The city’s proposed $108,757,787 budget for fiscal year (FY) 2022-23 includes cost of living increases for employees, $6.17 million for the school division, a 7 percent increase in all refuse collection fees, and no tax increase.
When presenting the proposal at Tuesday’s City Council meeting, City Manager Leon Towarnicki said the total represents an increase of $10,060,248 over the current budget. He added that it maintains reserves in all utilities, except for electric, and a 10 percent reserve in the general fund, in keeping with city policy.
The proposed general fund budget for the upcoming fiscal year is $37,406,307, compared to the FY22 general fund budget of $34,218,454, and the FY22 revised budget of $35,545,411.
The general fund revenue before transfers, he said, is projected to be $30,540,346 (compared to FY22’s $28,975,888), from taxes, fees, recovered costs, grants, and state funding which, he said, increased by 5.4 percent.
The city’s unassigned fund balance, Towarnicki said, is $7,574,286. “As we begin our budget process, that’s typically one of the first numbers that we look at because that tells us how much has been returned as an unassigned fund balance. That means we can use it for just about anything.”
However, applied to that is the 10 percent reserve policy put in place by council which, this year would equate to $3,740,630, leaving the available general fund balance of $3,833,656 available for transfer while maintaining a 10 percent reserve.
Towarnicki said the general fund budget balances with a projected $3,865,961 fund balance and $3 million from American Rescue Plan Act (ARPA) funds, with no proposed transfers from electric, water, sewer, telecom, or refuse. “We just didn’t feel that there was enough room in there to do any transfer from utilities this year,” as the funds in each are nearing the cash reserve policy limits. The city also will increase all refuse collection fees by 7 percent. The rates were last adjusted in July 2013.
He noted the council earmarked $4 million in ARPA funds to help with fund balance, with $2 million one year and $1 million each of the next two years. “This year, to balance we had to use $3 million.”
The electric funds have fallen below the cash reserve requirement. That utility’s FY21 audited total was $1,253,201, while the cash reserve policy threshold is $4,446,737. However, the aggregate total of all utilities from FY21 totals $9,548,998 – just above the total cash reserve threshold of $8,837,256.
The largest single line item in the city’s budgeted expenses, Towarnicki said, is purchased power, which represents 75.2 percent, or $16,068,000, of the total $21,356,332 electric budget.
Capital requests submitted by city departments for FY23 totaled $7,529,000, with $5,233,557 requested for utilities and $2,295,443 requested for the general fund/capital reserve, according to Towarnicki, who added that, while utilities cover capital internally, the capital fund is consistently underfunded with remaining meals tax funds once the debt service is covered.
Towarnicki said 25 percent of the city’s total budget was allocated to the schools, second only to the general fund at 35 percent. Electric was third, with 20 percent of the budget.
In total, city staff recommended $6,170,397 in school funding, which is FY21 level funding of $6,045,015 minus the Telecom e-rate contribution of $99,624, plus an additional $225,000 to offset a 16.1 percent health insurance increase for school employees.
Level funding was recommended for most outside agencies, with a recommended 2.5 percent increase in the 911 budget (from $497,503 to $510,101), a 12 percent increase in social services (from $489,257 to $548,056), a 19.8 percent reduction in Health Department funding (from $165,654 to $132,907), and a new request of $10,000 for the sports complex.
Under the proposed budget, the library would receive level funding ($295,308), $60,000 would be directed toward small business and Uptown development, Uptown Partnership (UP) would receive $30,000, and $39,000 would be allocated to the management of the Martinsville Mustangs.
Additional expenses include a 5 percent cost of living adjustment for city employees and constitutional officers, an overall 16.1 percent increase in health insurance costs, a 6.5 percent increase in contributions to the Virginia Retirement System, and other market adjustments to some agencies, including the police department and the sheriff’s office.
“Personnel issues this year were just substantial,” Towarnicki said. “We had situations where some seasoned veterans in some of our departments were ready to leave, and we did some adjustments and thankfully saved a couple of positions.”
The proposal includes the addition of several new personnel, including one person in street marking and signs and two in refuse collection. It reduces the number of positions in the police department by two, one sworn and one civilian, giving that department a total of 44 sworn and four civilian staff. A programs position with the Senior Services department also was eliminated, making it a transportation-only service.
Funding the capital reserve is recommended in the amount of $1,450,799. Of that, $361,349 is required for debt service and the $1,089,450 balance will be assigned to the capital purchases on a prioritized basis by the capital review committee.
Towarnicki used a graph of past, current, and projected fiscal year rates and said, “2023, ’24, ’25, we’re going to be hitting a period of some increases, so we’ll see where that ultimately leads.”
