As the Leesburg Town Council wrapped up its fiscal year 2017 budget deliberations last week with the adoption of a $94 million spending plan and 18.6-cent real estate tax rate, town staff already is looking ahead to future fiscal years to avoid another “fiscal cliff.”
The fiscal cliff was identified in fiscal year 2011, at the height of the economic recession, when town leaders began work to avoid increasing in debt service payments that would have required higher taxes and user rates. That year, town staff restructured $2.4 million in debt and began setting money aside in a Debt Service Reserve to avoid increasing taxes in fiscal year 2017 and subsequent years. At the time, the town’s financial advisors forecast the need for a 5-cent real estate tax rate increase phased over a three-year period to meet the obligations. Now the increased debt service costs will be offset by the accumulated funds in the Debt Service Reserve.
For next year, and over the course of the next five years, the fiscal outlook looks stable. Clark Case, the town’s director of finance and administrative services, points to the town’s Long Term Sustainability Plan, which assumes growth of 2 percent gross revenue annually through the next five years.
“If that holds true, then the 18.6-cent [real estate tax rate] would be the consistent rate needed to meet all of the town’s current service levels provided no other changes were made by Town Council,” Case said this week.
But despite the rosy picture, the town staff has taken steps to reduce the town’s dependence on debt and decrease annual interest payments. The council recently refinanced previously issued bonds, taking advantage of historically low interest rates. The move will save about $340,000 over the remaining life of the bonds, according to a staff report.
“The saving would allow the town to cover more capital spending with less borrowing in future years in the Capital Projects Fund,” Case said.
A move to use more cash, rather than borrowed money, for the Capital Projects Fund also saves money over the long term. The change was introduced during a council budget work session in March and the change will mean that internal project management costs will now be paid with existing funds, rather than the past practice of using bond proceeds.
“It results in an immediate reduction of the amount needed to be borrowed each year,” he said.
A copy of the town’s adopted budget and Capital Improvements Program—which includes future years’ fiscal outlook—will be available for download by May 2 at leesburgva.gov/budget.