The city of Charlottesville faces financial challenges as the budget for the upcoming fiscal year currently is projected to come up $2 million short. Vice Mayor Kevin Lynch said one of the main reasons for the current budget crunch is the fact that the Commonwealth is not meeting its funding obligations to Charlottesville in a number of areas, such as the car tax.
"The car tax that we've heard so much about is a local tax," Lynch said. "When the state decided to abolish the car tax, it meant that the state would reimburse the localities for the revenues that we would normally receive and use for police, firemen and schools."
Yet as the state faces its own budget shortages, Charlottesville and other localities are not receiving the reimbursements they need. According to
Council Member Blake Caravati, the decrease in state funding means that the City must rely more heavily on real estate taxes to generate revenue.
"Historically, real estate taxes are only a third of the budget," Lynch said. "Right now, they are about 85 percent of the revenue, and they have been for a while -- and that is a problem."
To lower the real estate tax rate, Lynch proposed that the City re-evaluate the methods used to determine car values for tax purposes. By assessing cars at a higher value, the City would obtain more money from personal property taxes and consequently offset its dependence on real estate taxes. Lynch said this would be a more fair method of taxation, because people have considerably more control over what kind of car they drive as opposed to what kind of house they live in.
Caravati said there is no need to panic over the budget because all plans so far have been preliminary. While current projections indicate an insufficient budget, it is possible the Commonwealth could give Charlottesville more money in March, he added.
Because Virginia currently is running a surplus, Lynch said he is hopeful that the City will receive its reimbursements this year. He also said he believes that current revenue estimates from other tax areas, such as sales tax and lodging tax, are too conservative because they are predicted to remain stagnant.
Lynch said it is important to focus on the City's fastest-growing components, such as public safety, when searching for solutions to fiscal problems. A large portion of the City's money is put towards jails, detention centers and new courts.
"That's something that I think locally we've really got to get a handle on, because we've got to keep these kids in school and out of the prison system," Lynch said. "People always say that from a moral perspective, but in Charlottesville, it's a real financial issue."
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