City faces unknowns on budget

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Due to economic effects from the COVID-19 pandemic, the City of Fredericksburg is facing several unknowns while planning for its 2021 Fiscal Year budget.

The Fredericksburg City Council had two budget workshops over the past week to discuss how to create a budget with less revenue than years past, as one of its largest economic drivers, tourism, has been greatly impacted by this pandemic.

“One of the main challenges is the fact that there are so many uncertainties right now with regard to COVID-19,” City Manager Kent Myers said. “We don’t know how long it’s going to last, we don’t know what sort of mandates the governor might issue, we don’t know how our employees will be impacted and we don’t know if we’re going to have to shut down any additional city facilities.”

Mayor Gary Neffendorf has suggested to city staff that the budget numbers be reviewed throughout the year.

“I think the council is committed to doing a quarterly review,” Myers said. “If we do end up, for example, being off on some of our revenue projections, we can make additional changes at that time.”

Myers said there’s much work to do, as the budget will go into effect Oct. 1.

 

General Fund revenues

City staff is projecting its General Fund revenues to be $14,883,813, which is less than the current year’s revenue of $15,437,218.

Some major revenues for the general fund include sales tax, mixed drink tax, payment in lieu of tax and franchise fees. Payment in lieu of taxes, which is a payment made by utility companies to the city for the use of its right-of-way, will increase from 8% to 9% next year.

Myers said it’s going to be difficult to project these revenues during the next year.

However, he said he has been pleasantly surprised to see no major decreases in sales over the past several months. Staff is budgeting its sales tax at $5.8 million next year, which is a 6.4% decrease.

Another main driver is property tax, which is 22.7 cents per $100 valuation in the current year. Myers said they can’t discuss a property tax rate for 2021 yet, as they are still awaiting information from the appraisal district.

 

General Fund expenses

Expenses are projected at $15,562,480, which is less than the current year’s $15,979,398.

Staff is projecting a General Fund deficit of $678,667 next year. Myers said staff had expected to use money from its General Fund budget balance, which stands at $1,260,478, to cover this deficit.

Myers said staff is trying to be conservative in its spending for next year by not adding more services to the budget.

“What we have for consideration is primarily a status quo budget,” Myers said in the Wednesday, July 22 meeting. “Not to add any new services or new programs. We just don’t think it’d be timely at this point to add those.”

The plan for 2021, Myers said, will be to maintain its services already offered to city residents.

“We will continue services like our street paving program so that we don’t get behind,” Myers said. “We’re going to tighten our belt and try to make it through next year without adding a lot of costs to our operations.”

Capital costs currently being added are sidewalk improvements, water and electric meters and other items. Funding for some capital projects, such as the East 290 water main and the Electric Department building project, are also being added.

Full funding was added back to the budget for the annual street paving program.

Personnel costs are expected to be down, with no new salary increases or employee benefit costs being budgeted. However, Myers believes the city’s health insurance fund is doing well, as it has a current balance of about $500,000.

Myers said that no staff layoffs are projected at this time.

 

Public comment

Myers said public input is always important when developing the city’s budget.

“We look forward to input from the public as far as items related to the budget,” Myers said. “We have our budget posted on the website and we encourage the public to participate.

All of the city’s work sessions are open to the public. Meetings through the month of August will be held remotely via the Zoom Teleconference platform.

Here is a list of dates for  budget events.

Budget workshop with county commissioners — Monday, Aug. 3, at 8:30 a.m.

City Council budget workshop on all funds — Wednesday, Aug. 12, at 4 p.m.

Council public hearing on proposed budget — Monday, Aug. 24.

Public hearing on tax increase, if necessary — Wednesday, Sept. 9, at 6 p.m.

Council adoption of separate budgtet and tax rate ordinances — Monday, Sept. 21, at 6 p.m.