BY EMILY BATTLE
Fredericksburg's City Council has been plodding through a difficult budget process this spring, working under the reality that it may have to raise the tax rate by 5 cents next year while at the same time cutting some services.
But in the public discussions that have gone on in the mayoral race between Debby Girvan and Tom Tomzak, there's been much more talk about last spring's budget process.
Last May, Tomzak and four other council members voted for a 53-cent real-estate tax rate, which was 3 cents higher than what would have been the equalized tax rate after last year's reassessment.
Girvan and Councilman Hashmel Turner both voted for a 50-cent rate.
The 3-cent difference amounts to $1.2 million in city revenue.
Girvan argued in council meetings and in an e-mail to constituents at the time that because the city had been bringing in more money than it had budgeted for in the past five fiscal years, city staff could recalculate their revenue projections to make up for the $1.2 million and keep the rate at 50 cents.
At the time, the council members who voted for the 53-cent rate said lowering the tax rate without making any budget cuts was not an option.
Councilman Marvin Dixon said at the meeting during which the vote occurred that Girvan's proposal was "reckless and irresponsible" and that it amounted to saying, "Let's go raid the rainy-day fund."
Tomzak leveled that charge anew at a forum hosted last week by the College Terrace Neighborhood Association.
"She talks about budget discipline, but last year she wanted to dip into the city's rainy-day fund rather than vote for a 1-cent tax hike, a decision that was not supported by our tenured financial staff in the city and that was opposed by six of the council members."
Tomzak was wrong on two counts: The tax increase was 3 cents, not 1 cent, and only five council members voted for the 53-cent rate.
But even as the city this year faces a potential $3 million budget shortfall due largely to declining sales-tax revenues, Girvan maintains that the budget would have been okay with $1.2 million less coming from the real-estate tax.
"There was extra money in the reserve fund that was well above and beyond the rainy-day fund," she said in an interview last week. "I think the bottom line is the mayor and the council members could have taken $1.2 million of that extra money and kept the tax rate low."
The "rainy-day fund" that Girvan and Tomzak are referring to is the city's general-fund balance, or cash reserve. The city's financial policies state that the portion of that balance that hasn't been reserved for anything specific must be kept at a level of at least 12 percent of the previous fiscal year's revenues.
At the beginning of this budget year, there was $12.4 million in that undesignated reserve, about $4.2 million more than what the city would have needed to stick to its financial guidelines.
But that money isn't recurring revenue. It's like a savings account, and the city makes a point not to use it very often for recurring expenses such as salaries and operating costs.
It has done that in the past, for example in the 2007 budget, in which fund-balance money was used to avoid a real-estate-tax increase.
But that move came with a warning from City Manager Phillip Rodenberg that the one-time money was a boost to get the city through to the reassessment year--when new recurring revenue was expected--and would not be available to balance future budgets.
Council members at the time likened the practice Girvan advocated to a household's using its savings account to pay for things such as groceries and utility bills--if you do that for too long, you no longer have any savings.
"It was not a responsible fiscal thing to do, and I think experience has borne that out," Tomzak said in an interview last week. "With the slump, we have the deficit, and if we had done what she had wanted, it would be much, much worse."
Asked what a lower tax rate would have meant for today's shortfall, Girvan criticized recent one-time expenses such as the $100,000 purchase of equipment for the AutoChalk parking enforcement system.
She said the problem is that the city doesn't do enough long-term budget planning.
"We do not look at how our spending decisions today are going to affect next year's budget or the year after," she said.
The council now faces a situation in which its sales-tax collections are declining more rapidly every month, as the slowing economy and regional competition take a toll on Central Park.
And its largest revenue source--the real-estate tax--could be under pressure if the council follows through with its plan to reassess property in 2009. Based on trends in the housing market, it's possible some property values could go down with that revaluation.
Neither Girvan nor Tomzak has made many forceful statements at public meetings about what direction to go with the real-estate tax or city spending in next year's budget.
In e-mails about the budget among council members, Girvan has said the council should not raise that tax at all, and Tomzak has said lowering the proposed 58-cent rate is a priority.
In the coming weeks, council members will have to figure out whether they're willing to take some of the drastic measures finance staff have said will be required to do that.
And with no significant new money and a lot of growing needs on the near horizon, it's certain that whoever is sitting in the mayor's seat next spring won't be leading a budget process that's much easier than this one.
Emily Battle: 540/374-5413
Email: ebattle@freelancestar.com