City Council voted in favor of a resolution to adopt a five-year financial plan designed to restore the city’s waning general fund balance and put Manassas Park back on solid economic ground.
But one of the key steps to building the city's finances up isn't very easy, city staff said.
The financial plan calls for limiting the combined growth of city operating expenditures and school operating payments to a maximum of 1.5 percent a year, unless the city's tax base growth is more than 3.5 percent.
City staff said they realize retirement, healthcare and fuel prices are likely to grow at more than 1.5 percent a year, but the cap is necessary in order to pay the impending increase in the costs for bonds used to build facilities.
Adopting city and school budgets that fall within the 1.5 percent cap will be extremely challenging, especially because of existing cutbacks and reductions that had to be made during the recession, according to the financial plan.
To operate within that 1.5 percent cap, there will be structural changes made within the city and school division.
These changes include consolidations, the abandonment of some services and the focus on only the most important priorities.
The decade-old revenue-sharing agreement that calls for 57 percent of the city’s non-earmarked funds to go to the schools is out. It will be replaced with a new method of allocating funds, according to the financial plan.
Vice Mayor Bryan Polk, who led Tuesday’s meeting in the absence of Mayor Frank Jones, thanked school division officials for their work and help.
“I know there some things in there that are not fun to swallow,” Polk said.
He also said that nothing in the financial plan is finite. “It’s a plan; plans change,” Polk said. “No budgetary decisions have been made yet.”
City school officials have already scheduled a
City officials are also hoping the new financial plan will spare the city from another steep credit downgrade, like the The drop took the city from AA- to BBB credit rating.
but agreed to wait 60 days for the city’s five-year financial plan to be completed before issuing a new credit rating.
The 60 days expires next Tuesday and Moody’s analysts are expected to have a conference call with city finance officials sometime within the next week, Manassas Park City Manager Jim Zumwalt said at Tuesday's council meeting.
Moody’s will issue its new rating within 48 hours of the call.
Councilman Preston Banks told Zumwalt he wanted to be on that call, as the last one with Moody’s was educational. As a representiave, it's important for him to be there, Banks added.
Moody’s currently has Manassas Park's credit rated at A1, a few notches below where it was before the Standard & Poor’s downgrade. The two credit rating agencies use different scales.
Zumwalt told council he expects the credit rating will decrease.
Some of the city’s goals as outlined in the plan are to reduce taxes, restore the general fund balance and compensate employees for their work.
Years ago, city council implemented a policy that mandated the general fund remain at a minimum of 15 percent of the city’s operating budget.
Because of the economy and other circumstances, that hasn’t been the case, Zumwalt said.
The plan is for the city’s general fund balance to be back in the black and for it to be back at 15 percent of the operating budget by 2016. To do this, the city needs to raise some $6.5 million.
Meeting this goal requires several steps, which include earmarking resources for the restoration of the fund balance.
The city plans on using the expected proffers for the planned housing developments of Manassas Park Station II and Belmont Reserve to build up the fund.
Even if those housing projects fall through and the proffers aren’t received, the plan is for the general fund balance to grow to $3.5 million by 2019, Zumwalt said.
The financial plan also calls for making the utility fund self-sustaining and avoiding taking money from the general fund to put into the utility fund.
Another step would be the refinancing of some of the city’s loans. Currently, the city, utilities and schools debt services comes to a total of $131 million.
City staff spoke with Virginia Municipal League/Virginia Association of Counties (VML/VaCo) Finance about , but the ultimate decision is that of city council and will be made early next year.
“Paying a dollar 25 years from now doesn’t hurt as much as paying a dollar today,” Zumwalt said.
The cost of refinancing is expected to cost $4 million over the next 25 years, city data shows.