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April 14, 2022

Warrenton town manager proposes tax increases to pay for infrastructure repairs, employee pay raises

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Staff Journalist
Warrenton’s town manager has proposed increasing the town’s budget by $5.9 million and raising meals and cigarette taxes to help fund capital improvement projects, hire more full-time employees and raise wages. The tax hike is also aimed at offsetting rising costs for the town due to inflation.

Town Manager Brandie Schaffer’s fiscal 2023 proposed budget would raise the town’s overall spending plan -- operating and capital costs -- from $26.5 million to $32.4 million, an increase of 22 percent, for the fiscal year that begins July 1. The increase is mainly due to capital expenditures like water and sewage infrastructure upgrades and the injection of an additional $1 million the town received through the American Rescue Plan Act.

The proposed budget for the general fund is $18.2 million.

According to the proposal, residents would not see an increase in their real estate tax rate. The town would keep its current rate of $0.05 per $100 of assessed value the same. However, because the value of properties in town increased by 22.05 percent, the average resident’s tax bill would increase from $171.87 to $209.68 and yield an additional $156,359 in revenue for the town.

In an April 1 letter to the Town Council, Schaeffer said the town has maintained a real estate tax rate at or below 5 cents per $100 of assessed value for the past 22 years. She noted Warrenton’s real estate taxes are currently below that of other surrounding towns, including Culpepper, which has a rate of $0.085.

The local meals tax rate would increase from 4 to 6 percent, yielding an additional $1.5 million in revenue, according to the proposal. Surrounding localities, including Culpepper, have a meals tax rate of 6 percent. The meals tax is currently the town’s largest source of income, accounting for 21 percent of its annual revenue.

Stephanie Miller, Warrenton’s director of finance and procurement, told FauquierNow that six of the nine surrounding municipalities, including Culpepper, Front Royal and others, currently have meals tax rates equal to or higher than Warrenton.

“The town of Culpeper has had a meals tax rate of 6% for many years, and Fauquier County is proposing a rate of 6%,” Miller said.

However, if the county and town both adopt a meals tax, they would not overlap with one another. Instead, people would pay 6 percent to either the town or the county, depending on the location of the establishment.

Schaffer is also calling for increasing the cigarette tax from $0.20 to $0.40 per pack, which would yield approximately $227,321 in additional revenue. Schaffer said the increased revenue from the cigarette tax would help offset the $200,000 the town may lose if the state eliminates the grocery tax.

With the tax increases, revenue for the general fund would increase $1.9 million, rising from $16.3 million to $18.2 million.

Although town revenue is projected to be higher than fiscal 2023 if new taxes are implemented, Schaffer said it would still “remain below pre-pandemic levels.”

The increase in tax revenue would mainly help support rising costs for the town caused by inflation, replacing the aging workforce and ensuring the town’s employee compensation and benefits stays competitive with surrounding jurisdictions, according to the town manager.

“Emerging from these unprecedented times, the proposed budget continues to provide Warrenton residents and businesses the services they expect while addressing our community's critical needs through strategic capital, community, and workforce investments,” Schaffer wrote.

The town expected it would need to raise taxes several years ago. In 2019, the town’s financial advisors, Davenport & Company, advised town leaders to consider raising the real estate and meals tax in the future to keep up with its operational costs.

But because of the pandemic and the economic recession, the town delayed the hike.

The town deferred several capital improvement projects as well, including many water and sewage projects.

The town currently provides water and sewer services to approximately 5,011 residential and commercial customers. Approximately 37 percent of the town’s operating budget is designated for water and sewer operating expenses and maintenance repairs.

During a work session Tuesday, a consultant with Davenport told the council the town will need to spend a total of $18.8 million -- in $3-$4 million increments per year -- over the next five years to meet “ongoing regulatory and operational requirements.” However, he noted this cost will likely be higher due to inflation.

Miller said “the most pressing capital projects are those in the Water and Sewer Fund,” including a “UV Disinfection project, Gravity Sludge Thickener upgrades, and waterline replacements, among others.” Schaeffer’s proposal allocates $4.1 million in the next fiscal year to start addressing these water and sewer projects, which will be funded by a mix of cash, debt and funding through the American Rescue Plan Act.

“Over the past few years, the Town began proactively quantifying the ongoing impact of repairs and replacements necessary to maintain services provided to citizens,” Schaffer wrote.

“Catching up does not happen overnight and, unfortunately, comes at a cost much higher than what would have been paid over the years if the issues had been addressed at the time,” she added.

If the budget is adopted, customers’ water and sewer bills would increase slightly. For customers with minimum water usage (2,000 gallons per month) their bills would increase $1.39 per month. The median water usage in Warrenton is 3,000 gallons per month, which would increase customer’s bills by $3.08 per month, according to Miller.

All together, there are 42 proposed items that the nearly $19 million budget would go toward, including things like $1.4 million in upgrades to the Cedar Run Pump Station and $4.1 million for Warrenton Dam improvements.

Other non-water and sewer related capital projects, which would come out of the town’s General Fund (separate from the Water and Sewer Fund), include “projects for walkability, safety improvements, wayfinding signage and asset replacements for public works equipment, HVAC replacement, and IT infrastructure,” according to Miller.

The town plans to designate one-time money from the American Rescue Plan Act to help fund the General Fund projects as well.

Also included in the spending plan is funding for new full-time positions and wage increases for town employees.

According to the proposal, the town experienced a 13 percent turnover rate in 2021, with the hardest hit departments being police (23 percent), public utilities (17 percent) and public works (36 percent).

The top reasons listed for leaving were compensation, retirement and better employment opportunities elsewhere.

“I think what we’re seeing is a trending up in [voluntary termination] for fiscal year 2021,” Schaffer said during Tuesday’s work session.

Fauquier County as a whole is experiencing the same issues with employee turnover generally, which is why the County Administrator Paul McCulla introduced adjusting pay scales for government employees to make its compensation and benefits more competitive.

However, the board has agreed to raise county employees’ wages across the board by 5 percent.

Similarly, Schaffer has proposed increasing employee salaries 5-7 percent, with 5 percent guaranteed “to address the cost of living increases for all employees” and an additional 2 percent based on employees' “work performance.”

Schaffer also proposed funding five new employee positions, including a new police sergeant and public utilities junior engineer position, as well as moving the town clerk’s position from part-time to full-time. If implemented, the new positions would cost the town approximately $865,664, according to the Town Manager's Office.

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