 1% Sales Tax Receipts and funds reserved for capital improvements. The Prince George Parking Garage is now open, and the streetscape redo on North Boundary and Prince George Streets is under construction. The Strawberry Plains project of blight removal and moderate income, owner occupied, housing is in full swing.
Here are some of the highlights from this year's update of the Five Year Capital Improvement Program:
- Richmond Road Reconstruction from Brooks Street to New Hope has been in progress for two years, mainly underground wiring and right-of-way acquisition. Street reconstruction itself is now scheduled to be re-bid in May 2004, and begin in summer 2004. VDOT’s current schedule calls for project completion in early 2006.
- Stage One of Treyburn Drive (design and engineering) has been substantially completed. Stage Two (right-of-way acquisition and permitting) occurs in 2004. Treyburn Drive is scheduled to begin construction concurrent with High Street, now anticipated in 2005.
- Several projects deal with enhancement to city highways and byways. These include landscaping at Route 199 and Jamestown Road , guardrail replacement, new city entrance signs, and participation in a regional “Wayfinding” project designed to help visitors navigate the area.
- Underground wiring on Monticello Avenue will begin in summer 2004.
- New touch screen voting machines will be purchased.
- The Burns Lane Area will receive stormwater outfall extensions for the Stormwater Master Plan.
- The Library and the Fire Station will have major roof work performed.
- The Fire Station will receive a new emergency generator and communications upgrades.
- The Braxton Court Community Development Block Grant Project if funded by the State’s Department of Housing and Community Development, will begin.
- Funding of the School’s CIP request – subject to action by James City County Board of Supervisors.
- Although not in the CIP, the city also plans to participate in the construction of a new animal shelter in partnership with the adjoining counties and the Heritage Humane Society.
The Planning Commission’s review of the draft CIP, used in developing the final recommendation, is provided under the Capital Improvements tab.
UTILITY FUND OVERVIEW
The Utility Fund projects $4,297,700 in operating revenues and a 0.2% increase in operating expenditures. A 2% water rate increase, $2.55 to $2.60 per 1000 gallons, is recommended.
A Rate Analysis for the Utility Fund is provided under the Appendix tab. The analysis shows a future with modest rate increases, and a future with no rate increases. The Rate Analysis is updated annually as part of the budget process. Expensive ”new water” from King William Reservoir or some alternate source, purchases of more watershed land, and renewal/replacement of infrastructure, are all in our future. Unlike nearly all other area jurisdictions, the city still does not charge separately for sewage collection and pumping, but rather bears this cost using water revenue. City rates for water and sewer combined continue to be exceptionally low in the region, as shown in Exhibit 3 of the Rate Analysis.
FINANCIAL POLICIES
Under the “Budget Guide” tab, Section VIII “Budget Policies” have been expanded to include new subsections on Financial Planning, Revenue, Expenditure, and Investment policies. The Finance Director and I recommend that these proposed policies be formally adopted by City Council resolution in May along with the budget itself.
NEXT STEPS
The budget process now moves from the staff level "formation" phase, to the Council and public level "adoption" phase.
The Budget Work Sessions, principally to look at outside agencies, are scheduled for Monday, March 22 and Wednesday, March 24. The school budget will be reviewed at the Monday, April 5, City Council work session. The formal budget hearing will be advertised for the April 8 City Council meeting. Adoption is scheduled for the May 13 Council meeting.
Jackson C. Tuttle
City Manager