Roanoke may need to slash millions in city spending as new leaders warn of a tighter-than-normal budget.

“This is a very difficult budget year, as our expenditures are outpacing our revenues,” City Manager Valmarie Turner told City Council members last week.

City leaders this month asked the school district to consider foregoing an increase in the funding they receive from the city, which would again require adjusting a longstanding policy directing 40 percent of local dollars to the schools. City officials are analyzing everything from potential cuts to public transportation to cutting back on mowing in public parks.

Spending above what was budgeted by previous city administrators is in part to blame for some of the expected shortfall, according to the municipal auditor. Councilman Peter Volosin said he believes the current gap is around $4 million, though it’s a fluid number, and could be higher.

“Leadership is important, and that’s one of the things I think we were missing in the finance department,” Volosin said. “If we had a stronger director of finance at the time that brought these issues to us, that would’ve been important.”

Turmoil at city hall last year saw the departure of City Manager Bob Cowell, finance director Brent Robertson, and turnover of half the budget staff. Cowell resigned under pressure after demoting Robertson, who was accused of berating a budget analyst, who quit.

“All that affected us and how we proceeded,” former mayor Sherman Lea acknowledged in an interview Monday. “And so maybe we didn't make, in certain cases, the right decisions when it comes to finances.”

Over two weeks, the city declined to make Turner and finance director Margaret Lindsey available to The Rambler for interviews. A city spokeswoman declined to answer written questions about the budget, including what the estimated shortfall is. Mayor Joe Cobb did not respond to text messages for this story.

While the city expects to take in an additional $23 million next year in a $402 million budget, that won’t be enough, Turner said. Increased employee compensation and inflationary pressure are among the culprits, which have affected local governments for several years. Tax revenues have not kept pace with those needs, which prompted Council last spring to adjust its school funding formula to allow for more flexibility.

“It does not surprise me. I mean, we could see this coming, and it was a concern,” Lea said. “We probably should have been on a moratorium, in terms of hiring and certain things we should have looked at, you know, but … we didn't do it. I think, in hindsight, we probably should have.”

Councilman Phazhon Nash said the financial outlook from Turner, who started last month, surprised him.

“It is serious,” Nash said. “I think we’ll make it through, 100 percent. … Will we love the next few years? No, I don’t think so.”

'It's out of the ordinary'

With 1,800 employees — from trash collectors to police officers — the city spends more than 40 percent of its budget, or $157 million a year, on compensation.

Since a 2022 study found Roanoke lagging behind its peers in compensation, the city has boosted wages and made them more equitable based on experience. Bringing up pay for police officers, firefighters and first responders has also been a focus for several years. Since the pandemic, the city increased wages by more than $22 million, or 19 percent.

But the city didn’t always budget for pay increases.

“Overtime and temporary wages have skyrocketed,” Turner said.

Since the current fiscal year budget was adopted in April, total employee base pay has gone up more than $5 million, she said. Some employees were hired at 10 to 15 percent above minimum salary ranges. Employee health insurance rates are expected to increase 10 percent, another $2 million. Millions more are needed to bring a couple hundred workers up to a living wage.

“Everything with compensation was not handled great,” Drew Harmon, the city’s municipal auditor, said in an interview.

Two recent audits found Roanoke was spending more than budgeted — on overtime pay for firefighters and paramedics, as well as on after-school programming — even though city officials knew how much was needed. The city increased its minimum wage to $15 per hour in 2022, but in the after-school program case, did not account for that cost for contract workers, one audit found.

“There were known costs that were operating costs that should’ve been included in the budget and weren’t,” Harmon said. “If you’re dealing with a baseline budget, that’s going to create additional stress to do the next year’s budget.”

Harmon said that’s not a typical budget practice.

“It’s out of the ordinary,” he said.

Robertson, the former finance director and assistant city manager, said in a text message, “I retired at the end of November and have no knowledge of the current issues surrounding the City’s budget, or otherwise.”

Cowell, who resigned in June after the last budget was adopted, declined to comment.

The city has brought on Sherman Stovall, a former deputy city manager who retired in 2021, to help with the budget, Turner said. At a Council meeting last week, Stovall sat two rows behind the city’s current deputy city managers, Sam Roman and Angie O’Brien, and beside Lindsey, who took over as finance director in August from an interim director.

Lea said Council asked Stovall to serve as interim city manager following Cowell’s departure, but Stovall declined. Instead, the city hired Lydia Pettis Patton, a former Portsmouth city manager.

Volosin said Turner and finance officials have been working on the weekends to get a handle on the budget.

“They started to notice some things that were done a little bit differently,” Volosin said of Patton and Turner. “I’m not 100 percent sure what budget issues are still to be found [but] they’re working very hard. …We don’t have a full sense of what’s going on yet.”

“To be clear, there wasn’t anything done by the previous administrators that was illegal or anything like that,” Volosin added. “It was just different ways of handling budgets.”

'Projecting down the road'

Roanoke is hardly alone in facing more dire financial straits.

Fairfax County, one of Virginia’s wealthiest areas, last week proposed slashing $60 million in spending, on a $5.2 billion budget, the greatest cut since the Great Recession. The county proposed laying off at least 100 workers, increasing tax rates and adding a new food tax.

Fairfax, where many federal workers and contractors live, cited how “changes at the federal level may have significant economic effects.” Local governments are also facing rising costs.

“They sort of go hand in hand, the inflation and the salaries,” said Joe Flores, director of fiscal policy at Virginia Municipal League. “Localities were struggling to compete for staff that could go work in other industries and make a lot more money with less stressful jobs.”

Besides compensation, Roanoke has millions in building improvements it needs to make soon, according to Turner’s presentation, including at the adult detention center and Berglund Center. She described $4.3 million in repairs for elevators across city buildings as a priority.

These days, city staff are “working on a multi-pronged and multi-year approach to reduce expenditures and increase revenues,” Turner told Council members.

“We’ve been learning about this as we go,” Cobb said after Turner’s briefing.

Next month, Turner will present a draft budget, and the city expects to have two public outreach meetings to hear residents’ feedback.

“The budgeting process isn't just about this fiscal year, it's about projecting down the road so we can be prepared for what the economy may or may not do,” Cobb told reporters earlier this month. “And that's kind of a wild card right now.”