A Troubling Budget Shortfall

I have always believed that budgeting is primarily a question of priorities. Of course, when you sit down to prepare a budget for the year there are some immediate expense categories that are a given. We must pay our bills (utilities, debt interest, etc.), and provide for salaries or else the city really cannot function. After those items, everything else is subject to a division of a pot of money. Difficult questions need to be addressed – how much funding should go to schools, safety, maintenance, capital improvement, transportation and roads, lowering debt, etc. Should we create new sidewalks, curb cuts and bike lanes or should we divert that money to repaving and road improvement? Are we willing to sacrifice some maintenance of public parks in order to assure that trash, recycling and brush are regularly collected?

Creating, understanding and approving a budget cannot be a passive activity. It is a complicated task that not only reflects on the priorities of the city for the next year, but for the long term health of the city as well. For dozens of years, I have essentially served of a COO of an organization with the same budgetary questions- though obviously on a smaller level. The construction of a budget is comparable to a game of chess – you need to think about both the current impact and the future impact. Unfortunately, I did not find Roanoke City’s budget to be as transparent as I think is necessary. In several places, revenue/expenses are bundled, and it can be very difficult ascertain where revenues offset expenses. Additionally, though there is a new “assets management department” there is no mention of city assets, their worth, cost or necessity.

Out of curiosity, I did a comparison of Roanoke City’s and Roanoke County’s budget in terms of major categories of income and expense. The City and the County are roughly equal in population and though the County has and overall higher net income per household the City’s higher tax rate may make the income equivalent. As a caveat, please understand that the following numbers I extracted from the available online information and they may not be completely accurate, nonetheless they are striking. On the income side, I looked at the following categories – property tax(real estate), personal property tax, public service corporation tax, meals tax, utility tax, vehicle license fee, local retail tax, BPOL, transient occupancy tax, communications tax, cigarette tax and solid waste/storm water fees. Here are the rounded numbers for last year:

City                                                                 County

Real estate - $140 million                                                       $143 million

Personal property - $33.4 million                                           $49 million

PS Corporation - $6.9 million                                                $8.25 million

Meals  -                $28.2 million                                             $6.36 million

Utility                   $9.3 million                                               $3.8 million

Vehicle License - $3.1 million                                               $2.5 million

Local Retail          $18.3 million                                            $21.1 million

BPOL -                  $15.1 million                                            $8.3 million

Transient -             $4.3 million                                              $3.1 million

Communications - $4.6 million                                              $3.4 million

Cigarette -              $1.8 million                                             $1.1 million

Solid waste etc. - $11.5 million                                              $2 million

Total Broad, non-grant income –

Roanoke City - $276.5 million                                               Roanoke County - $251.91 million

Now, let’s look at major expenses side by side. This is a bit more difficult since the two budgets categorize differently but I have done my best to make them comparable. The major categories are schools, safety, transportation/roads, Health and Human services, parks/entertainment, enterprise/environmental utility and debt service. (It is almost impossible to compare salaries as they are broken down among each department and are generally listed as an aggregate whole. Also, Roanoke County’s budget appears to be approximately $2 million dollars higher but Roanoke County includes the overall school budget in that figure while Roanoke City lists them separately.)

The school budgets tend to be the most controversial, so a more intense understanding is necessary. The City and the County have very close to the same number of schoolchildren. I am not dividing this out on a per pupil basis because some children require more expensive services than others (ESL, Special Ed, Gifted, physically handicapped etc.) and the city has a greater proportion of these children. This means that the 90-95% of children that do not fall in these categories receive even less money per pupil in the City. The budgets report that the city awarded the schools $108 million and the County gave the schools $97 million, but this figure is misleading. There are three major categories included in the city school budget that are primarily covered by the County in its budget. In its budget, the City schools are required by City Council to repay approximately $5.5 million for the federally mandated Child Safety Act ( meeting the needs of children with significant health/emotional needs) while the County schools only pay $500,000 back to the County for its share of the cost. In the County this is a flat cost annually regardless of the expense. Roanoke City Schools are required to pay the city for their school resource officers totaling $1.5 million while Roanoke County Schools pay $180,000 and the County covers the remainder. Roanoke City Schools are required to pay 100% of their debt service which is $11 – $12.5 million dollars (I have found both numbers.) while Roanoke County pays approximately 22% of its debt service which totals $4.125 million out of $20 million. The bottom line is that Roanoke City Schools pay $14.695 more than Roanoke County in equal fees to the city. In reality, when apples are compared to apples, Roanoke City funds its schools $3.695 million dollars less that the County. This is rarely discussed and should be a huge issue.

Roanoke City funds its police, fire-EMS and Sheriff’s division at approximately $99 million while Roanoke County funds the equivalent departments at $86.5 million. Unfortunately, this area is very difficult to determine a clear equivalency. Certainly, Roanoke City has an increased financial obligation due to the maintenance of the Roanoke City Jail whereas the County uses the either the Roanoke County/Salem shared jail or the Western Regional jail where costs are shared.

Due to Virginia State law, VDOT does not operate in cities. Roanoke City therefore spends between $10-$12 million more on public transit and roads than the County does. Roanoke City spends approximately $3.5 million more than the County does on Health and Human services. Additionally, the City spends about $2.5 million more on parks and entertainment (including the Berglund Center). The City also spends about $4 million more on Enterprise and Environmental Utility costs. In regards to debt service, the city generally does better than the County – the County spends about $23.7 million while the city spends $28.5 million but with the payback to the city of approximately $11 million from the schools the real figure is $17.5 million.

I share all of these figures in order to be as transparent with the figures as I can. All of these figures added up subtracted from revenue show that in these major categories it costs $3-5 million more to run the city. Simultaneously, the city, due to its lower overall socio-economic mean, receives more grant money. In the end, though in different categories, the City and the County are roughly equivalent when it comes to revenue and expenses.

I do not believe that the City has a real revenue problem. Clearly, due to the lack of long term planning, there is a short-term budget crisis in order to resolve deferred maintenance issues and what I believe was a failure to convert a short-term loan to a long-term loan. Rather than a real estate tax increase when we already have the highest rate in the area, I believe we need very strict spending controls coupled with an unusual amount of Council oversight. Though the day-to-day flow of the budget is the job of the City Manager, in the end the Council has fiduciary responsibility. We need to have serious conversations about overtime hours outside of areas of safety and economic development. Any discretionary or unneeded “amenity” expenses should be seriously reviewed. I truly want to believe that any lack of transparency in the budget is a long-term structural issue of how the budget has been developed, but I believe that taxpayers have the right to know exactly where all money is spent. If I am elected to Council I will strongly advocate for a significantly more detailed and easier to read budget. Transparency matters.

There has been a lot of discussion as to how the City ended up in this situation. Some people choose to blame the previous City Manager; some choose to say it was the responsibility of previous Councils to catch these issues, and some say there was simply an honest effort to make the City the best that it could be in the present and hoped that the long-term issues would be somehow resolved. I think there was a confluence of many issues that led to the reality we face today, but I do not believe that assigning blame will help the situation. I hope that we can develop a combination of strict spending controls, an increase in economic growth and a program of public/private partnerships that can ease and ultimately resolve our current shortfall. We are headed for some lean years, but with conscientious leadership we will be able to return to a higher level of support for our schools, safety programs and infrastructure.