Norfolk — Before the coronavirus epidemic hit, Norfolk’s top leaders were preparing the kind of budget government officials dream about.
The city expected to carry over money from the current year and was poised to see property values increase, which would mean millions more in revenue without increasing tax rates.
But that was before daily life ground to a halt and tax revenues from several critical sources — like retail, restaurants, events and performances — fell off a cliff due to quarantine measures aimed at stopping the spread of the coronavirus.
Now, Norfolk is staring down a budget that assumes a loss of $15 million in tax revenues by the end of June — goodbye end-of-year surplus — and $40 million in lost revenue for the next fiscal year, even with property values going up 3% and partially offsetting tax losses.
All in all, that leaves the city’s operational budget about 4.4% smaller than planned.
As the financial toll from the virus has come into view for Norfolk’s leaders, City Manager Chip Filer has put forward a budget proposal that includes some major cuts and shifts in spending — initially temporary, but which may become permanent, according to his presentation.
Filer’s current pitch doesn’t include changes to the city’s tax rates.
The plan must be approved by the City Council, which can make changes as it sees fit.
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Filer’s pitch includes continuing closures of services such as libraries and rec centers implemented in recent weeks as quarantine measures to fight the spread of COVID-19, which would reduce city expenses. This is coupled with the continued furloughs of 622 part-time employees who were largely working in departments that have gone dark.
But the proposal goes further than that, potentially seeking additional furloughs and service reductions in order to cover the city’s core services.
Notably, Filer wrote in his presentation that the city may need to divert millions earmarked for services for St. Paul’s public housing residents, who are still in the early stages of being relocated to make way for redevelopment of the area near downtown, as well as money meant for projects to fight flooding and sea level rise. A 2018 real estate tax hike earmarked the new money for those two efforts.
To keep the city on track and responding to things as they happen, Filer also pitched the idea of a semi-annual appropriation, starting the year with an austere appropriation to fully fund core services and scale back others.
Once his team could re-evaluate how much money is coming in halfway through the fiscal year, Filer would come back with a new request for funding for the remainder of the budget year, potentially restoring some suspended services if quarantine measures have lifted and revenues have stepped back up.
“This is an aggressive approach and we recognize that, but we also recognize its going to be easier to start the year in a very conservative stance financially and deal with the happy problem” of figuring out how to spend unexpected revenue, Filer told the council.
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The manager laid out a litany of possible cost-saving measures for the next year to balance the books, depending on how long the economic impacts drag on for, including:
- Re-opening only a few central libraries and rec centers;
- Freezing non-essential hires, continuing furloughs of part-time staff and implementing furloughs for non-essential full-time staff;
- Reducing funding for outside agencies that the city relies on for some services and eliminating grants for human services, arts and humanities; and
- Putting off non-essential capital projects like the long-discussed renovation of Chrysler Hall, initially slated to begin this year with $50 million in capital improvement funds.
Filer and the city council will be working for the next several weeks to put a dollar figure on each of those efforts and decide what steps the city will ultimately take.
“We want to get a very clear understanding at the staff level of council’s priorities for when we can get back to turning things back on," Filer said.
The reduction in city revenues also means funding for schools will automatically go down, under a funding formula. Norfolk Public Schools gets 29.55% of any taxes the city brings in.
However, Filer proposed taking a $15 million pot of money from selling the Lambert’s Point Golf Course that the city had been holding onto to fund future schools projects and letting the school district use that as it needs – either to offset the schools’ operational hit from the end of the current year and next year or use it for major projects.
Norfolk will have a digital public hearing May 6 for citizens to voice their thoughts on the proposed budget plans.
Ryan Murphy, 757-739-8582, ryan.murphy@pilotonline.com