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BY EMILY BATTLE
Fredericksburg City Manager Phillip Rodenberg has told his staff that he's implementing a hiring freeze on city jobs to try to stave off a potential budget shortfall.
Much of Rodenberg's worry stems from recent data on how the city's second-largest revenue source--the sales tax--fared in November.
The city collected $897,000 in sales tax that month.
The last time sales tax numbers for the month of November dipped below the $1 million mark was in 2003, before Central Park was as built-out as it is today.
For the year, the city is 10.58 percent below what it had banked on receiving in sales tax revenues.
"This is our No. 2 revenue source, and it's very significant that it would be that far off," Rodenberg said. "Economic activity is slowing in the city, and we believe that it's slowing in the counties, as well."
He may be right.
Spotsylvania County has implemented a hiring freeze through the end of the fiscal year for some departments to avoid a shortfall, as early projections lagged revenues.
Stafford County departments have cut their spending by 7 percent, helping the county to make up a little more than half of the $10 million shortfall it is anticipating this year, mostly due to declining sales tax, recordation, development and the housing market slump.
Spotsylvania's sales tax revenue was down 2 percent and Stafford's was down by 2.3 percent for the first three quarters of 2007 compared to 2006. Both counties, however, showed slight increases in the third quarter of 2007.
Stafford has not enacted an across-the-board hiring freeze but has held off filling key positions like its deputy county administrator.
King George and Caroline counties have not had to enact hiring freezes or midyear cuts, but officials there say they are watching revenues carefully.
In recent months, Gov. Tim Kaine has proposed a series of cuts, as well as a significant draw from the state's emergency reserves, to close a $641 million shortfall in the state budget.
That shortfall has been tied to the slowdown in the housing market and the economy in general.
In Fredericksburg, it's not just the sales tax that's suffering.
Meals tax and building permit fees have also lagged as consumer activity and building has slowed.
Rodenberg pointed out that at this point, with data on the first five months of the 2008 budget year, the city has brought in $25.5 million but spent $30.2 million.
Council members gave their nod Tuesday night to the hiring freeze, but Councilman Marvin Dixon said that might not be enough.
"I'm very concerned about our economic position at this point," he said. "We're going to have to monitor it very closely. We're going to potentially have to do more than what's being proposed."
Mayor Tom Tomzak asked that city officials make the economic situation clear to outside agencies the city funds, as they prepare their requests for taxpayer money in the 2009 budget.
"It seems our revenues are not able at this point to sustain our core services," he said.
After the budget discussion Tuesday, council members talked about the $61 million incentives deal they've struck with Kalahari Resorts, which plans to build in Celebrate Virginia.
Several council members stressed that the city's budget situation makes Kalahari even more important, because it will help the city make more money off tourists through the lodging and sales taxes.
That could take pressure off the city's largest money source--the real estate tax.
It could also provide a more stable source of funds than the sales taxes generated by retail businesses, because Kalahari is less likely to be replicated in Stafford and Spotsylvania counties, as Central Park has been.
Staff writers Dan Telvock, Kafia Hosh and Corey Byers contributed to this report. Emily Battle: 540/374-5413