Correction: An earlier version of this article overstated the amount of non-taxed land area in Radford and the amount of land owned by Radford University. This has been updated.
The sharp tax increases and tightened budget that the Radford City Council approved last month are a signal of a badly needed course correction, Radford’s mayor and other officials said recently.
For years, the city council’s budget decisions were based on inaccurate, overly rosy revenue projections, leaving income to lag behind expenses, officials said. It may take several more budget cycles to bring the city back to a more stable financial outlook, they said.
The good news, council members said, is that Radford’s $78 million budget for the upcoming fiscal year — reduced by about $1 million from the current budget — is based on more realistic expectations. Council members said that going forward, they would be more focused on the details of the city’s balance sheet.
And whatever adjustments to tax rates and spending are still needed in the next few years should be smaller than those just approved, they said.
“This was the year of … deflating the balloon,” Mayor David Horton said.
Among the challenges still facing the city is that Radford is more than four months behind on payments to American Electric Power for electricity that the city buys wholesale and resells to residents and businesses. The amount in arrears is more than $6.5 million, reported interim City Manager Craig Meadows.
City officials expect that increases in revenue will let the electricity debt be paid in the next six to 12 months, Meadows wrote in an email.
There also is an unusual, $4 million loan that the city has been unable to retire. First taken out in 2023 and described as a measure to ease cash flow problems, the 4.47% interest loan was to be repaid in a year. But instead, the city last year renewed the full amount of the loan for another year.
Last year, a representative of the Virginia Municipal League said that no one there had heard of another locality taking out a revenue anticipation note as Radford had.
A schedule of payments was to cancel the loan by next month, but Meadows said that none of the payments were made. Meadows said that it is likely that the loan will be renewed for another year, but that the council will have to make a formal decision in June about what to do.
Last month’s unanimous budget and tax votes included a third year of no raises for city workers, a hiring freeze, and a 10% cut in council members’ own pay.
A package of tax and fee increases larger than any that officials could recall included raising Radford’s real estate tax rate by 13 cents to 82 cents per $100 value, increasing the personal property tax rate by 11 cents to $2.55 per $100 value, raising the meals tax from 5.5% to 6.5% and taking the hotel occupancy tax from 8% to 8.5%. Also, the city’s base rates for water and sewer use were each increased by $4 per month, and the solid waste fee went up by $3 per month.
Each cent increase in the real estate tax rate brings in about $121,000, Meadows said.
Vice Mayor Seth Gillespie called the tax and budget decisions “a huge weight on our citizens and our staff,” but also “truly a Radford rebuild.”
“While I struggled with both the rate increases and the cuts, I truly felt for us to have a chance to retain our independent city status, be able to continue the level of service we provide, and begin to dig out of this, these very hard but necessary steps had to be taken,” Gillespie wrote in an email.
Serious as the city’s financial stresses are, officials said they saw no immediate threat to Radford remaining an independent city — in part because residents would likely face higher taxes if the city became a town in neighboring Montgomery or Pulaski counties.
Horton and Councilwoman Jessie Foster noted that though Radford’s new real estate tax rate is higher than the county tax rates next door, Radford’s 82 cents remains lower than the combined town and county rates paid by residents of Blacksburg, Christiansburg, Dublin and Pulaski — $1.02, 90 cents, 98 cents, and $1.10, respectively.
“Our citizens would pay as much, if not more, if we joined a county. I don’t see that happening as long as we are all willing to pay what it takes to successfully run a city,” Foster wrote.
The roots of Radford’s financial challenges lie in Virginia’s legal framework for cities, which are required to supply schools, courts and other services but are barred from annexing surrounding areas to increase their tax base. Radford’s land area is limited — the city covers about 10 square miles — and much of the development within it cannot be taxed. The total value of property in the city is almost $2.2 billion, according to information prepared by city staff. But 36.5% of that value cannot be taxed by the city because it belongs to Radford University, and another 12.3% belongs to public schools, churches, or other tax-exempt entities.
Historically, Radford’s city budget relied on profits from electricity sales. But the city’s largest electricity and water customers disappeared more than a decade ago with the shutdown of iron foundry operations run by Intermet and Grede Holdings.
More recently, officials said, the Radford City Council adopted budgets that relied on financial projections presented by former City Manager David Ridpath.
Ridpath, who retired at the end of last year after 40 years of service with the city, including 14 years as city manager, presented budget proposals that did not adequately account for business slowdowns after the pandemic, declines in Radford University’s enrollment, inflation and increases in American Electric Power’s prices for electricity, Horton and other officials said.
Outside auditors each year reviewed the budgets that the council approved, as is usual for Virginia local governments, and found no problems, Horton and others added.
But the city’s revenue, while growing, did not keep up with expenses. Meadows noted a continuing gap of about $4 million between the city’s income and costs.
Last fall, discussing the renewal of the $4 million loan, Horton and other council members acknowledged the city’s financial problems but described them as caused by the timing of when money was coming in rather than as an annual shortfall.
This month, Horton said that before this year, the council did not see a complete picture of what was wrong.
“We did not have a full understanding as a council and as a community of the revenue, based on the projections we were given. … I don’t feel like we were given a fully transparent and clear picture of where we were and where we were headed,” Horton said.
Gillespie wrote in an email that he thought “a real sense of trust has been lost in this community and we will be held accountable for all the actions we do or do not take moving forward.”
Foster invited residents to look back at videos of council’s budget meetings from prior years.
“We made the best decisions that we could with the information on hand,” Foster wrote.
Foster added that the council probably should have gradually increased taxes all along, but “we had no reason to burden our citizens financially based on the budget as presented.”
This year, the council’s budget work was guided by a new interim city manager — Meadows, whose long career included 14 years as Montgomery County’s top administrator before he retired in 2023. Meadows quickly highlighted what he called a “structural imbalance” in the city’s finances.
“It was obvious,” Meadows recalled about his first looks at Radford’s accounting.
The city’s finances received another blow last fall with between $1 million and $1.5 million in expenses related to Hurricane Helene damage, Meadows noted. Some of this may be reimbursed by the Federal Emergency Management Agency, but it will be months more before any money arrives, Meadows wrote.
City officials are now conferring with Radford’s financial adviser, Richmond-based Davenport & Co., about debt financing and restructuring, Meadows wrote.
Council members have said they want more detailed monthly reports on Radford’s finances. Another discussion of income and expenses is planned for its June 17 meeting, when the council is to decide whether to renew the $4 million loan.
It may be one of Meadows’ last sessions with the city — he has been definite that he was interested only in an interim position, and council members have said they hope to announce the hiring of a new city manager soon.
Foster, Gillespie and Horton said they continue to be excited about Radford’s future.
“We have so much to take pride in and build upon. We have sown seeds for future growth and sustainability,” Foster wrote.
Gillespie agreed, writing, “We have a beautiful river city, amazing school system, strong industrial base that is poised to expand, and most importantly our people.”
Horton praised Meadows’ work and said that a bright spot among this year’s budget discussions was seeing city staff and council members’ willingness to work together.
“We are truly more fortunate than not,” Horton said.
