By Debbie Adams
Vinton Town Council held its first ever virtual meeting on April 21. Town Council and members of the town Leadership Team participated via Zoom, some from their offices in the Municipal Building, others from their homes. The public had access to view the meeting through livestreaming on the town’s Facebook page and was invited to register in advance to join the meeting through Zoom if they had comments to make.
Mayor Brad Grose introduced some levity into the unprecedented situation by joining in from home wearing a tuxedo. There were comments on “pandemic attire” and a question about how many participants were wearing shoes.
Council soon got down to the serious business at hand – modifying the town’s current FY20 and upcoming FY21 budgets because of reductions in revenue due to the COVID-19 pandemic. With citizens asked to “Stay Home” and many businesses closed or curtailed, many sources of revenue have been dramatically reduced for local governments.
Finance Director Treasurer Anne Cantrell led council through a briefing on the town’s financial state during a budget work session which followed the regular council meeting. She focused first on what is forecast to happen to the town’s main revenue sources this year since economy-driven revenue comprises about 60-70 percent of the FY20 General Fund Budget.
The meals tax is the single largest source of local revenue in the General Fund. Staff estimates a 43 percent loss of monthly revenue from March through June 2020, and a FY21 percent budget reduction of 12.47 percent. While the meals tax was expected to bring in $1.2 million per the budget, the projection now is that the revenue will be $1.1 million.
Cantrell shared statistics based on surveys from local businesses showing an average loss of 15 percent in revenues for “fast food” restaurants, and a whopping 80 percent for “sit down” restaurants. It is uncertain what will happen in the coming months; however, Cantrell stated staff anticipates a slow recovery through January 2021 once the economy reopens.
The state sales tax is the town’s second largest single source of revenue. While staff estimates meeting the FY20 budget due to an outperforming economy last fall and winter and bulk buying in March, they anticipate a “stark decline” for April-June. Estimates for FY21 are a for a budget reduction of 13.6 percent.
The town was already set to see a decline is sales tax revenues in FY20 due to the expired Gainsharing Agreement with Roanoke County that reduced the percentage of county sales tax the town receives from 11.77 percent to 8.64 percent.
Communication sales and use tax is the statewide 5 percent tax on telephone services and cable/satellite television and radio services, including the E-911 75 cents charged per land line or cell phone. Cantrell said this revenue source was declining before COVID-19 as more people switch to the Internet from traditional cable. This is the town’s third largest source of revenue and is expected to decrease by about $33,000.
Cantrell did share some good news about the town’s fourth largest source of local revenue – the business license tax, known as BPOL, which generated about $100,000 more than anticipated. Business licenses are filed each January; a portion of the gross receipts from business generated within the Town of Vinton is taxed. (Any business under $125,000 is only charged a $30 application fee.)
FY20 estimates for BPOL greatly exceeded the budget which, she said, will aid losses in other major categories
The fifth largest source of revenue in Vinton comes from personal property tax and vehicle license fees. Due to COVID-19, staff estimates FY20 is one month behind on normal collection. They estimate a budget reduction of 2 percent.
The National Automobile Dealers Association (NADA) is projecting vehicle prices to decrease from 2-10 percent in 2020, lowering their value and thus reducing taxes collected. There is an anticipated delay in these payments as well and a delay in the purchase of new vehicles with a higher dollar value.
Pari-mutuel taxes from off track betting through Rosie’s Gaming Emporium has quickly become the sixth largest source of local revenue since its opening a year ago. This tax is generated off a percentage of the total pool of wagers that a person is participating in at the Vinton location. Before COVID-19 the town was estimating approximately $613,000 in annual revenue for FY20. With Rosie’s temporary closing, FY21 estimates are for a 26.83 percent decrease with a budget reduction of 7 percent.
Real estate taxes are the seventh largest source of revenue for the town. Staff is not expecting to see a big swing based on the 2008-2010 recession, just a small decrease.
Banks in Virginia are required to pay a franchise tax on the net capital of the bank, which is pro-rated to localities based on local deposits. FY21 estimates are for a budget decrease of 13 percent.
Cigarette taxes are the ninth largest source of revenue. Cigarette suppliers are required to affix state and local stamps to each carton sold. FY20 will most likely show a minor loss due to COVID-19.
In conclusion, Cantrell is anticipating an unexpected shortfall of $166,272 in revenues for FY20 – 2 percent of the town’s General Fund budget.
Town Manager Barry Thompson has already taken steps to deal with the shortfall. Department vacancies have been frozen through June 30. Non-essential spending has been frozen as well. Travel and training expenses have been delayed, along with capital projects and items not yet started or purchased. Maintenance paving has been reduced for the current year. Personnel have been re-allocated where work has dissolved from COVID-19 to other areas/departments needing assistance.
Cantrell went on to present an expenditure summary broken down by department indicating whether each is over or under budget for FY20. She went on to explain the required “Unassigned Fund Balance.” Localities are expected to maintain a 60-day “rainy day fund” in reserve as if no revenues were coming into the town coffers. The Unassigned Fund Balance is projected to be down from June 2019 to $2.7 million in June 2020, still far in excess of what is required (about $1.4 million).
Utility fund revenues have decreased due to an 80 percent reduction in consumption by the town’s third highest water consumer, Cardinal Glass, and decreased consumption at schools and businesses. The estimated revenue loss for FY20 is $150,000. However, the good news is that the Utility Fund is estimated to be $236,800 under budget due to Public Works being down several positions.
FY21 budget impacts were the final topic of discussion. The FY21 revenue forecast is $7.1 million – a reduction of $459,420 from the current budget (6.02 percent). After reducing all operation requests to prior year amounts and reducing capital to grant requirements only, the difference at this time between the revenue and expenditure budgets is approximately $225,000.
Other budget impacts discussed included a VRS rate increase, different scenarios for dealing with health insurance premium increases, the inability to fund salary increases for employees, and CIP reductions.
Staff identified possible budget reductions for council to consider to make up the difference, ranging from leaving vacant positions unfilled, to changes to the bulk pick-up and recycling schedules, to cutting back on building and grounds maintenance.
Thompson said that the Leadership Team and Finance Committee would continue to consider options and return to council with a balanced budget. The final budget adoption has been delayed until late June this year.