Newport News could end fiscal year with extra money
If trends for revenues and expenses in Newport News continue, the city could end up with a positive budget balance despite the pandemic.
The city created its fiscal year 2021 budget in the early stages of the pandemic and has repeatedly referenced its commitment to living within the revenues that it generates. The major revenues — real estate, personal property and machinery and tool taxes — have remained largely unaffected by the pandemic, Lisa J. Cipriano, the city’s budget director, told City Council at the Feb. 23 work session.
“You’ve heard very frequently about the hot real estate market — it’s true for Newport News. We are closing in right now, in February, on collecting the full $1.7 million that we had estimated for the whole fiscal year,” Cipriano said during a presentation of the second-quarter financial report.
Properties in the city spend about 21 days on the market before they’re sold, with the most popular in the $150,000-$200,000 range.
She said the local economy has shown signs of strength and improvement.
In June, and again in December, the treasurer offered a payment arrangement program that gave citizens and businesses additional time to pay taxes without penalty or interest. The first time, there was about $2 million worth of taxes in applications, but by December, only about $280,000 was postponed, Cipriano said. All but $16,000 has been collected from the June postponements. The December postponements were collected Feb. 5 and about 8% of the $280,000 is still outstanding.
If the current trends in real estate, personal property, machinery and tools, sales and grantors tax continue through June, all of the major revenues will be more than was estimated when the budget was created.
Sales tax could generate about $1.9 million more than the city expected.
Cipriano attributed the overage, in part, to a 2018 Supreme Court ruling that allowed states to apply sales tax to online purchases even when the retailer is not based in the state where the consumer is located. Currently, sales tax collections are averaging about $175,000 more per month than last year.
Some of the city’s major sources of revenue have not fared as well. Revenue from public gatherings, which include things such as amusements, lodging, car rental and festivals has gone down as in-person events have been canceled or postponed creating a shortfall of about $5.2 million from the initial projection.
Cipriano said that with fewer people on the road, the city has generated less money from traffic enforcement. The city also saw fewer people calling 911 and being taken to the hospital.
The city is watching the Business, Professional and Occupational License taxes due in March. The category has been a strong source of revenue the past three years, but it includes retailers and wholesalers and professionals, and has been inconsistent because of business closures during the pandemic.
“This will probably be a very mixed bag. Retailers are in this group, and we expect to see a strong performance there, but businesses have closed and we’re anticipating some offsets,” Cipriano said.
“When you take our very strong performing tax base and combine it with these items that are very specifically related to the pandemic, we’re looking at a $7.1 million revenue shortfall, for right now,” Cipriano said. “We hope it gets better, of course, with the vaccine and continued careful masking and social distancing and all the other strong behaviors that we’ve learned over the last year.”
“Every month it changes and so we just have to look at it on a month-to-month basis. We look at our revenues every single day and the plan is to continue revenue restrictions until we are sure that our revenue base is strong,” Cipriano said.
Last year, the city instituted a hiring freeze on all positions except those deemed essential and critical and limited its expenditures. The freeze has remained in effect throughout the year, saving the city about $8.3 million from its operating budget.