When you receive your property tax bill or pay your personal property taxes each year, the City of Newport News budget process is probably not uppermost in your thoughts. Yet, the budget is the place to find out how your tax dollars are being spent.

A government’s budget may seem complex or confusing at first glance and possibly put together so that only a bureaucrat could understand it. This is because government is called upon to do much more than before, and financial detail is necessary so that those responsible for making budget decisions will have all the necessary information.

If you understand the budget process and how the budget is assembled, then the budget document will make a lot more sense. Even more importantly, it will be possible for you to influence budget decisions.

The primary purpose of this document is to explain the budget process and how concerned citizens can have access to it. Even if your interest in City spending is limited to only a desire to know what happens in general to your City tax dollars, reading this booklet will help you find the answers.

Elected officials must stay in touch with community needs if they hope to provide appropriate and responsive government services. The budget process provides an important avenue for them to solicit your opinions as to where government should be spending its money. In the answers to the questions posed in this document, you will learn where in the budget process residents can communicate their opinions to the City Manager and City Council.

Introduction by Newport News City Manager, Edgar E. Maroney (ret.)


To the Citizens of Newport News:

As an appointed official in the field of public administration, I have a full appreciation of the importance of budgeting for the operations of government. The budget process is the method used to determine the types and amounts of public services to be provided by the government as well as how to pay for them.

It has never been more important for citizens to present their views on City services or, at least for them to understand in general terms the purpose and cost of government programs. In order to encourage discussions of City service levels, this booklet explains the City’s budget process in terms that the general public can understand.

Please read at least those sections that address access to the budget process. If you take the time to read the entire booklet, you will have a good basic understanding of how the budget develops.

Newport News is a great place today, with an even better future. We are a City on the move, as is reflected in the sense of pride and excitement being expressed by our citizens. Thanks for being a part of it.

Sincerely,

Edgar E. Maroney
City Manager





What is the Budget?

The budget is a plan. It is a financial proposal which annually directs the provision of public services and facilities. This plan represents the City Manager’s and City Council’s commitment to provide for the most important citizen needs within the boundaries of available revenue (funds).

The money collected by the City from taxes, grants, fees, and many other sources to pay for this plan is called revenue. The money spent on salaries, materials, and equipment to provide these planned services and facilities is called expenditures. By City law, revenues and expenditures must be equal in the Annual Budget. This is what is meant by a balanced budget.

In Newport News, water services are provided by a separate agency with its own distinct budget. Likewise, automotive maintenance and repair services for City-owned vehicles, solid waste collections, and wastewater (sewer) maintenance are provided by a department with a budget separate from the rest of the operating City departments. The City Council must give approval to these separate budgets and they are included in the City’s overall budget plan.

Why do governments budget? 

As a practical matter, most large public and private organizations, and many smaller ones, prepare budgets in order to manage their finances properly. Governments have two other primary reasons for budgeting as well. Governments provide facilities and public services to meet their citizens’ needs which are paid for with public funds. Usually there is not enough revenue to provide for all the citizens’ needs, so compromises must be made. The budget process provides a mechanism where elected officials, after hearing the diverse views of citizens, taxpayers and other interested parties, can compromise and reach an accord on spending priorities.

An obvious reason why the City budgets is that it is legally required to do so. Section §6.02 of the City Charter requires the City to prepare an Annual Operating Budget.




What is the sequence of the budget?

During the month of September, the Budget Department begins to brief the City Manager on the financial outlook for the upcoming fiscal year. Actually, the City Manager and City Council are made aware of how operations are proceeding financially more often. But for budgeting purposes, a hard look is taken at historical, current, and projected future revenue and expenditure trends at this time.

The Department of Budget and Evaluation (DBE) develops the City Manager’s budget guidelines for the City departments and agencies. These directions are issued in early October. Based on these guidelines and their own analysis of their departmental needs, department heads prepare their operating budget requests during November through January, and submit them to DBE. Following the Budget Department’s analysis of these requests, operating department personnel and DBE staff meet to jointly review the budget. The budget is then considered by the operating department, DBE staff, and the City Manager. At the conclusion of this series of hearings and reviews, the City Manager decides upon a specific level of total funding to be proposed in the budget. After all funding decisions have been made by the City Manager, a Proposed Budget is prepared by the Budget Department.

