Partially because of rampant errors in the city’s financial records, Manassas Park homeowners may have to wait a little longer for substantial tax relief.
Bookkeeping problems have cast a shadow of doubt over the budget process, making it harder for the city to accurately project spending for the upcoming fiscal year, city officials said.
Now, the city is planning to lower the tax rate by less than it had previously discussed, and is opting for a series of future tax rate reductions that would bring the rate down over the next several years, city officials said.
Part of the problem is that the city has lost faith in some of the numbers that it would normally use to calculate next year’s budget.
“It’s my responsibility to give the governing body information that is cautious and reliable,” City Manager Mercury Payton said. “And we’re doing that, even when the information is not the most positive.”
The less-than-positive news is that the finance department debacle has muddied the waters for the coming year, making it more difficult for the city to predict its spending. As a result, the City Council may not be able to lower the tax rate as much as it would like to, Mayor Frank Jones said.
“I would prefer not to have to set the tax rate right now,” Jones said. “Unfortunately, we are where we are in the fiscal and calendar year. So what we’re doing is being conservative to make sure that we don’t do something that would cause us to go into deficit spending.”
The root of the problem is that the city’s financial records contain errors going back to at least September, Payton said. Though the total amount of money taken in by the city is where it should be, it isn’t clear if the money has been channeled into the right places. If the current budget shows incorrect amounts of revenue coming in, it’s harder for staff to put together predictions for how much money the same revenue sources will bring in next year, Payton said.
“If we’re trying to project ’06 revenue for a budget line called ‘utility/electric,’ it’s kind of hard to do when we have a concern about the accuracy of the ‘utility/electric’ budget line in ’05,” Payton said. “It makes everything more cautious in the budget process, because we question the validity of the numbers that we’re seeing in some individual line items.”
The discovery that some numbers may not stand up to scrutiny hit Manassas Park at a time when the city is trying to put together not only a budget for fiscal 2006, but also a five-year forecast.
The city’s current plan is to enact a series of tax rate reductions over the coming years that will gradually lower taxes, without risking the possibility of lowering the tax rate only to have to jack it up again in future years, Payton and Jones said.
“We feel more comfortable in having conservative estimates, and projecting consistent tax rate reductions based on those estimates, than projecting numbers that would make us believe that we could reduce the tax rate even lower, only to find out later that we have to raise taxes again,” Payton said.
The council is poised to lower the real estate tax rate for the second half of fiscal 2005 from $1.33 to $1.29 per $100 of assessed value. Because of record growth in assessments, this lowered rate would still generate 18 percent more revenue that the previous year for the city. There had been talk of lowering the fiscal 2006 rate to $1.27, but the city is backing off that approach, Jones said.
“If the finance departments numbers are hosed up right now, it could cause some real softness in the 2006 budget,” Jones said.
However, in the event that the city takes in more revenue than it needs during either fiscal 2005 or fiscal 2006 because of its “conservative” approach, that money will be rolled forward into the next year’s budget, creating a higher possibility of future tax relief, Jones said.
“If we take in more than we spend, it will result in a future rate reduction,” Jones said.
The bookkeeping errors have prompted a full-scale external audit of the city’s finances by the Charlottesville-based accounting firm Robinson, Farmer and Cox. The audit, which should clear up the city’s questions about how its funds are dispersed, will be complete within 90 days, Jones said.
“I don’t want a smoke-and-mirrors answer, I want an audible answer,” Jones said. “I want to be able to stand up and say ‘this is what we’ve found.’ “
Jones said that the results of the audit will be made available to the public when it is completed.
When health care coverage for some city employees was unexpectedly canceled in mid-February because of insufficient payment, the city started taking a closer look at its finances. Bookkeeping problems were discovered that later led to two terminations in the finance department, Payton said.
Now, the city is actively seeking both a new finance director and a deputy finance director, Jones said.
“It’s a challenging time for us, but I have absolute faith that the city will get through this with no difficulty,” Jones said.