Manassas braces for millions in losses due to coronavirus pandemic

The coronavirus outbreak has Manassas leaders predicting some changes to the city’s proposed budget for Fiscal Year 2021.

Manassas City Manager Patrick Pate said that a decline in tax revenues, particularly the meals tax, will leave less for the city to spend in the coming fiscal year which begins July 1. Many restaurants have either had to close or pivot their business models, like offering curbside or delivery service only.

And, because meals tax payments have been delayed until June 20, the city won’t see the impacts on the lower tax revenues until later in the Fiscal Year 2021.

Pate said that they are anticipating cuts from 25% to 75% in meals tax revenue moving forward. Despite some businesses faring well, there has been a dramatic decrease in business revenues across the city.

The city expects to also lose from rental revenue from city-owned spaces like the Manassas Museum, and the city’s public parks. Even though the Virginia Gov. Ralph Northam stay-at-home order expires June 10, many don’t expect people to jump back into renting right away.

Pate said that while they don’t rely on the transient occupancy tax (hotel taxes) very much, it is also declining, as are gas taxes. An investment income decline is expected as well.

Pate added that they do not have all the information yet so “we can only speculate” as to what’s going to happen. According to statistics from the Virginia Municipal League, overall, the city could lose $2 to $3 million this year. In neighboring Prince William County, it’s much of the same story as it is facing a $40 million decline in tax revenues due to the coronavirus.

Despite the projected loss in Manassas, Pate said city revenues were trending higher than they budgeted this year so they think they will come in to close to an even amount during this fiscal year.

To hedge the economic fallout, Pate said that all departments have been told to only spend on essential things. As for bringing on new employees, the city won’t institute a hiring freeze however, it will experience a hiring “chill,” as Pate described it, with fewer open positions being filled.  The city is currently not interviewing people to fill jobs due to social distancing requirements, despite some of those positions being “critical,” said Pate.

Prior to the pandemic, both meals and sales tax revenues were projected to be higher than city leaders had ever seen, so Pate said he believes that the city will end this fiscal year on June 30 to a very close break-even amount in the general fund. The city will have a better handle on where it stands with meals tax collections on April 20, said Pate.

That being said, Pate said that going forward to next year, the city could face a two to four percent decrease in revenues for next year, assuming that the pandemic continues and no bounce back in the economy occurs by the first quarter.

Pate said that they will hold back on some expenditures but still adopt a budget that includes employee pay raises and capital expenditures; while putting them on hold until they know what the revenue looks like. This way, if the coronavirus pandemic affects their budget, the city can use funds from those raises and capital projects to fund more vital parts of the budget. Pate said in a phone call that the money would be there in the budget and it would not affect things such as the fire station; only projects that had not been started yet.

Pate recommended that the city council set aside $2 million from the city’s general fund to be on the safe side.  A total of $1 million would be taken out of the school budget and another $1 million would be taken out of the general fund budget.

“We’ve got to give some certainty to the citizens with tax bills and things like that,” Councilman Mark Wolfe said, adding that he doesn’t envision massive layoffs for staff.

When it comes to those tax bills, under the original proposed budget for FY2021, the average homeowner in the city would see a $4,295 property tax bill — about $22o more than the previous year.

Councilman Ian Lovejoy said that if the money rebounds, then they can fund the things they sequestered. But he asked Pate if the money doesn’t materialize, how will they fund those things? The city could use its rainy day reserve fund, Pate responded.

Councilwoman Pamela Sebesky asked Pate if the city would need to raise the fire levy to accommodate three new firefighters that the fire department needs. Mr. Pate said yes, they would, and city fire officials said they need three new employees due to a drop in volunteer firefighters.