The economic effects of the coronavirus pandemic are backing Loudoun towns into a corner of decreased spending, abandoned rake hikes and postponed salary bumps.
The Middleburg Town Council on April 9 voted to adopt its $5.66 million Fiscal Year 2021 budget with a $624,000 spending freeze. A day earlier, the Purcellville Town Council discussed the option to adopt Town Manager David Mekarski’s revised budget—one that’s down by $1.16 million from the originally-proposed spending plan and does away with a suggested 2-cent real estate tax rate increase, a half-cent Fireman’s Field special tax district rate increase, a 1-percent meals tax rate increase and 5-percent utility rate hikes. Once adopted, that budget—called an interim emergency FY21 budget—would apply strictly to the first quarter of the next fiscal year.
The $1.16 million reduction in Purcellville’s proposed $18.99 million budget includes an expected $300,000 expected drop in real estate tax revenue, a $75,000 expected drop in the special tax district revenue, the elimination of a $305,000 transfer from the general fund to the sewer fund and a $480,000 drop in meals tax revenue—revenue that accounts for about 11 percent of the town’s total operating budget.
To compensate for loss of revenue in the next fiscal year, the town would need to reduce its operating budget expenditures.
That might include reducing planned salary increases from 3 to 1.5 percent, deferral of a $175,000 transportation study and a reduction in the number of full-time equivalent positions from 87 to 85. The town might also defer some Capital Improvement Plan projects.
Mekarski’s new proposed Capital Improvement Plan for the next fiscal year totals $1.19 million, which is $334,000 less that what he originally proposed and $11.33 million less than what the town budgeted for when the Town Council adopted this year’s budget.
When Mayor Kwasi Fraser asked if that deferral of capital improvement projects, at least in the first quarter of Fiscal Year 2021, might put the town at risk, Mekarski said there were no projects scheduled for the next 12 months that, if delayed, would cause concern.
The Town Council will need to adopt the Fiscal Year 2021 budget by June 9. Mekarski said that once that interim emergency budget is adopted, the council would have to reconvene in August work sessions to lock down a complete budget before Oct. 1. He said the council at that point could also adopt a budget that applies to the second quarter of the fiscal year, and then another for quarter three and finally another for quarter four.
The Middleburg Town Council last Thursday also voted to adopt its Fiscal Year 2021 budget, which is about $170,000 lower than the current spending plan and includes a $624,000 spending freeze to account to buffer an expected reduction in revenue from the business license tax, the occupancy tax and the meals tax. In Middleburg, meals tax revenue accounts for about 18 percent of the revenue in the town’s operating budget.
To compensate for an expected reduction in those revenues in at least the first portion of Fiscal Year 2021, the spending freeze reduces salary and merit increases by about $59,000, reduces marketing efforts by $75,000, places a $450,000 freeze in the Town Hall replacement project, and takes out $40,000 originally set aside to support the town’s second running of the 1000 Miglia rally race. Town Administrator Danny Davis said that event might be postponed or canceled for 2020.
Combined with contingent revenue already built into the new budget, the total money to be held in reserve until the Town Council takes further action is $952,000.
After a discussion surrounding the necessity to postpone the 3-percent salary increase for town staffers, the council opted to reconsider that portion of the spending freeze at its first meeting in May.
“It’s not about punishing anybody, it’s about being fiscally prudent,” said Councilman Philip Miller about the temporary hold on town staff pay increases.