Under the law, the City Manager’s proposed budget must be submitted to the City Council no later than May 1st (“...60 days prior to the beginning of each fiscal year...,” City Charter, Section §6.02). The City Council may conduct several work sessions on the budget at this time using supplementary information such as staffing data and program details provided by DBE. After this, Public Hearings are required by the City Charter. They must occur within thirty days after the City Manager’s proposed budget is submitted (Section §6.02). Only one public budget hearing is required; however, two are usually held -- one each in the northern and southern areas of the City.

City Council members then conduct further work sessions on the budget. After this, it is voted upon at a regularly scheduled City Council meeting, concluding with adoption of the budget and appropriations ordinances.

The approved budget takes effect on July 1st, marking the beginning of the new fiscal year. Only eight weeks later, the preparation of the next year’s budget begins again, as the current budget is implemented and the past year’s audit of financial activity is prepared.





Why does the budget begin in the middle of the calendar year? 

Many organizations have adopted twelve-month financial planning periods which do not begin or end with the calendar year. These financial or fiscal years are often set to be in conformance with similar organizations. Most governments, school systems, and many nonprofit enterprises use a July 1 to June 30 fiscal year. By law in Virginia, the State and all other local governments are required to have a fiscal year that begins on July 1st and ends on June 30th.

How are spending decisions made?

The City Manager and City Council make the final decisions on what is included in the budget and what funding levels will be. But before these choices can be made, information, recommendations, and preferences are provided to these decision-makers by a wide range of groups which have an interest in government programs and finances.

One good way to gain a sense of the diversity of involvement in the budget process is to glance down a list of speakers for a typical budget hearing. There are speakers representing senior citizens, public education, the handicapped, the taxpayers association, and the general citizenry for example.

These community group representatives, as well as elected officials, individuals, department heads, the Budget Department staff, and other interested parties, all have an important role in the budget setting process.

Citizen recommendations presented to the City Council and City Manager at the public budget hearings subsequently are discussed at work sessions by them with the Budget staff and department directors and their staff as necessary. All of these participants contribute to the final decisions each year on what are the most important citizen needs for public services and facilities in Newport News and their funding levels.





What budget documents are required to be prepared?

The Proposed Operating Budget is required by City Charter to be reproduced and made available to the public. Additionally, the City Code specifies certain requirements as to content and format. Copies of the Proposed Operating Budget are available for review by the public usually around the beginning of April. These may be reviewed in any City library or the Budget Department. The City Charter specifies at Section §6.08 that the proposed budget will not be open to public inspection until after it has been made public by the City Manager.

The approved budget is usually not available until the start of the new fiscal year, in order to allow sufficient time for incorporating any changes to the proposed budget and for printing the document in final form. The final or adopted budget document is then available for examination in any City library or the Budget Department. The City presently prints enough budget documents for distribution to all City libraries, City Council, and each operating department of the City. The budget document is not printed in quantity for general distribution to organizations or individuals.





What are the legal responsibilities of the City Manager and City Council regarding budget setting?

The City Manager initiates the budget process. The City Manager sets the form of the budget and establishes the revenue estimates to finance the budget. The City Council may increase, decrease, or delete individual items in the proposed budget except for Debt Service expenditures. The City Manager must propose, and the City Council must adopt, a balanced budget.

Once the budget is approved, can it be changed?

After the final approval of the budget by the City Council, only limited changes may be made. A department may transfer its own funds internally from one category of expenditure to another should the need arise. Money cannot be moved from one department to another without approval of the City Council, as recommended by the City Manager.

Supplementary appropriations that may be needed require the recommendation of the City Manager and approval of the City Council. Sufficient funds must be available for such appropriation.

Capital Improvements Plan (CIP) changes require a different procedure. Upon the recommendation of the City Manager, the City Council may amend the Capital Improvements Plan by a majority of affirmative vote. The CIP is not a formal budget. Appropriations are made on a project-by-project basis only. Only the first year of the plan is approved by City Council on an annual basis. This provides the City Council with flexibility in executing the plan and the ability to add to the CIP with unprogrammed projects as necessary.





Where do City revenues come from?

Real property and personal property taxes are the City’s two main sources of revenue at this writing, comprising nearly half of the City’s general revenue sources. All other taxes, fees, licenses, and earnings comprise the remainder of general revenues. State and Federal revenues comprise about ten to twelve percent of General Fund revenues, primarily as categorical aid in the Social Services area.

Many City revenues, while paid out by citizens as taxes to the State and Federal levels, come back to the City in the form of aid programs or grants.

Each year, the City or City agencies receive funds from State and Federal sources for everything from transportation projects to education assistance. Even though these programs are paid for with revenue derived from your income and sales taxes, the City usually has little choice in deciding on what to spend the money. The Federal and State governments establish the policies and guidelines for these programs, that the City must follow in order to be eligible to receive these grants and aid.

