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The original item was published from 3/30/2012 4:21:37 PM to 5/1/2012 12:05:02 AM.

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Danville, VA Local Government News and Announcements

Posted on: March 30, 2012

[ARCHIVED] City manager proposes budget with no property tax, utility rate increases

City Manager Joe King released publicly on Friday a proposed budget without the need for property tax or utility rate increases during the next year that starts July 1.

In addition, the proposed budget continues nearly all municipal services, programs and facilities at current levels. King proposes to set aside money to give city employees a 3 percent pay raise – the first in their base pay since a pay raise was granted in July 2008. Economic development and blight eradication programs would be sustained, and Danville Public Schools would receive an additional $2.1 million to avoid closure of a second school during the next school year.

The proposed budget is for the fiscal year 2013 (FY 2013), which begins July 1 and ends June 30, 2013.

“The deficits that we identified early in the budget process have been closed and the budget is balanced,” King said. “This (budget) allows the city continued provision of high quality services next year with some of the lowest tax and utility rates in the Commonwealth.”

As for school funding, King said, “The city of Danville has faithfully provided very strong support to the Danville Public Schools. The city currently funds nearly twice the statutorily required minimum amount.”

For the next school year, King proposes that the city continue that level of support by providing $17.9 million from the city’s general fund in support of school operating costs. In addition, he proposes transferring from unassigned reserves an additional $2.1 million as requested by school officials to avoid closing a second school at this time.

The transfer of $2.1 million from reserves would be a one-time transfer only.

“Continued funding beyond FY 2013 at this increased amount would require a 10-cent increase in the real property tax rate.” King said.

School officials have announced W. Townes Lea Elementary School will be closed at the end of this academic year due to declining enrollment and consequent loss of state funds, expiration of a federal stimulus grant and increased employee retirement costs. They requested additional money to avoid closing a second school for the next school year.

No increases in property taxes or utility rates

The current real estate tax rate is 73 cents for every $100 of assessed value. The personal property tax rate is $3 per $100 in value. King is proposing those rates remain as they are for another year.

He said Danville’s economy appears to have begun a modest recovery.

“We recognize that many citizens are continuing to feel the effects of the recession, but the economy has turned,” King said. “Our unemployment rate remains twice that of the Commonwealth’s, but is lower than it was last year at this time. Major area employers are doing better. Retail sales have rebounded after three years of decline, and sales, meals and bank share tax receipts are projected to increase next year.”

The recovery, however, is not yet reflected in real estate and property values. Those values continue to decline after a prolonged recession, and with current tax rates are expected to produce less revenue in the next fiscal year.

“The net effect of these changes and declining revenues from the Commonwealth will yield $1 million less in General Fund revenues next year,” King said. “The situation is not expected to correct itself for a few years.”

The city has several funds, but the General Fund is the one supported by property taxes and used to pay for municipal services such as public safety and support of public education.

King said many other local governments are considering property tax rate increases to offset revenue losses, but rather than increasing property tax rates in Danville, King proposes to fill the gap by transferring additional money from utility funds and enacting a new cigarette tax.

The utility fund transfers would increase by a total of $1.25 million, with $750,000 coming from the electric operation and $500,000 from the gas operation.

“We should increase utility fund transfers on the same basis as an investor-owned utility would pay taxes and provide a return on equity to shareholders,” King said.

The assets in these funds have increased while transfers have remained unchanged for five years.

“Both of these funds can withstand transfer increases within current utility rate structures,” King said.

The proposed cigarette tax would amount to 30 cents per pack and could be enacted as early as Jan. 1, thus generating $100,000 in the second half of FY 2013 and $250,000 to $300,000 annually in following years.

“This (cigarette tax) is one of the few sources of revenue available to local governments in Virginia,” King said. “Thirty of 39 cities in the Commonwealth levy taxes ranging from 10 to 85 cents per pack.”

King noted that the cigarette tax and the increased utility fund transfers would provide ongoing revenue to the General Fund. “They will hopefully make up the gap in property receipts over the next few years while real and personal property tax values rebound from recession.”

Municipal services, programs and facilities

Revenue growth will be essential to maintaining services, programs and facilities at current levels in future years, King said.

“Citizens demand much of the city,” King said. “While too many citizens and small businesses are experiencing economic hard times, we detect very little public support for significantly lowering municipal service quality levels, downsizing municipal programs, closing facilities or reducing maintenance levels.”

As a result, all but three municipal services, programs and facilities will continue at current levels in the next fiscal year under the proposed budget.

King is proposing to close Danville’s only branch library, reduce early morning and late evening hours of operation at the main library, and discontinue drop-in hours at Coates and Glenwood community centers.

He also is proposing to eliminate 12 full-time positions. Most of these positions are currently vacant, and for the positions that are not vacant, the workers will be transferred to available jobs. In addition, three part-time positions will be eliminated, and hours will be reduced for another eight part-time workers.

These moves carry forward with the second year of a three-year effort to “rightsize” city services, programs and facilities.

A year ago, the city eliminated 39 full-time positions and one part-time position. The city also then reduced tourism spending, consolidated departments and switched from backyard to curbside refuse collection.

The cost savings from those actions a year ago, coupled with the cost savings anticipated from the actions proposed this year are a major factor in balancing the proposed budget.

However, King warns of challenges ahead.

“Current operations cannot be sustained beyond FY 2013 at current levels without tax increases, significant reductions in services or capital projects, or a combination of revenue increases and expenditure reductions,” King said. “Future cost increases for employee compensation, health insurance, retirement, debt service and commodities cannot be offset with productivity improvements alone.”

Employees pay raises and spending priorities

To provide the services expected by the public, King said it is critical that the city retain talented employees. Toward that goal, he is proposing a 3 percent salary adjustment within employee pay ranges.

“Employees received a special one-time bonus last December, but have not experienced movement up their pay ranges in four years,” King said. “We know there are many citizens that are not getting pay raises, but there are many that are.”

Most municipal jobs, he noted, require a combination of experience, education, training and professional certification.

King said the proposed budget also recognizes that Danville remains a small city with big city problems.

“Essential municipal service and economic and community development responsibilities must be met if Danville is to realize a brighter future,” King said,

In addition to continued funding of essential municipal services, infrastructure, facilities and support of public schools, King said the proposed budget sustains support for key community and economic development programs.

A total of $2.82 million will be set aside for increasing the inventory of serviced sites for newly recruited businesses, including the redevelopment of existing buildings and acquiring and preparing industrial park lots.

Nearly $750,000 is proposed to be used toward eradicating property blight. “No city can hope to thrive unless it is an attractive, desirable place to live,” King said. “Danville’s future is threatened by the corrosive effects of blighted, abandoned and poorly maintained buildings.”

The River District also will be a priority, with $4.55 million included to stimulate investment by renovating buildings, eradicating blight and moving forward with streetscape and park elements.

Public access to budget

A budget summary for the public is accessible from the city’s website – – and hard copies will be available at the public library.

Additional information is available online to help residents understand the budget and the budget process. Questions may be submitted via the website.

City Council will deliberate on the budget proposal over the next three months. A final budget must be adopted by June 30.

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