THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Thursday, November 23, 1995 TAG: 9511230543
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY KAREN WEINTRAUB, STAFF WRITER
LENGTH: Medium: 73 lines
Over the next five years, Virginia Beach is likely to encounter more of the financial and social pressures well-known to its urban neighbors.
In a presentation to the City Council on Tuesday, the director of the Department of Management Services, E.D. ``Dean'' Block, warned of dire effects on the city from projected state and federal cutbacks.
At the same time, Virginia Beach will suffer more of the problems of a city coming of age, Block said.
The housing stock is getting older and thus more likely to fall in value; the city's modest growth is no longer driving economic development; and demand for city services will increase as poverty levels rise and cutbacks take effect, he said.
The next few months, as the federal and state budgets are prepared, will be crucial for setting the city's direction, Block said.
The city already has instituted a hiring freeze, so it should not need to lay off anyone if things turn out worse than projected, he said.
Block said he also has required department heads to prepare ``contingency'' budgets for next year, in addition to their regular proposals, which will allow the city to quickly make cuts if necessary.
Unlike previous years, Block did not present much information on the local economy. He predicted modest growth over the next few years, but said whatever happens in Virginia Beach will be overshadowed by the actions of the state and federal government.
The city receives about 40 percent of its funding from the state and federal government, so any cuts at other levels of government significantly affect the city's bottom line, Block said. A 5 percent reduction in federal and state aid, for instance, would cost the city $15.6 million, which would require a 9-cent tax increase to replace.
``So much is politically driven rather than economically,'' Block said.
Block presented four possible futures for Virginia Beach, depending on the level of cutbacks.
Under the two middle projections, which Block believes are most likely, Virginia Beach will have to moderate its demands, reduce some services and consider tax increases to avoid large deficits.
But local government will be cutting at the same time that state and federal governments have scaled back services, Block said. Pressure on council members to make up for those losses will increase as more people clamor for city funds, he warned.
As less money is available for mental health services, for instance, the families of mentally handicapped people will want the City Council to make up the difference, Block said.
``There seems to be a deserving project around every corner,'' he said.
The city also cannot afford to overlook the aging of its housing stock, Block said, because run-down housing loses value and therefore generates less in property taxes. By the year 2000, over half the city's housing stock will be more than 20 years old.
Lower housing values also attract people with less money to spend, people who may be more likely to need city services, Block said. As income declines, demands for government programs often increase.
Block and City Manager James K. Spore asked for the council's help in dealing with the impending problems.
They asked council members to lobby state legislators to avoid severe cuts in funding for cities and school districts; they promised to keep council members up to date on the progress of the federal and state budgets.
And they issued a ``heartfelt plea'' to the council members not to approve any more costly projects over the next several months, until next year's budget is compiled.
Copies of the five-year forecast will be available at all city libraries. by CNB