While it is still true that much of government revenue is derived from your taxes, increasing use is being made of user fees as a source of funds for selected public services. Water, sewer, garbage collection, and certain recreation programs are a few examples of public services whose costs are paid for primarily by user charges.

Since the final budget can be only an estimate, what happens when the actual spending or revenues is higher or lower than the City expected?

If City finances are healthy, the City will complete the fiscal year with expenditures lower and revenues higher than anticipated, i.e., in a surplus position. Many government financial experts believe that a surplus, or reserve, makes good management sense. As excess City funds are identified, they generally are either used to fund supplementary appropriations to the current year’s budget, are used to fund extraordinary or emergency projects, or unplanned capital projects as they arise.

A far more serious situation exits when revenues are over-estimated and/or unbudgeted expenses are incurred, so that a potential deficit situation exists. In such instances, immediate action has to be taken to curtail spending. There is little, if any, opportunity to pursue the alternative remedy, that is, to increase revenue yields, once the budget has been approved. To date, the General Fund has never incurred a year-end deficit.





How is the current operating budget organized?

The front portion of the budget document contains revenue and expenditure summary tables, and explanatory charts. The middle section, which comprises the bulk of the document, contains information about the spending plans of City departments. These pages, which are grouped by functional categories such as Public Safety, General Government, and Schools, describe the functions of the departments and what types of expenditures they will be making during the budget year. In addition, measures of service levels are provided through the inclusion of service indicators. Department descriptions are generally detailed by major operating divisions or activities. Three years of financial information are shown for revenue and expenditure items contained in the budget.

What is the Capital Improvements Plan?

The Capital Improvements Plan (CIP) is a planning document. It lists many projects that the City desires to accomplish, generally over a five-year period. The CIP includes new construction or renovations to existing school buildings and other City structures, major street, bridge and sewer repair projects, and upgrades to existing park facilities or new park structures.

The CIP is a dynamic instrument that may change from year to year as infrastructure needs in the City are identified. Basically, the preparation, approval and financing process for the CIP are (1) development of a CIP by the City Manager and staff, (2) City Council approval of a CIP after public hearings, (3) City Council approval of a CIP funding source, which is usually a Bond Authorization (after a public hearing), (4) an appropriation of funds to the project, and (5) award of a construction contract for the project to be built. Each of these elements is explained further as follows:

First, the City prepares the multi-year planning document based on all known information about particular projects. Project categories are developed for buildings, school facilities, sewers, streets, etc.

The next step is to request City Council adoption of a resolution approving the CIP. This is an important step that indicates that the City has identified certain infrastructure needs. It does not mean that all projects will be accomplished within the time frames shown in the planning document. Project timing may change for a variety of reasons such as alternative ways to get the project accomplished, need for the project and cost. The City Council has total flexibility to accept, reject or modify projects in the plan.





How are Capital Improvements Plan projects paid for?

Before a project can receive funding, an approved fund source must be identified. If enough uncommitted funds are available, the City may pay cash to have the project done. Most projects however, must be financed over a long time period since rarely do City governments have the money readily available to pay for high-cost capital projects. Financing of the projects is similar to a homeowner’s mortgage. The City borrows a large sum of cash to pay for projects and then repays it with interest over a long period of time (generally 20 years). The amount repaid each year is called “debt service”. The general purpose behind the use of long-term debt for financing capital projects is that these facilities will last for many years so that current taxpayers will not have to absorb the full cost of their construction. Borrowing also serves to smooth the cost impact of large expensive structures (such as a school or fire station) over more than the facility’s shorter construction period.

Before the City can borrow the funds or even commit to begin a project, State law requires that several steps be complied with.

The State requires that a public hearing be conducted on a bond authorization by the City Council. A bond authorization indicates an amount of funds that the City intends to borrow (at some time in the future) to pay for capital projects. A notice (advertisement) that the public hearing will be held by the City Council must be advertised in the newspaper twice during the two-week time period before the public hearing is actually held. The advertisement lists the amount of funds that the City intends to borrow (at some time in the future) and provides an estimate of the amount of money by category that it intends to spend on capital projects. The public hearing gives citizens an opportunity to express their views about the City’s intention to incur additional debt for capital projects.

If the bond authorization is not approved, capital projects can only be done when the City has saved enough money to enable it to pay cash for the project.

