With corporate revenue down, state cutbacks likely and uncertainty over war and the nation's economy, Manassas is calling on taxpayers to make ends meet in next year's proposed $74.5 million city budget.
At Monday night's City Council meeting, City Manager Lawrence D. Hughes proposed creating a cell phone tax of up to $3 a month on users; raising the lodging tax from 4 percent to 5 percent; and increasing the cigarette tax 10 cents, to 25 cents a pack. The three taxes could raise an estimated $518,000 annually, he said.
The City Council accepted Hughes's plan Monday night, saving their feedback for the first budget work session Tuesday night. The council will vote on the package in late April.
Hughes's plan doesn't call for real estate tax relief for homeowners. The proposed budget would maintain the current real estate tax rate at $1.20 per $100 of assessed value. Meanwhile, the assessment on the typical Manassas house rose about 16 percent, he said.
"The good news is for the amount of revenue lost, we didn't need to increase real estate tax rates," Hughes said.
John P. Grzejka, the revenue commissioner, said he won't know exactly how much typical families can expect their real estate tax bills to jump until at least next week. He said the average bill for a single-family house will increase by at least what it did last year: $389 without any tax cut.
Prince William County is considering a 4-cent real estate tax rate reduction, to $1.19 per $100 of assessed value, from $1.23. But even with the reduction, county tax bills will still be 12 percent higher because assessments rose nearly 16 percent.
Manassas Park City Manager David W. Reynal said he won't know until Tuesday whether his city will consider changing the real estate tax rate.
The single-biggest hit to Manassas is a $3.1 million revenue loss following Micron Technology Inc.'s purchase of the Dominion Semiconductor plant in April. When Toshiba Corp. sold the Dominion plant to Micron, it removed a lot of expensive equipment from the city. That cost Manassas about $2 million in machinery and tool taxes. Approximately $1 million more was lost because of the plant's declined real estate value.
"I don't think we've ever put together a budget with this much uncertainty," Hughes said. "When you look at the war on terrorism, the nervousness of the market and the uncertain economy, everything is just kind of on hold . . . not only here but throughout the state, the country and internationally."
The budget for fiscal 2004, which begins July 1, calls for a general 4 percent rise in spending, including an increase in pay and health care expenses for city workers. Hughes also proposed using $1.5 million of the city's savings to help make up for the revenue shortfall.
Hughes's budget calls for $200,000 toward the design phase of the planned George Mason Center for the Arts, $225,000 for infrastructure work in the city and $25,000 for other long-range planning.
Creston Owen, a major commercial landowner in Manassas, said he understands and supports Hughes's proposal to keep the real estate tax flat.
"Running the city is like running a business, you have to make sure revenues are even with expenses," he said. "Until they know what the future holds in store, they need to be conscious of their income levels and expenses, and I think right now the City Council is."
John Weber, former Manassas mayor and a real estate broker with Weber & Associates Realty, said he thinks the real estate tax could hurt the city if its not lowered.
"I think in light of last year's increase [in assessments], it could put a crunch on people having to pay real estate taxes in the city," Weber said. "Hopefully, the total tax bill increase could be kept to a minimum."
Weber said he would rather see the city increase the cell phone and lodging taxes than raise the burden on real estate owners.
"These are tough times for government and for business, so what the council has to do is balance the equities and come up with something adequate for the city and not detrimental to . . . real estate owners," he said.
Hughes said that although the $3.1 million drop in revenue from Micron affected the city's tax base, he hopes it will be a temporary loss. Micron is the top employer and top taxpayer in Manassas.
Hughes said that traditionally businesses have contributed about 35 percent of the city's tax base and residents the remainder. "This year commercial went down to 30 percent," he said.
Hughes said he anticipates that to improve after this year. He said he hopes Micron will beef up its on-site equipment despite last week's layoff of about 560 employees.
Hughes said he looks forward to relying less on individual companies to sustain the city in the future.
"We'll have to try to diversify the economic base," he said. "You do that by increasing retail and increasing other retail activity. . . . You encourage the [small businesses] you have and attract more to start up."