On Monday, the Roanoke City Council adopted a shoestring budget that levels the school division’s funding for the upcoming year and increases the meals tax by 1% for two years — two moves that have drawn criticism from citizens, but that officials felt were necessary to balance the city’s $403.7 million budget.
The budget also includes $3.5 million in cuts across city departments, Mayor Joe Cobb said after the council meeting was recessed. The city is looking into 3% cost-of-living pay increases for city employees, which will be revisited later this month.
This year’s budget development process has been particularly active. City Manager Valmarie Turner started with the city in January, taking over after the abrupt resignation of Bob Cowell and presenting a draft budget in March.
PTA members and other residents packed public hearings, and restaurant owners put together social media videos and a petition to protest the meals tax increase.
Cobb said after Monday’s meeting that this is the most community engagement he’s seen in some time, and that last week’s public hearing on the budget brought the largest crowd he’s seen during his eight years on council.
A 1% meals tax increase
The increase in the meals tax was proposed as a way for the city to manage $4 million to $6 million annually in deferred maintenance on city buildings. This backlogged maintenance, as well as raising employee compensation, were two of city leaders’ biggest priorities this budget season.
During a May 5 meeting, council members verbally agreed to a 1% meals tax increase, rather than the 1.5% — up to 2% — increase that had been proposed by Turner.
Restaurant owners have been vocal in their opposition to an increase, citing already slim margins in the industry, especially post-pandemic.
The increase from 5.5% to 6.5% could bring in about $4 million in extra revenue for the city annually. Cobb said that this money will still be split between deferred maintenance and other “unfunded priorities.”
As part of the meals tax increase, the council also created a “Compensation for Collection” credit, which will give restaurants that pay the meals tax on time a 1.5% credit each month. According to city documents, this serves to offset the restaurant’s cost of collecting the meals tax.
Before the council voted on the ordinance, councilman Terry McGuire suggested an amendment to sunset the tax increase after two years. His recommendation was supported by some council members, but not by Cobb, who said he was “frustrated” that this topic was being debated on the day of the budget adoption.
“I’m concerned that until we know, or as we know, our other sources of revenue, it is premature to make this kind of decision,” Cobb said.
The ordinance, with the sunset amendment, passed 5-1, with Nick Hagen voting against. Hagen has previously said that he opposes tax increases of any kind.
Council member Vivian Sanchez-Jones was absent from the meeting.
The school funding policy
The new budget gives Roanoke City Public Schools the same amount of city funding that it received last year — $106.9 million — despite a request from the school division for a 6.3% increase.
Before Monday, city policy had stated that the school division each year would receive 40% of local taxes collected by the city. To allow for flat funding, the city council amended the document on Monday to carve out the 2026 fiscal year as an exception to the policy, citing “current fiscal constraints.”
The council also adjusted the wording to say that the school division will receive “up to” 40% of local taxes received by the city — rather than “equal to” 40%. The allocation will be reviewed annually, and the city “remains committed to meeting or exceeding all state-mandated funding requirements for public education,” the policy says.
City officials have argued that the city has historically provided more funding than is state mandated. In fiscal year 2024, for example, the city allocated more than two times what the Department of Education required, at $82.2 million.
The future of the school’s $61.5 million fund balance is still up in the air, as the newly amended policy does not guide how the city is to handle this money.
Under state law, the city is entitled to the school division’s fund balance. But Roanoke City Public Schools has historically held on to its year-end surplus, and school officials were planning to use $12.8 million of that balance this upcoming fiscal year to make ends meet after the city indicated that it would provide level funding.
It was made clear in letters between Turner and Superintendent Verletta White, obtained through the Virginia Freedom of Information Act, that Turner now wants that money back.
School officials have said that cuts will have to be made with level funding and without the fund balance. RCPS Chief Financial Officer Kathleen Jackson has presented scenarios to the school board where up to 100 positions would be lost.
Councilman Terry McGuire asked Turner what the process and timeline moving forward will look like for school funding, and whether lowering the 40% funding policy is something the city is looking into doing.
“What I’ve stated is that we have to look at being fiscally flexible and not necessarily a fixed allocation,” Turner responded.
The council approved the amended funding policy 5-1, with Hagen the only vote against it.
Councilman Peter Volosin addressed the $6.7 million gap between what White requested of the council, versus what the city is providing in a level budget.
“Council will ultimately close this gap by reappropriating $6.7 million from the unassigned fund balance currently being held by the schools,” Volosin said, reading from a statement. “We are funding the full request of Superintendent White as she presented it to the council.”
After the meeting, Cobb told reporters he’s “not sure where [Volosin] came up with that.”
Later Monday evening, Volosin said via email that while this plan to reallocate $6.7 million to the schools is not confirmed until it is voted on by the council, “this is the plan for the funding gap” and is “supported by Council.”
Cobb said the division might ask the council to appropriate between $12.2 million and $18 million for its needs, but that conversations will continue with the school division to make a plan for the fund balance. The school division will adopt its new budget on June 10.
Other ordinances passed; 1 requires a second vote
Also up for council’s vote on Monday was a new pay plan for city employees that would include a 3% cost-of-living raise.
The council voted 4-2 in favor of the ordinance, with McGuire and Volosin voting against it. Both declined to comment on their votes after the meeting.
McGuire later said in a text that he “has concerns about some of the levels of increases.”
City Attorney Tim Spencer said that because a five-member majority is needed for this ordinance to pass, the council will vote on it again May 19.
The council also approved the fee compendium for the upcoming fiscal year, including a 10% increase to the Fire-EMS fee.
The real estate tax
The real estate tax rate remains steady at $1.22 per $100 of assessed value, though the total assessed values in the city will be 7.5% higher than last year’s assessments, city documents show.
The city held a public hearing April 21 about the real estate tax, as is required by state law when the reassessment will result in an increase of at least 1% over the prior year’s total real tax revenue.
Hagen was the sole nay vote on an ordinance to keep the rate steady. He said after the meeting that the city should be reducing rates when assessments go up significantly, to keep the tax payments “relatively low” for homeowners.
The council will meet again on Friday for a strategic planning retreat, with a meeting that following Monday, May 19.
