A giant hole in Beach budget

Local governments have been singing the budget blues for two years, but their song is about to take on a much more somber tone - "the sign of the weary," as Bob Dylan's "Hard Times" goes.

Virginia Beach's revenue forecast for its 2010-11 budget shows its savings accounts depleted, home values down another 5 percent, taxes on hotels and restaurants reflecting the recession. Interest income from the city's investments has dropped 45 percent. The state isn't providing money to fix potholes or build roads. And schools, which make up half the city's budget, are expecting $15 million less from the state next year.

The result: The Beach at this point is $84.4 million short of its projected $1.73 billion of city and school expenses.

Increased taxes can't come close to making up the difference. That's even with budget director Catheryn Whitesell's assumptions that city and school employees won't get raises next year, that no more money will go to building projects such as an animal shelter and a recreation center, and that Virginia Beach will absorb the increase in payments to its employee retirement system - all assumptions that will be up to the City Council to determine.

Her prediction means Beach leaders will spend the next few months deciding what services are so important that they must be held harmless and what expenses must wait for a stronger economy. Where the council places its priorities will say a lot about what Virginia Beach will look like.

The Beach has long been known as a good place to raise a family, a suburb of safe neighborhoods and, thanks to the military and tourism, a city with low unemployment. Historically, the City Council has set aside money for open space, invested in parks and recreation centers, provided money to ensure good schools, offered stability and good benefits to its employees.

Last year, as the stock market plummeted and businesses closed, the city banked on the economy improving in 2009, so it used $45 million from its savings accounts to shore up the budget. Plenty of people are second-guessing that decision now.

The City Council also invested in the Beach's future, spending $10 million to control the 10-mile rail corridor between Norfolk and the Oceanfront. The purchase is likely to be used eventually to extend mass transit through Virginia Beach, but even if it isn't, the city will control that vital space.

Now the council faces more immediate and long-lasting decisions on what's fair and what's critical. No department, no service, no employee can be left out of the discussion. Given the condition of the budget, the council must revisit literally every aspect of its financial house - from tax rates to salaries - line by line.

Should, for example, the city assume greater responsibility for fixing potholes and repaving roads because the state has shirked that responsibility? Should the owner of a $100,000 fishing boat be exempt from personal property taxes while the owner of an $8,000 car pays nearly $300? Should Virginia Beach be in the business of operating recreation centers that compete with private gyms? Should condo owners - but not single-family dwellers - have to pay for garbage pickup?

What about the amenities that have set Virginia Beach apart: its parks and recreation centers, museums and cultural events?

In the next four months, city officials will be mapping out a strategy to get through the recession and put Virginia Beach in a position to thrive. They're asking citizens for help. The next opportunity is 7 p.m. Dec. 3 at Kellam High School.

Virginia Beach can continue singing "Hard Times," or it can make the hard decisions on what can be postponed, what needs immediate attention and what is critical if Virginia Beach is to remain a vital, sustainable city in 25 years.