Richmond’s FY2020 Budget

On March 6th, the Mayor’s five-month process to create the budget then became City Council’s to dissect, interpret, and analyze. Over the course of the past six weeks, City Council has been inundated with presentations, data, reports, and responses about the Mayor’s Proposed Budget. Mayor Stoney has challenged City Council to fund the following priorities:

1. Richmond Public Schools Strategic Plan — $18.2m
2. Richmond Public Schools Maintenance — $19m
3. Richmond Streets & Sidewalks — $16.1m
4. Affordable Housing Trust Fund — $2.9m
5. Eviction Prevention Program
6. GRTC Expansion of Service and Routes
7. Cost of Living Raises for City Employees

This proposal has an increase of 5.3% in spending from last years budget, however, our revenues only increased by 2%. This is where the proposed increases in Real Estate Taxes from $1.20 to $1.29 and the Cigarette Tax of $0.50 per pack came from. These generate more than $24 million to support the priorities outlined in the Mayor’s Budget.

On March 6th, the Mayor’s Budget was placed before City Council and therefore became our budget to navigate the charge set forth in the presentation. There are a few pieces of clarification that need to be addressed.

1. The only way to fund schools is through a tax increase. This is not entirely accurate. That is how the Mayor proposed we fund these priorities. Not supporting a tax increase DOES NOT mean City Council does not support funding schools. City Council has ways in which to explore funding these priorities without raising taxes. That is my goal.
2. Its time for wealthy neighborhoods to help the poor neighborhoods. They can afford it. While some families may be able to afford a tax increase, that is not the case for everyone. Utility rates are increasing and this proposed tax increase will hit many hard-working lower and middle-class families hard. Households across our city are living paycheck-to-paycheck or on fixed incomes. These increases combine to make tough decisions between what they can and can’t afford.

Many residents and families in the First District have voiced their advocacy for fully funding schools. In fact, I have not received a single request to not improve RPS. The First District has been a vocal leader for change in improving our schools. Annually, the First District generates more than 21% of real estate revenue generated by the City of Richmond. We are strong supporters for all city schools, actively involved with many volunteer efforts, non-profit organizations, and after-school programs around the city. That is why

The combination of an Eviction Prevention Program and a significant real estate tax increase is a dangerous combination. The Eviction Prevention Program is working to address a huge issue of high levels of evictions of families across our city, impacted typically by the need for small amounts of money to cover rent. A real estate tax increase of 7.5% will permanently increase many rents by far more than the amount of funding needed to avoid eviction. We are going to put more families at risk of eviction if we increase the taxes on the places they live.

Last year, City Council approved a balanced budget that had revenues and expenditures at a level of $719 million. The Mayor’s budget has ballooned to $753 million, an increase of more than $38 million, a 5.3% increase. Richmond is not growing at a rate that can afford this increase. In fact, both Henrico and Chesterfield approved budget increases of only 3% in their most recent budgets. Over the past two budget cycles, City Council has approved increases for many agencies, departments, and schools, justified to fill service gaps and needs. It is time to prioritize our funding, hold City Hall accountable, and look for ways to be more efficient. The charge to fund the Mayor’s priorities, with these costs, is not one that is easily done. Over the past month, I have worked with my fellow City Council members and staff to identify sustainable, reasonable, and valid options to improve the budget for City Hall. Here is my proposal.

