Wednesday, November 18, 2009

Mayor Jones Announces Revised City Revenue Projections

~Outlines initial strategy to respond to projected revenue shortfall~

Mayor Dwight C. Jones today announced that city revenue projections for the current fiscal year (FY 2010) are tracking behind the officially adopted FY 2010 Budget. Reductions in state funding, as well as the drop in sales taxes, were cited as leading to an overall projected revenue shortfall of $10 million for FY 2010.

“The entire nation has been experiencing lingering effects of the recession and Richmond is no exception,” said Mayor Jones. “A number of key revenue sources weakened in FY 2009, and they are continuing to falter in the current year (FY 2010). Moreover, we have to be realistic and assume that the ripple effects will continue into FY 2011.”

The updated revenue estimates are based on revenue collections and economic data from the first quarter of FY 2010. The main driver in the lower-than-projected revenue is a decline in sales tax collections. The local option sales tax is $7.9 million less than projected and the state shared sales tax is $1.9 million less than projected. Another $2.6 million of the shortfall is a direct result of the state’s budget cuts announced in September 2009.

“We have anticipated a downward adjustment for some time in light of the sour economy,” Mayor Jones advised. “For the current year, the adjustment represents 1.7% less than the approved budget. What we are embarking on now is a number of strategies to help close the budget gap while keeping our fund balance intact.

“A number of upward revisions have helped to offset the declines the city is facing. Real estate tax, personal property tax, and delinquent fees and licenses are all tracking above the FY 2010 forecast.

“The city is also reviewing the best way to implement a new commercial tipping fee at the landfill, which is expected to offset some of the decline. We will continue to look for other ways to offset the projected declines.

“Further, I am recommending that we undertake targeted reductions and specific operational strategies rather than across-the-board cuts. Fortunately, a plan to control spending was already in place with our existing hiring freeze. Our department heads have also been charged with looking for day-to-day operating efficiencies, and I fully anticipate that we will realize savings through improved operations in the current fiscal year.

“I've assembled a strong leadership team bringing skills and experience from around the state and across the country. I have full confidence in their abilities to bring innovative ideas and to strengthen our operations. We've already proposed reorganizing to streamline our efforts and we are going to move forward by budgeting to the realities and presenting periodic changes as necessary,” Mayor Jones said.

There are remaining concerns about how further state budget cuts will impact the city’s overall budget. A two-year budget for the state will be presented to the General Assembly in December by the outgoing administration. Additionally, the state Department of Education has recently recalculated the composite index which determines state funding for the school system. Based on the new index, Richmond Public Schools could lose approximately $9 million in state funding beginning in 2011.

Mayor Jones is establishing a Council of Economic Advisors to help the city navigate the continuing financial challenges. The Mayor will also give residents the opportunity to weigh in on the tough decisions that will need to be made. He expects to have the advisors in place by the end of the year, and a citizen involvement process in place by the beginning of the year.

Richmond’s deputy chief administrative officer for Finance and Administration, Marcus Jones, will discuss additional details of the fiscal forecast and the city’s strategy for responding at the next meeting of the Finance Committee of the Richmond City Council on Thursday, November 19, 2009.

Contact: Michael Wallace, (804) 646-2772