A behind-the-scenes look at preparing the town’s annual budget

Although governmental budgets are normally larger and more complicated than your family’s, they really have a lot in common.  Like a family’s budgeting practices, the Town government must also balance available resources with needed and desired expenditures.  As in our personal lives, the Town has mandatory expenditures which we must make as well as desires to do more and consequently spend more.  The process to match the two competing goals can, especially in recessionary times, be both trying and frustrating. Preparation of this year’s Town budget was one of the most challenging we have faced in many years. Given the unstable economic picture, clouded by layoffs, rising unemployment, foreclosed housing and increased fuel costs, this year’s budget preparation was especially complicated.

Coupled with the troubling times, the Town also faced creating a budget without a full-time Treasurer/Finance Director. Thankfully, Ron Mabry, a former Culpeper County Finance Director, stepped in to help on a part-time basis. Ron was recently selected by the Town Council to take on these responsibilities full-time and began work as the new Town of Culpeper Treasure and Finance Director last month.

This year’s budget preparation process actually began this past January with a Council goal-setting session. Numerous   work sessions were held and the process concluded in June when the Town Council approved the fiscal year 2010 budget.  Preparation for the new budget, which took effect July 1, was based on the goal of maintaining the same level of services to town residents and businesses without resorting to a large tax increase, employee layoffs, furloughs or pay cuts. In order to achieve this goal, we focused primarily on preserving basic services while forgoing desired improvements and additional services being requested. This year, Town employees received no merit or cost-of-living raises, training opportunities were reduced and for the second year running, we greatly limited capital expenditures for needed replacement items such as vehicles in our aging fleet and replacing leaking roofs.  While we did what was required to achieve a balanced budget this year, if this situation continues, not addressing critical issues will have a cumulative effect and eventually put our organization in a difficult situation. Continuing to have unmet employee compensation issues, training, capital need’s, etc.,  will eventually create a situation in which decisions to adjust service levels or to increase revenues will have to be made.

The Town Budget is actually made up of a number of smaller budgets. The most widely publicized budget and the one that is often thought of as the “Town Budget” is actually the General Operating Fund budget. The General Fund includes the funds needed to run the Town’s daily operations, including such items as salaries,  purchasing fuel, providing trash service and road maintenance, paying debt service on projects and purchasing utilities and supplies.  This year the General Fund budget is $12.2 million, which is actually lower than last year’s. Other major segments include the capital budgets, which provide funding for major capital needs, which may include acquisition of such things as vehicles, major equipment, construction projects, and building renovations such as the new police station.  Finally, both operating and capital budgets are created for the Town’s two enterprise funds, which provide electricity to many Town residents and water and sewer services to most of the residents of the Town.  Enterprise operations, (which will the subject of a separate future column) are designed to be self-sustaining “businesses” which are funded by the users of the services. The Enterprise operations are supported by the ratepayers, those who receive the services, and not by the taxpayers.

When   municipal budgets are discussed, all too often the conversations focus primarily on expenditures and not on the revenues. However, revenues can be even more important to the budgeting process than expenditures. When building a budget and looking forward for over a year into the future,  revenues are usually more difficult to project than expenditures are to control.  Preparing this year’s budget was especially tricky. We had to look into a somewhat cloudy   crystal ball and try to predict, as best we could, how much revenue we could expect to receive. Our work must be based on the premise that municipal budgets in Virginia, as opposed to the Federal government, must be balanced and expenditures can not exceed available resources.  And in this economic climate this was a difficult task, but one in which we are comfortable with the outcomes, as we feel we made realistic predictions for both. 

And speaking of revenues, the Town receives its funds from many sources, including state sources, local real estate and personal property taxes and taxes collected on business licenses, cigarettes, meals, lodging, sales and bank stocks to name a few.  An increase in some of the secondary sources of income as shown below has allowed a reduction in the primary source of income, the real estate tax, over the past few years. 

So how does the Town’s budget relate to the population and how has it changed over the years? Following are some comparisons for your information. 

1990:
• the Town’s population was 8,581
• 123 full employees – one employee for every 70 citizens
• general fund operating budget was $3.9M - $454 per citizen on services
• the Town maintained 84 lane miles of roads
• Town received $612,665 in meals taxes and $84,649 in lodging taxes.

2000:
• the Town’s population was 9,664
• 130 full time employees - one employee for every 74 residents.
• general fund operating budget was $8.7M-$900 per person (In 1998, Yowell Meadow Park opened and additional citizens require additional services such as trash collection, police protection and road maintenance, but few employees were added to the payroll
• tax rate 21 cents per hundred of assessed valuation

2010:
• the Town’s population is estimated at 15,500
• 161 full time employees – one employee for every 96 citizens
• general fund operating budget is $12.2M -  $787 per citizen to provide services
• the Town maintained 120 lane miles of roads
• tax rate 11 cents per hundred of assessed valuation
• Town expects to receive $1.65 million for meals and $220,000 for lodging taxes.

The process of putting together the annual budget is a time consuming activity that is conducted each year. This process however is more than simply a funding outline for the year. The annual budget is the Town Council’s most important opportunity to set policy direction for the Town and it is through this effort that they set service levels; number of employees, and capital purchases.  The annual budget is a critical element in the operation of the business of Town government.

Please e-mail me at if there are any questions.