1. Support Hilbert’s 1.5% Budget Reduction ($7.5 million budget reduction) — this is not a budget cut or reduction exactly, it is more of a challenge for the Administration to find ways to operate at its current budget funding level. There are increases in expenses proposed across most departments. It is our charge to the City to maintain the operations asked us to fund last year again and make it work again.
2. Reduce Vacancy Funding ($4.9 million budget reduction) — in the Mayor’s budget is a request to fund more than $5.5 million in new positions. There is funding for more than 550 currently funded vacant positions. My proposal simply removes the added new positions that are above the current number of vacant positions and restores the funding to close to the amount from last years budget. Ultimately, use the positions you already have available. Furthermore, there is more than 12% turnover citywide in positions, which means that throughout the year, 1 in 9 employees will leave employment in City Hall. Thus, this reduction will have no impact on current staffing levels or additional staffing needs as at no point will the City be fully staffed.
3. Voluntary Retirement Incentive Program ($3 million budget reduction) — governments and businesses across the country use this type of program to encourage employees that are eligible to retire to do so. The City last did this program in 2015, and as was the case then, there are approximately 200 employees eligible to retire today in City Hall. In 2015, this program saved $3.5 million and I am proposing that we implement the same program with slightly more conservative estimates. This program encourages those employees that have served our City well to go and enjoy their retirement.
4. Delinquent Property Tax Sale ($3 million revenue increase) — every quarter, the City of Richmond auctions off tax-delinquent properties. Currently, there is a required development agreement that has caused a huge delay in processing these transactions, in fact, it has also created another barrier and hurdle that has lowered demand in people buying these properties. By addressing this issue, we can sell more revenue losing properties to be converted into revenue-generating homes again.
5. “Dreams 4 RPS” Accountability Fund — several members have suggested that Council fully fund of the RPS Strategic Plan in a special fund that can be used for the specific items outlined in the budget. This creates a partnership between City Council, RPS, and the School Board to publicly work on these priorities together.

These reductions and increases create a balanced approach to fully fund all of the Mayor’s highlighted priorities while not increasing taxes. This proposal leverages other Councilmembers’ concepts, ideas, and approaches while also providing further explanation as to impact and approach. The theme outlined above is to charge the Administration in City Hall to operate in FY2020 at a level of staffing and funding close to what we are currently operating under. The increases proposed in both staffing and expenses cannot be justified with such a significant need for funding for Schools and investing in our streets. To become a performance-based organization, which City Council and City Hall are both committed to building, we must hold constant our current operations before making further changes.

What about the Cigarette Tax?

The most common reason to implement a Cigarette Tax is to curb people from smoking. The higher the cost of cigarettes, the lower the desire to smoke will be, goes the reasoning. Virginia is a Dillon Rule state, this means there are separate cities and counties which are only allowed the powers to create laws explicitly defined by the General Assembly. Thus, only cities CAN impose a cigarette tax and the counties CANNOT (*If you think this is crazy, I can go on for days about how this impacts other city operations!). This is important because if Richmond imposes a cigarette tax, then smokers will simply go across the county line to buy cheaper cigarettes. Think about how most of us buy gasoline, we will drive an extra half mile to buy gasoline that is $0.05 cheaper per gallon. Smokers will do the same for cheaper cigarettes, taking with them their other purchases as well.

I am way in the weeds right now but wanted to make this point clear.

Making Richmond a healthier city is a goal many of us share. If we are going to implement a Cigarette Tax, then do this to support the goal of improving our health, not just a way to grab revenue. Smoking Diversion and Smoking Cessation programs support people making healthier decisions to not smoke and help those that want to stop smoking do so. If Richmond is to implement a Cigarette Tax, let’s use this revenue to achieve those goals. A Cigarette Tax is a declining revenue source that is inconsistent and not dependable year after year. I would like for the City to explore a Cigarette Tax in partnership with VCU, VCU Health, and the Richmond City Health District to support smoking diversion and cessation to make our city healthier. Together, these combine to achieve an impact that has significant socioeconomic impacts. Approximately 37% of smokers are low-income households. Helping them quit smoking means more money in their pockets, drastically improved health outcomes and creates further positive impacts. I am concerned by the proposals for implementing a Cigarette Tax to meet revenue needs for our budget, mostly due to the reality that if the outcome of implementing this tax is successful in reducing smoking and the purchase of cigarettes, then the revenue projects will never be met. It is self-defeating.

In closing, the budget approach outlined above makes considerable reductions to the Mayor’s budget that align closely with the budget we are currently operating in. There is not a call to fire anyone or remove jobs. There is no reduction in current staffing or funding for current operations. It is focused on accountable government operations built on efficiencies and performance. Yet at the same time, fully funding the Mayor’s outlined priorities for RPS Maintenance, the “Dreams 4 RPS” Strategic Plan, Streets and Sidewalks, Eviction Prevention Program, expansion of GRTC routes, Affordable Housing, and employee raises. There will be many conversations and discussions about how we finalize the FY2020 budget, but there is a way to make everything work without increasing the burden on our residents.