Mark Hand
With revenue from meal, hotel and sales taxes projected to remain flat or possibly decline, the City of Lynchburg will need to look at other revenue streams that will allow it to provide the current level of services in the new fiscal year, according to city officials.
Over the past three years, increases in these consumer-related taxes, especially the meals tax, helped Lynchburg keep up with inflationary cost increases. But revenue produced from these taxes is expected to remain steady at best in the coming year.
At the city council's annual winter retreat at the Point of Honor Carriage House on Thursday, Lynchburg Deputy City Manager Greg Patrick said the city will need to spend more money in fiscal year 2026 -- due to inflation and rising costs with city contractors -- if it wants to maintain the same level of services it currently provides its residents.
"We're going to have to figure out how to either cover those costs, or have a conversation around the services," Patrick said.
At this point in the discussion on Thursday, At-large Councilman Martin Misjuns, the new chair of the council's finance committee, noted the reason why consumer spending might be declining -- thereby affecting the consumer-related tax collections in the city -- is inflation.
"If it's more expensive for folks to live, it's not the right time to increase taxes," Misjuns said.
City officials also provided councilmembers with a rundown of how the annual budgeting process is conducted and outlined options for the councilors to consider when voting this spring on the budget for the new fiscal year.
Lynchburg still is a month or two away from the city manager's office releasing its proposed capital and operating budgets for fiscal year 2026.
Donna Witt outlined the financial practices she has followed as the longtime chief financial officer of the city. The parameters within which the city's finance department operates are "fiscally conservative, efficient and sound, which is what we want to be," she said.
"I take great pride in my years with the city in working with great city councilmembers to set this city up for success," Witt said. "That's what we're here to do, because we want this city to be here a long time after us."
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The top five expenditures from the city's general fund for fiscal year 2025 were on the city's schools, at $39.4 million, followed by police at $31.1 million, public works at $27.1 million, human services at $27 million and the fire department at $25.2 million.
In her tenure as CFO, Witt said the budget for city schools was often far higher than the public safety budget, referring to both police and fire services.
"If you added your public safety money together, it was still not as much as we funded schools, and that has swapped," she said. "A lot of that is because of the importance of public safety. City council has spent that money to grow our public safety program as needed."
The Lynchburg Police Department is scheduled to move into its new $50 million headquarters on Odd Fellows Road in February. The fire department is planning to begin construction of a new station near Liberty University later this year.
When assessing potential revenues, the city first looks at general economic conditions.
"What do our current collections look like," Patrick asked. "Our meals tax collections this year are actually pointing to us not meeting budget in that particular area."
Every business in Lynchburg is required to levy a 6.5% tax on all prepared food and drinks, including alcoholic beverages.
City staff members then look at growth and new development happening across the city. The new Rosedale Apartments on Graves Mill Road will be the highest assessed property in the city, bringing in new tax revenue.
Patrick also said the recently renovated Chick-fil-A restaurant on Wards Road had "a big enough impact on our meals tax that we had to take that into consideration when we were forecasting revenues."
For years, Olive Garden, also on Wards Road, was the No. 1 producing meals tax restaurant in Lynchburg. But Chick-fil-A has overtaken Olive Garden in the amount of meals taxes collected, he said.
In fiscal year 2025, the meals tax was among the top five revenue producers for Lynchburg's general fund.
In the top spot was real estate taxes, which generated $68.8 million in revenues, followed by personal property taxes at $30 million, local sales taxes at $22 million, meals taxes at $21.5 million and business license taxes at $10.9 million.
These top five sources represented about 67% of total revenue for Lynchburg for fiscal year 2025, according to the city. Revenues from the state and federal governments also play a large role in funding the city government.
Mark Hand, (434) 385-5556
mhand@newsadvance.com
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