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Vienna proposes using nearly $1M surplus on employee pay, tax cut

Compensation increases for employees and real estate tax cuts for residents are on the table, as the extra money keeps rolling in for the Town of Vienna.

In addition to receiving $8.5 million in federal COVID-19 relief funds this summer, the town ended the last fiscal year (July 1, 2020 to June 30, 2021) with $900,000 in surplus revenue, staff told the Vienna Town Council in a conference session on Monday (Oct. 18).

“We’re in this position because we cut our budget. We cut our revenues to deal with the pandemic. We had to cut our expenditures,” Finance Director Marion Serfass said. “But then our revenues came in in some key areas pretty darn close to what we had budgeted, so that gave us a nice surplus.”

According to town staff, Vienna got higher-than-expected revenue from sales taxes, business licenses, zoning permit fees, and state and federal revenues in FY 2020-2021. In addition, position vacancies helped keep costs down.

Vienna’s budget committee presented three options for allocating the surplus funds.

Scenario 1

The town could follow its traditional practice of putting half of any surplus in a rainy day fund and using the other half to cover currently unfunded priorities:

  • $125,000 to fix pay compression for 41 employees
  • $175,000 for street paving work
  • $50,000 for tree maintenance and beautification
  • $100,000 to address 2022 budget corrections

Scenario 2

Because the rainy day reserve is already above where it needs to be, town staff proposed instead “returning” some money to employees and taxpayers. If the town allocates all $900,000 in the current fiscal year, it could:

  • Cover the unfunded priorities above, except paving would get just $75,000
  • $280,000 to give residents a half-cent tax rebate
  • $270,000 to give employees a 3% salary increase starting on Jan. 1, 2022

Scenario 3

The town could also hold $550,000 to spend next fiscal year, while still covering the unfunded priorities now:

  • $280,000 to reduce the real estate tax rate by half a cent
  • $270,000 to increase employee salaries by 3% starting on July 1, 2022

Serfass noted that the surplus could be spent on any priorities, but she suggested paving and tree maintenance because the town council had previously floated those as areas that could use more money.

“Here’s some things that fall into the category of things we wanted to do but haven’t had enough money to do them,” she said. “We could always put more money in paving. We’re only getting the index of ‘fair’…We know we have issues with trees.”

The council gave its support for funding those needs as well as holding money for a tax rate reduction in July instead of an immediate rebate.

“I know it’s not much either way, but I think [a rate reduction] has more value than mailing somebody a pretty small check,” Councilmember Ed Somers said.

The council proved skeptical, however, when it came to the proposed 3% salary increase, since it would be a recurring expense paid for with a one-time surplus.

“If you are using long-term money for short-term gain, I have never seen that work,” Councilmember Steve Potter said, adding that he would be more comfortable offering bonuses or another incentive to help recruit and retain workers.

According to Michelle Crabtree, Vienna’s human resources director, other jurisidictions have seen some success in using bonuses to recruit employees, particularly police officers and commercially licensed drivers.

“We’ve had a high turnover in public works,” she said. “We’ve lost eight people this year, and seven of them said it was one hundred percent because they could find more money elsewhere.”

Noting that Vienna is hardly alone in having labor challenges, Councilmember Nisha Patel said she would support bonuses targeted toward the positions facing the biggest hiring and retention issues.

“If we have additional funds that can go to staff, maybe we should use those more wisely to attract and retain, as opposed to just spreading it out,” Patel said.

The Vienna Town Council will hold a public hearing on the surplus funds on Nov. 15.

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