Colonial Heights council weighs cuts vs. tax hike
By Blake Belden, Staff Writer
May 3, 2014, 12:31
COLONIAL HEIGHTS — As Colonial Heights continues to figure out how to make up for a shortfall in next year’s budget, the City Council remains undecided on what measures it will take. However it did indicate it was leaning towards budget cuts over increasing the property tax, and ruled out implementing a cigarette tax to make up for next year’s shortfall.
This shortfall derives from the additional staffing of four new sheriff’s deputy positions (two full-time and two part-time positions) to account for increased security enhancements at the courthouse, costs which are projected to exceed $200,000 for next year.
Currently, Colonial Heights is $480,000 below the expected total revenue for fiscal year 2013-2014, a deficit that City Manager Thomas Mattis projects will be greater than $500,000 by the end of the fiscal year.
“Compared to our actuals from the prior year [2012-2013], we’re still up. It’s just not what we had anticipated,” Mattis said.
Despite this fiscal year’s revenue shortfall, the proposed $74.9 million budget for fiscal year 2014-2015 is still designed with the expectation that these revenues will turn around and increase in the next year, Mattis said.
In the budget proposal designed by city staff, a two cent hike in the property tax rate is included as a long-term revenue stream to fund the additional sheriff’s deputy positions, however the council asked Mattis to look at where budget cuts could be made instead of imposing the tax increase.
City staff came back with a suggested budget cut proposal before the council on Tuesday, with the bulk of those cuts being seen in the public safety sector, the city’s largest receptor of general fund expenditures.
“Because public safety has the biggest slice of the pie, they’re the ones that will be hit by the biggest cut with this,” Mattis said of the proposed budget cuts.
Although the council made it clear that they wanted to maintain the high level of services that are currently provided for all citizens in Colonial Heights, Mattis emphasized that the majority of the general fund expenditures are allocated to provide these services.
“It’s tough to make a significant reduction in the budget without adversely affecting major service areas,” Mattis said.
Councilor Kenneth Frenier said that he was against the proposed budget cuts, many of which include funding for employee training, and cited a Colonial Heights fatality in 2006 that was the result of inadequate training methods.
“I don’t want to see that happen again. ... I appreciate what the department heads have presented to us, but I just really think that’s going to come back to haunt us in the long run,” Frenier said.
Previously, members of the council had suggested that cuts be made to the capital outlay costs in the proposed budgets, but city staff drafted a budget cut proposal that only decreased operating expenditures rather than capital investments.
“The capital [expenditures] don’t go away. It’s just a delay. ... If we take a few capital items out of the budget, we’re just going to plug that in next year or the year after that,” Mattis said.
Four of seven council members indicated that, as of Tuesday night, they were leaning towards budget cuts over increasing the property tax rate. They included Milton Freeland, T. Gregory Kochuba, John Wood and Mayor C. Scott Davis).
The existing budget proposal includes a two cent increase in the property tax rate, up to $1.16 per $100.
Colonial Heights decreased the property tax rate by four cents just two years ago.
Taking into account the property re-assessment that occurred earlier this year, the median home price in Colonial Heights is just under $135,000, and a two cent property tax increase would impose a net cost of $26 on the average household, Mattis said.
“The net would still be a reduction in their tax bill of about $30,” Mattis said.
Three council members said they would rather see the tax rate increase over cuts in the budget including Joe Green, Frenier and Diane Yates.
Green said that he needed more time to deliberate over what was best for the city, but said that if he had to choose between budget cuts or a property tax increase, he would lean towards the latter.
“Yes, it’s more money. But, I like living here and I like the services we provide. And I’m not sure that I want to give those up because I don’t want to pay $25 more a year on my property tax,” Green said.
Dave Hoopsick, of Colonial Heights, voiced his opposition to raising the real estate tax, not only in conjunction with a general distaste for more taxation, but because he does not support the fact that this revenue would be split between the city and the schools.
“The school system, in my opinion, is already way, way over budgeted ... and they do not need an increase in the money they get. The city needs the money, not the school system, and it’s not sensible to me to increase the tax just give the city half of the money that they need to get,” Hoopsick said.
William Tatum, of Elko Avenue, also expressed resistance to the idea of increased taxation, claiming that the city already misuses it’s available funds in many areas, including keeping the air conditioning on at schools during the summer or paying too many people to perform certain tasks.
“You might have somebody patching a hole. ... There’s three or four people standing there, one man might have a shovel, the others are standing on the shovel talking,” Tatum said.
After considering the implementation of a cigarette tax as a possible option for generating the revenue necessary for the sheriff’s deputy positions, the council determined that it would not be a sufficient method to replace the proposed property tax increase, but could be a potential source for long-term revenue.
Eight of 39 cities in Virginia do not have a cigarette tax, including Colonial Heights and Hopewell, but almost 80 percent of localities in the state have imposed such a tax.
Petersburg has had a cigarette tax in place since 1992, charging 10 cents per pack and $1 per carton, which has pulled in an annual revenue high of $317,000, but in more recent fiscal years has leveled off to around $217,000 per year, according to Tomeka Smith, the deputy director of finance for Colonial Heights.
If the cigarette tax is implemented, a stamp must be placed on every pack of cigarettes sold in Colonial Heights, and the costs associated with purchasing generic stamps for all packs in the city could exceed $13,000, Smith said.
Prior to any implementation, the city would have to take inventory of all cigarettes available for purchase in the city, and then new revenue would not be gained until after businesses have depleted their existing inventories before the tax took effect, Smith said.
Smith added that periodic inventory checks by a city employee must be enforced upon businesses to make sure that these tax stamps are on the packs of cigarettes, Smith said.
As the budget process continues, every option for replacing the revenue shortfall is just a proposal at this point, and nothing has been voted on as a definite.
The next city council meeting will be held on May 13.