Manassas is projected to have a budget shortfall of close to $1.15 million--almost $160,000 more than initial projections--for the 1999 fiscal year, city finance officials reported Wednesday, and the deficit will likely continue for the next two years.
Despite the shortfall, city officials say they are relieved that, because of midyear spending adjustments in several city departments, the deficit is not as large as it could have been. In 1999, departments have spent $350,000 less than they were budgeted. The higher deficit on the city's $60 million annual general fund budget resulted from the collection of fewer than estimated tax dollars.
"The bottom line: This is not as bad as we feared," Lawrence D. Hughes, city manager, said at a Finance Committee meeting.
Conservative spending and years of budget surpluses have left the city in a good position to handle this year's budget shortfall, said Patricia Weiler, city finance director. The deficit will be absorbed by an $11 million fund surplus.
Next year, the city probably will have to continue taking money from the fund balance. In the adopted budget for 2000, spending is expected to outstrip revenue by almost $1.8 million. Weiler said this is not cause for concern because the fund balance is expected to remain 15 percent of the total budget, a savings target set by the City Council.
Officials project that the budget shortfalls will continue into 2001 as a result of tentative accounting changes announced by a governmental standards-setting agency. Based on current spending figures, the city could be forced to budget $1.7 million more than in the past for potential leaves of absence by government and school employees.
"This change has no effect on how much the city spends on absence pay, but it is a huge change in the way we do our accounting," Hughes said. "It's a ludicrous way of accounting, one that has no basis in reality whatsoever. It's like assuming that everyone on staff either retires, goes on vacation or takes their sick leave--at the same time."
If the accounting change is adopted, it will hit schools the hardest, Hughes said--especially if the city is to stay within fund balance targets. "In the past, we have had positive balances on the budget, and we're going to restore that," Hughes said. "It will take efforts by the city and schools and might result in less money for our five-year school [budget]."
This year's larger budget shortfall came as a result of less tax revenue in 1999.
The city lost $250,000 in projected revenue when it chose to alter the billing cycle for car decals, a change that allows taxpayers to pay for decals and personal property taxes at the same time. Decreases in personal property tax and sales tax revenue totaling close to $500,000 also led to the deficit.
Although decreased tax revenue in 1999 was foreseen in part, allowing the city to cut some spending, Manassas was unable to slow spending enough to avoid the increased shortfall. "If we had known about the deficit in December, we would have reacted to it by slowing spending," Hughes said.
To make the city more responsive to revenue fluctuations and to facilitate midyear adjustments in the future, Hughes said he will review the budget monthly and present quarterly budget reports to the City Council. This year, neither measure was taken to avoid the shortfall.
The numbers for the 1999 budget are only an estimate, but financial planners do not expect significant changes to the reported $1.15 million shortfall.