The City of Williamsburg’s preliminary budget shows city revenue falling short of expenses in fiscal year 2015, and the gap sparked a conversation about the possibility of a new tourism tax.
City officials are entering a series of talks leading up to City Manager Jack Tuttle’s proposed 2015 budget expected in late March. On Saturday, City Council gathered for a retreat at the Municipal Building to discuss work done so far on the budget using early projections.
The talk revealed the possibility of a budget gap that could range from about $250,000 to $883,000, though Finance Director Phil Serra warned the amounts seen on the preliminary budget could change depending on how things shake up in future conversations.
Tuttle said the budget gap comes from several different moving parts. Most revenue streams are projected to stay fairly flat in 2015 aside from property taxes, which are expected to jump 2.6 percent due to increased value of property. No property tax increases are proposed in the preliminary budget.
While revenue is expected to remain steady, expenses are on an upward trend. Projected increases to the amount the city must pay into the Virginia Retirement System and increased contributions to schools, the Williamsburg Regional Library, the jail and emergency services put the city with overall expenses going up 0.9 percent compared to a 0.5 percent rise in money Williamsburg expects to take in.
To make up the deficit, city officials discussed long-term options like working with the EDA – who recently requested a $200,000 discretionary budget – to bring businesses to the town. Mayor Clyde Haulman said, also taking the long view, the city should begin looking for other revenue streams to supplement tourism revenue, which he expects to continue to contribute less to the city’s economy than it has in the past.
To that end, Councilman Doug Pon suggested using a tax on admissions to tourism attractions available to cities in Virginia.
By his estimation, Pons said, the tax could raise about $2 million if tickets to tourism attractions were charged a 10 percent tax. He said the money could free up the $1.9 million the city pays to the Colonial Williamsburg Foundation and the Chamber and Tourism Alliance while minimizing the impact the tax would have on residents. The 2014 budget shows the city contributing $1.3 million to CWF and $650,000 to the Chamber.
Where the tax gets tricky, Tuttle said, is what could be considered a tourist attraction. While obvious tourist attractions like Colonial Williamsburg and Ripley’s Believe It or Not would be taxed, movie theaters and golf courses could also be taxed.
Pons said he would want it to be a tri-community effort instead of charging the tax only within the city limits. One obstacle to having all three Triangle localities charge the tax is that while cities are free to charge it whenever they want, counties must be approved by the General Assembly. Tuttle said he could not imagine the state legislature approving a new county tax.
Councilman Scott Foster wanted to know if ticket sales at the College of William & Mary fell underneath the umbrella of tourist attractions. City Attorney Christina Shelton said the city cannot tax the college directly but it would depend on how the events were perceived, as something state-run could not be taxed.
Vice Mayor Paul Freiling — who works for Colonial Williamsburg Foundation, a private educational nonprofit — asked if the tax would affect nonprofit organizations. Nonprofits are not taxed if they are considered “charitable.”
At the end of the discussion, there was consensus for Haulman to enter in to conversations with officials from James City and York counties about the possibility of initiating the tax.
The city will revisit the budget March 24 to discuss requests from outside agencies, which may be preceded by a Feb. 8 continuation of the council retreat. Tuttle’s proposed budget is scheduled to go before council March 28 with final approval May 8.
