City Unveils Proposed Budget

Saturday, March 19, 2011

The City of Williamsburg released its proposed $31.9 million 2012 budget Friday, a spending plan slightly higher than 2012 projected revenues due to higher costs in areas such as healthcare, jails and schools and still-suffering revenues mainly in real estate. No large cuts are proposed.

“I’m feeling better than I was a year ago [about the budget],” said City Manager Jack Tuttle. “There is an upturn in tourism-related revenue and I sense that the bottom is behind us, but it will be many years before we get back to 2008 revenues. We’re in the process of digging out of a deep hole.”

Though the proposed plan projects a 1.9 percent increase in overall general fund revenues, the 2012 plan is still 6.5 percent less than the 2009 budget. The city is proposing no big cuts in spending or personnel for 2012, but there are some significant spending increases for the regional jail and for healthcare, as well as a long-term shortfall in the retirement fund due to weak investment performance (see below for details on budget spending areas).

Most outside agencies and health services are receiving level funding for 2012. The budget proposes using about $88,000 of general fund reserves to cover the difference between expenditures and revenues (in 2011, the city will use approximately $1.3 million in this reserve fund).

View the entire budget on the city’s website.

City Council will hear input from outside agencies on Monday, March 21, and Tuesday, March 22, at 5 p.m. at the Quarterpath Rec Center. The school budget will be reviewed by council either at their April 11 work session or the April 14 regular meeting at the Stryker Building. The budget hearing will be April 14 at 2 p.m. at the Stryker Building, and adoption is scheduled for May 12.

Revenues

Real estate property tax assessments are expected to dip by 3.9 percent in 2012 due to the still-soft real estate market, and overall property taxes (including real estate, car and business property) are expected to decrease by 2.7 percent. Property taxes are expected to bring in $12.4 million in 2012.

Other local taxes, which include utility taxes, franchise fees, business licenses, lodging and meals taxes, are expected to generate $13.9 million, a 5.9 percent increase over 2011.

Room and meals taxes (which fall under “other local taxes”) are often used as an indicator for how tourism is doing in the city. Meal taxes are expected to increase by 9.3 percent and room taxes are expected to go up 6.3 percent, which show an upturn but still aren’t up to 2008 levels.

Healthcare costs

Healthcare costs under the city’s self-insured plan with Anthem have risen dramatically in recent years. Between 2005 and 2010 costs rose 75 percent. The city now covers 84 percent of costs, and employees pay 16 percent. Last year, the city looked at other service providers to see if they could lower payments, but they found no takers.

Over the next year, the city expects Anthem will increase costs again between 12 and 15 percent. “This big jump in healthcare is a major point of concern,” Tuttle said.

The city is looking into other options this year, including getting a quote from the state’s “Local Choice” program. The budget only allows for a 10 percent increase in healthcare costs, so if the number gets beyond that the city will need to reassess how much employees are asked to pay and also look at the structure of included benefits.

A decision needs to be made by June 15.

Virginia Retirement System (VRS) funds

The city fully funds its share of retirement costs for its employees. Like the state and other localities, however, the fund has lost value as investments plummeted during the recession. Due to the underperforming market, the city’s VRS plan is considered only 76.6 percent funded. Due to this uncontrollable underfunding, the city expects its contribution to increase in 2013.

Regional Jail

The city’s portion of funding for the Virginia Peninsula Regional Jail is expected to go up 16 percent in 2012, to about $1.3 million. This is due primarily to state cuts in jail funding, according to the budget message. Recent state cuts to mental health – namely cuts to Eastern State hospital – have also put an added strain on the jail, according to Tuttle, as people who need mental health services and don’t receive them often end up in the penal system.

Education

The state made cuts to education last year, but this year they’ve added back some of that funding. This year, based on city student enrollment numbers, the WJCC school budget and expected state funding, the city will need to increase its funding for schools by 4.6 percent, or $7.3 million. The city and county have a set funding ratio which both localities follow.

Tourism Promotion

The City spends money each year to support Colonial Williamsburg and the Greater Williamsburg Chamber and Tourism Alliance, with roughly two-thirds of combined support set aside for CW and one-third for the Alliance. Last year, the city cut funding to both by a total of $250,000.

This year, due to higher income projections for tourism-related revenues, the budget proposes $1.3 million in funding for CW and $650,000 for the Alliance (which uses the same two-thirds and one-third ratio).

This is a slight increase of about 2 percent for CW compared to 2011 funding, and a decrease of nearly 4 percent for the Alliance over 2011.

The Williamsburg Hotel Motel Association requested $325,000 in funding from the city this year for marketing support.

The WHMA recently opened a Tourist Information Center in the Kingsmill shops on Route 60 to help visitors find hotels, restaurants, attraction tickets and other services in the Historic Triangle. They use their own website to book room nights and packages, and the WHMA’s site used to be the booking site for the Triangle through the local destination marketing committee.

Tuttle said in his budget message that he didn’t recommend funding the WHMA because, “In my view, the city should support one regional visitation website. The Alliance/WADMC [the marketing committee] website is visitwilliamsburg.com. Customer confusion and marketplace dilution results from multiple, non-destination driven, regional websites.”