On Wednesday, March 19, 2025, Interim Town Manager Kwasi Fraser presented the proposed Fiscal Year 2026 budget to the Purcellville Town Council. The budget, totaling $35.9 million, includes allocations across four funds and a Capital Improvement Program (CIP). A key feature of the proposal is the transfer of funds from the General Fund, specifically the Meals Tax, to the Utility Fund, aimed at postponing increases in water and sewer rates for residents.
The proposed budget is structured as follows:
– General Fund and Parks and Recreation: $16.7 million, primarily funded by tax revenue.
– Water and Wastewater: $9.7 million, classified as Enterprise Accounts primarily funded through utility rates and new connections.
– Capital Improvement Programs for All Funds: $9.5 million.
The Purcellville Town Council has contemplated transferring assets between the General Fund and the Enterprise Funds for several years but has held off due to concerns expressed by financial consultants and town management.
In response to a formal request from the Council regarding the use of Meals Tax to support Enterprise Funds, financial consultant Davenport & Co. provided insights on May 22, 2023. Their memo stated, “It is recognized as ‘best practice’ and an industry norm for well-managed Water & Sewer Utility Enterprise Funds to be fully self-supporting and not dependent on ongoing annual support from the General Fund.” They emphasized that this principle is vital for maintaining the Town’s strong credit ratings, as noted in reports by National Credit Rating Agencies.
The proposed budget does not suggest adjustments to real estate or Fireman’s Field Tax rates. However, due to increasing property assessments, many homeowners may experience higher tax bills. Notably, the draft budget also avoids increases in water or sewer rates, thanks to the proposed fund transfers.
To balance the budget, Fraser recommends transferring 50% of Meals Tax revenue—approximately $1.6 million—from the General Fund to the Utility Fund to alleviate potential rate hikes. Recent Council initiatives to balance the water and sewer funds have included restructuring loans and utilizing utility reserves, but dwindling account balances have made reliance on reserves unsustainable.
Davenport & Co. has been instrumental in formulating strategic financial plans, assessing debt capacity and affordability, managing debt issuances, and conducting economic evaluations for Purcellville.
However, Davenport & Co. has raised concerns about the implications of using Meals Tax Funds to support Utility accounts, particularly regarding its potential impact on the town’s credit ratings. The draft budget outlines a $9 million Capital Improvement Program (CIP) request for FY26, with over $5 million expected to be financed through loans. Questions remain about how these loans will be repaid given the immediate CIP needs.
Looking ahead, Purcellville has identified an additional $36.8 million in CIP requirements over the next five years, with over 70% anticipated to be financed through loans. This figure does not include funding for a permanent police station, as the current facility operates on a short-term lease. Maintaining a strong credit rating is crucial to saving taxpayers millions in interest on future loans.
Another significant concern within the budget is the stability of Purcellville’s workforce. Over the last decade, the town has experienced considerable turnover among experienced staff due to forced resignations, retirements, and competitive job offers. During a recent town meeting, the Interim Police Chief addressed these challenges. Although a 2018 Operational Audit requested by Mayor Fraser indicated the need for additional police officers, this year’s budget has removed funding for four of those positions.
The proposed budget does not provide for a cost-of-living adjustment for employees, opting instead for a merit increase. Maintaining experienced staff is essential for the town’s future, as hiring and training new employees can be costly and time-consuming, a point frequently highlighted by financial consultants.
Over the years, Purcellville’s consultants and town managers have advised against “mixing” funds to avoid creating a precarious financial situation that could jeopardize all funds during emergencies, rising costs, fluctuating revenues, and economic shifts.
Key Timeline for Budget Adoption
The timeline for the budget adoption process is as follows:
– Real Estate Tax: Scheduled for adoption on March 25.
– Budget Work Sessions: Three additional work sessions are planned.
– Public Hearings: Public hearings regarding the FY 26 Budget and Master Tax and Fees will take place on April 8.
– Budget Adoption: The final budget adoption is set for Tuesday, April 22.
Moving forward with the proposed budget, community engagement and transparency will be essential for navigating these financial decisions and ensuring the long-term vitality of Purcellville.