If the bond authorization is approved by the City Council, it signifies that the City will use bonds as the fund source to pay for projects up to the amount of the bond authorization. It does not mean that the City intends to sell bonds immediately or even in the very near future.





What does the Bond Authorization permit the City government to do?

The bond authorization gives the City Manager authority to bring individual requests for funding for capital projects to the City Council for their action (i.e., approval or disapproval of funding). Projects often may be financed in stages - to accomplish the architectural/engineering element, land purchase when necessary or to perform studies as required by regulatory agencies. Approval of funding is called an “appropriation”. When an appropriation of funds is made, construction or whatever work the project calls for may commence. Once the work begins, the City is generally committed to doing the project and eventually selling bonds.

How can the City go ahead with projects if it has not sold bonds yet to get the cash needed to pay for them?

The City receives most of its revenue on a seasonal basis. Property taxes are collected in November-January and again in May-July. This money must last the City for the entire year. Usually, the City will have enough cash on hand to be able to meet its regular monthly bills and still have enough cash to “front-fund” some capital projects. When bonds are eventually sold, the cash that was used to “front-fund” projects is reimbursed to the City from the bond proceeds.

This procedure is in the best interest of the City as it maximizes the use of the City’s available cash. Bond sales are timed to market conditions (interest rates) and actual cash needs. Actual cash needs are determined by the amount of funds that have been expended on individual capital projects.

If the CIP is approved, the financing process can be summarized like this:

• a funding mechanism is approved which generally is bonds (the bond authorization);
• projects receive funding (an appropriation) on an individual basis;
• project costs are paid for from existing City cash (front-funded);
• bonds are sold to re-pay any City funds that were used and for the remaining costs of the projects;
• the funds borrowed are paid off usually over 20 years (debt service payments).




Is there any limit on the amounts that the City can borrow?

State law sets the City’s debt limit at ten percent of the assessed value of real property located in the City.

How does the budget affect my property taxes?

As was mentioned previously, property taxes are an important source of the revenue used to pay for the cost of government services and facilities. The amount of revenue anticipated to be received by the City is the major determinant in calculating the level of expenditures the City may budget.

How can I express my opinion to elected officials on budgetary?

The most direct means of addressing elected officials concerning the budget is by participating in a public budget hearing. Public hearings are held in the evening at two different locations. Notice of a budget hearing appears in the newspaper about two weeks before the hearing. If you wish to speak, you may sign up to do so at the public hearing site at the door the evening of the hearing. You will be asked to furnish your name, address, and the subject matter you wish to address. All speakers who sign up will be heard, generally in the sequence in which they registered. Speakers are requested to limit their remarks to five minutes. It will help the effectiveness of your presentation if you have your comments well organized in your mind or, better still, in written form.

Written comments, whether or not you personally attend a hearing, are always accepted before or after a hearing by mailing or delivering your comments to the City Clerk’s office. Be sure to include your name, address, telephone number, date, and the subject matter or hearing to which your comments pertain.

Those residents who prefer to voice their views in a less formal forum than public hearings may wish to do so through involvement in organizations such as their PTA or civic associations, as these groups frequently maintain a continuing interest in the budget and often delegate representatives to speak at public hearings. A listing of City Council appointed Boards, Commissions, and committees is included in the insert to this pamphlet. These groups provide advisory and administrative support to the City Council through their varied statutory functions. It is through these groups that a variety of citizen’s concerns are heard, acted upon, or recommended to the City Council for action.





Budget Calendar


July 1	Beginning of the Fiscal Year
October	Budget preparation instructions distributed to departments and agencies
November-January	Departments and agencies develop budget requests
February-March	Budget Hearings conducted by the Department of Budget and Evaluation
March-April	Budget Hearings conducted by the City Manager
April-May	City Manager submits proposed budget to City Council and Budget Hearings on the budget
May	City Council work sessions on the budget
May 15th	Date by which Schools Budget must be approved
June 15th	Date by which the City Operating Budget must be approved
June 30th	End of the Fiscal Year





Department of Budget and Evaluation

Gregg Jones, Director
Department of Budget and Evaluation

William S. Keeler, Budget Manager
Lisa J. Cipriano, Budget Manager
Robyn D. Rose, Senior Budget Analyst
Rhonda K. Everton, Senior Budget Analyst

Additional information or questions?
Contact the Department of Budget and Evaluation at:

Department of Budget and Evaluation
2400 Washington Avenue
Newport News, VA 23607

Main Telephone Number: (757) 926-8733
Fax Number: (757) 926-6940