THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Monday, July 25, 1994 TAG: 9407250062
SECTION: LOCAL PAGE: B1 EDITION: FINAL
SOURCE: BY TONI WHITT, STAFF WRITER
DATELINE: PORTSMOUTH LENGTH: Long : 135 lines
The City Council and its top executive have dreams of a prosperous, thriving city - it just doesn't have the money to make those dreams come true.
Like many cities across the nation, this old urban city just held on during the recession. As municipal expenses continued to rise, the city avoided tax increases and maintained its bond rating by eliminating jobs and increasing fees for services.
But the city wants to do more than ``remain steady.'' It wants to flourish.
The council and the manager are planning to revitalize the crumbling Mid-City area, a once-thriving retail center for the region. The council also has plans to put some finishing touches on the downtown district, envisioning an area like Alexandria, which has arts, antiques and specialty shops, and museums. The city also is in a bidding war for the state's only pari-mutuel race track.
They have the dreams, but not the money.
``The city is facing severe financial challenges,'' City Manager V. Wayne Orton said.
Portsmouth is poor, hemmed in, has stalled property values, expensive building needs and a shrinking retail base. It's a story being told in similar-sized cities across America.
That's why Orton is looking for executive help.
The city will begin advertising nationally for a new chief financial officer this week. The city manager said he hoped to hire someone from the banking industry, where layoffs have created a glut of available talent.
The new financial manager will head the city's Finance Department and will supervise Finance Director J. Peter Teig. The city manager said the new chief will have the authority to reorganize the department.
Putting the city on better financial footing will be the first challenge for the financial officer.
The executive will be asked to assess certain projects for risks and potential payoffs.
Many urban cities the size of Portsmouth are facing a similar economic crunch.
Expenses outpaced revenues by nearly 5 percent or more in about one-third of U.S. cities with a population of more than 50,000, according to a survey by the National League of Cities.
The survey says the same problem is expected next year in nearly half of those cities unless they make some changes.
Most cities blame spiraling health care costs, building needs and services mandated but not paid for by the state and federal governments.
Nearly 45 percent of all cities answering the survey had either hiring freezes or staff cuts, or both.
Orton has told taxpayers that the city was not laying off employees because it was on the brink of bankruptcy. But the city, he said, has had to cut costs in order to remain healthy.
``I have said all along we have too many employees,'' Orton said.
In his four years as city manager, Orton has eliminated 177 positions, most of them through attrition. The city's bond-rating agency credits Orton for shrinking the city staff, thereby enabling it to to keep a fairly strong rating.
Orton estimates he will save the city nearly $7 million a year by eliminating the positions. The city hasn't had a real estate tax increase since 1989, when the council raised the tax by 10 cents to $1.32.
Five years ago the city was borrowing money to meet day-to-day expenses. The financial reserve fund - normally used to bridge the tight times in a year, had been tapped so often only $4 million was left.
Portsmouth now has about $7 million in reserve, but its municipal finance commission recommends increasing that amount to $11 million.
The finance commission also has recommended that Portsmouth cut borrowing for new construction and begin putting more money in reserve accounts.
For the past few years, Portsmouth has borrowed $10 million annually for new projects, but has repaid only about $7 million annually.
That means the city's debt is growing by about $3 million a year - even before interest is added.
Portsmouth is third on a list of the state's most fiscally stressed cities, behind only Norfolk and Petersburg.
That doesn't mean bankruptcy is imminent, but indicates that Portsmouth has little room to grow and can't squeeze more from its tax base. Of the city's population, 19 percent are at or below poverty level.
While fees for services like city water and garbage collection have increased over the years, the City Council all but eliminated its boat tax and also has cut its taxes on recreational vehicles.
Orton urged eliminating those taxes to attract tourists to the city. But the city still is waiting for those tourists.
If several planned projects are a success, the city could take off.
If the city invests a lot of money into projects that fail, it could face severe financial hardships, according to former Deputy City Manager Roy W. Cherry, who kept a close watch on the city's purse strings.
Norfolk has spent $100 million to renovate its downtown in the past decade. It's ready to invest another $100 million on a new downtown mall.
Orton isn't willing to put Portsmouth into that kind of debt.
The city is gambling that it will win the state's only pari-mutuel race track. The city would invest $15 million and has promised to guarantee another $38 million.
City officials hope the track will bring revenues, as well as breathe new life into Tower Mall and the surrounding area.
But if the horse track goes bust, the city could be in the hole $4 million to $5 million a year for the next 30 years. The city would be forced to raise taxes or cut services. Resulting tax increases could be large: A 1 cent increase in real estate rates raises about $250,000.
With one of the highest tax rates and the poorest populations in the region, the city realistically can't squeeze much more from its tax base.
Orton said the city is not depending on the track for new life.
He is counting on several projects to rejuvenate the city, including the new Children's Museum and the new Tidewater Community College Fine Arts Center.
The council has launched a study on how to complete downtown development and turn around its Mid-City area.
Orton has directed the city's Economic Development Department to sell the Cox Property in the West Norfolk area of Churchland for commercial development.
He has targeted the River Pointe Corporate Center for future development.
His reorganization, Orton said, was designed in part to allow him to personally spend more time on economic development. But it will take time to get new businesses up and running.
In the meantime, Orton is searching for a financial wizard who can work magic on the city's coffers and help make his dreams come true.
``I felt a need to add a resource with greater leadership and financial ability than we have now,'' Orton said in his announcement to hire the new executive. ``I want someone who can give us even more precise financial information - and to help me and the council understand the reality of the city's financial needs.'' ILLUSTRATION: V. Wayne Orton, Portsmouth city manager
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HOPE FOR THE FUTURE?
PAI/Staff
by CNB