Budget surpluses: City Council’s dirty little secret

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The City of Charlottesville recently reported a substantial budget surplus for fiscal year 2006. However, the only thing remarkable about this surplus is that it was actually reported in the local press. Collecting surplus tax revenues has been a dirty little secret for more than a decade.

According to the “Historical Revenues” data posted on the City’s website, between 1996 and 2005 the City government collected an average of over $4 million per year in excess of stated budget requirements for a cumulative total surplus of about $42.8 million. Actual revenue collections for 2006 have not yet been posted, but will certainly add to this total.
The persistence of such surpluses year after year calls into question not only the necessity for the tax increases of the past 10 years, but also the process by which the need for such tax increases was evaluated.

City Council does not have a good system for evaluating spending requirements and the attendant need for tax increases. Instead, City Council has simply permitted a virtual tidal wave of revenues from rising real property assessments to flow into City coffers with no attempt to assess the need for those additional tax revenues.

If you doubt this conclusion, consider the following. Had the real estate market been stagnant rather than appreciating over the past 10 years, City Council would have had to set the tax rate at $2.33 to support the current budget. Even the most ardent proponents of government spending would not likely have shown the political courage to raise the tax rate by $0.12 per year for 10 consecutive years. The people would have demanded an accounting.

Yet City Council has in fact specifically voted to raise those taxes each year because Virginia law otherwise requires the tax rate to be reduced to compensate for the increase in assessed value. Our legislators in Richmond grasp what many City Councilors do not; namely, that, in the absence of demonstrated need, it is fundamentally unfair to tax paper wealth unrelated to a person’s present ability to pay his taxes. However, the law is poorly understood; thus, City Councilors have been able to mask their votes to raise taxes by reducing the tax rate slightly and claiming falsely to be providing tax relief.

It gets worse. Each year City Council specifically directs the City Manager to program those tax increases into the budget and to publicize the budget before the necessity for a tax increase has been demonstrated. This process is exactly backwards and virtually guarantees that public hearings on the budget will be highly politicized.

Most City Councilors seem to realize that we simply cannot sustain the present rate of growth in City spending. But none seem willing or able to demand more of the City Manager, the one employee specifically paid to find efficiencies in government.

Instead, criticisms of the process have been met with varying degrees of silence, defensiveness, misinformation and even personal attacks. But facts are pesky little critters. Persistent revenue surpluses juxtaposed with a skyrocketing tax burden stand as sentinels to an increasingly unresponsive and inefficient government. City Council, not the tax assessor, is wholly responsible for both.

Charlottesville may aspire to some mythical “world-class” status, but she will not survive solely as a haven for the underclass and an amusement park for the idle rich and the vagabond young. The community, in order to be a community, needs the civic virtues and dynamic energy of small business entrepreneurs and a broad middle class committed to the urban idea. Yet, it is precisely these two groups who are most at risk—insufficiently poor to qualify for special tax relief and insufficiently wealthy to endure the tax burden.

We do not need another program of “targeted” tax relief. We need a City Council willing to establish and enforce spending limits and to impose some long-term and long overdue fiscal discipline on City Hall.

Charles L. Weber, Jr. is a local attorney and the founder of the Charlottesville Taxpayers Association. He has resided in the Charlottesville area since 1993 and in the city since 1995.

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