Norfolk sees a welcome rise in tax revenues
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By Harry Minium, The Virginian-Pilot, Norfolk, Va.
Jan. 27--NORFOLK -- In spite of the continued deterioration of the housing market and a decline in federal and state aid, the city's financial outlook is much brighter than it was a year ago, City Manager Marcus Jones told the City Council this week.
Frugal spending and increases in some tax revenues, including from sales, meals and hotel taxes, have helped the city's bottom line, he said.
The current budget shows a slight surplus, and the projected shortfall in the budget he will propose in April is just $7 million, Jones said.
It's a much different picture from what the city faced in March, when Jones projected a $32 million deficit for this year's budget.
"We're in much better shape than we were," said Jones, who became city manager in February.
By law, Jones is required to submit balanced budgets, so he'll have to address that $7 million gap.
Jones said sales tax revenue increased 0.6 percent in the fiscal year that ended in June, the first increase in three years. Meals tax revenue, which had declined for two years, was up 4.3 percent, and hotel tax revenue was up 2.5 percent, ending a three-year decline.
Looking ahead, real estate tax revenue, which provides 25 percent of the city's general fund, is expected to decline about 2.5 percent in the budget that begins July 1, and residential real estate assessments will fall as much as 3.5 percent, he said.
That would be the third consecutive year that assessments have fallen. "That's unheard of," Jones said. "We've never had assessments fall three years in a row."
On July 1, 2010, an average homeowner's real estate tax bill was $2,570. If residential rates fall by 3.5 percent, the average bill would drop to about $2,270 beginning July 1, a savings of $300 per home.
Real estate tax revenue hit an all-time high of $192 million two years ago and is projected to fall to about $175 million overall next year. Jones said the real-estate tax rate would have to increase by 10 cents, from $1.11 per $100 of assessed value to $1.21, to get back to the $192 million level.
"But no one is suggesting a real estate tax increase," he said.
Jones said the projected budget gap is small only because of surpluses in previous budgets and because the city has spent less than budgeted.