Overall, Towarnicki said the FY23 budget “continues the practice of the enterprise operations balancing internally, utility fund transfers when available to help balance in the GF (general fund), and use of FB (fund balance) as available, all while attempting to keep policy-directed minimum balances and reserves intact.
“That process, however, is getting increasingly difficult while attempting to maintain reserves, without increasing revenue, reducing services, or combinations. Of particular importance is the fact that the FY23 general fund budget, if you look at the numbers there is a funding gap between revenue and expenses of $6,865,961. That funding gap this year is closed by use of about $3.8 million in fund balance and $3 million in ARPA funds.”
Due to the pandemic, he said the unassigned fund balance at the end of FY21 was unusually high, around $7.4 million. It is usually more in the area of $1.5 to $2 million.
“With this number here, $6.8 million being the gap, just think about that. If we balance this year, we’re pulling the fund balance down to the 10 percent reserve. Assuming that, as the ’22 audit is done, we put another $2.5 million into fund balance, and that represents what we can transfer next year to balance the FY24 budget, that’s still going to leave a $3- to $4 million shortfall in the general fund budget, and with the inability to transfer from utilities, something’s going to have to happen.
“I think this, to me, is a pretty clear picture that somewhere down the road, and it could very well be next year, we may be in a position where if you’re going to balance without raising taxes, fees, or anything like that, we’re going to have to cut significantly.”
He noted the city’s three largest expense areas are the general fund, public safety, and education and, in the general fund budget “our three biggest chunks are education, police, and fire.”
Council voted to set a public hearing on the budget during its regular meeting on May 10. The meeting will begin at 7 p.m. in council chambers.
In other matters, the council:
*Heard information related to the possible use of ARPA funds for Uptown renewal. City Public Information Officer Kendall Davis said the city received 122 total responses to an online survey about how people would like to see ARPA funding spent. Of those, affordable housing was the most popular, with 22.9 percent of the vote. A homeless shelter/recovery center and direct financial relief for small businesses each received 16.5 percent of the vote, while other responses, including a city rebranding campaign and minority business support, garnered fewer votes.
Monday said the city’s original suggestion of allocating $4.5 million in ARPA funds to Uptown revitalization remained the same: $1 million for property acquisition; $750,000 for development of a public attraction such as a park; $500,000 for support of Uptown Partnership (UP); $250,000 for the Chamber of Commerce and CPEG’s façade improvement program; $250,000 for Uptown property maintenance enforcement; $25,000 for uptown parking; and $1 million in utility waiver incentives for existing or new businesses.
He said city staff proposed the grants be administered by a committee of five, consisting of two council members, one person from a list of three submitted by UP, one from a list of three submitted by the chamber/CPEG, and one at-large appointment taken from resident applicants.
Lawson noted that two council meetings ago, “there was the misconception that the Uptown group had asked for this money. That is incorrect. It needs to be stated publicly that it is incorrect.” Instead, she said, city staff asked UP to present a budget on what that organization would do if allocated the money. “Perhaps the articulation of how that information was given was done very poorly, not just on one part, on all parts, and that needs to be corrected. We as a city know that we have to invest in ourselves.”
Pearson expressed concerns about what she said is the small size of the committee, which would allow only a few residents to participate. Several council members asked questions pertaining to conflicts of interest that members of the committee may encounter as entities applied for the utility waiver program.
Council took no action on the matter during the meeting.
*Heard an overview of the April 25 Southside neighborhood tour and meeting.
*Approved the minutes from the April 12 meeting.
*Read and presented a proclamation recognizing the week of May 1-7, 2022 as National Correctional Officers and Employees Week.
*Recognized May 2022 as Guillian-Barre Syndrome and Chronis Inflammatory Demyelinating Polyneuropathy awareness month.
*Read and presented a proclamation recognizing May 2022 as Building Safety Month.
*Heard an update from Taxing Authority Consulting Services (TACS) on efforts related to delinquent tax collections and approved a resolution authorizing the city treasurer to employ the services of a private collection attorney to help collect delinquent taxes.
*Conducted a public hearing on the 2021 update of the Martinsville-Henry County Solid Waste Management Plan, and unanimously voted to adopt the plan update, with Martin abstaining from the vote.
*Adopted on first reading Ordinance 2022-3, enacting or amending certain sections of the city code regarding the use of electric scooters, and heard a presentation from a representative of Bird, an electric scooter rental company, about a plan to introduce scooters to the city.
*Unanimously approved allocating $500,000 in ARPA funds to city demolition projects.
*Selected nominations for membership on the Virginia Municipal League 2022 Policy Committees.