Petersburg Backs Away from the Precipice

Petersburg City Manager Aretha Farrell-Benavides

The City of Petersburg looks like it has finally dug out of its fiscal hole. City Manager Aretha Ferrell-Benavides presented a $73 million budget to City Council last week that restores funding to schools and public safety even while building up the cash reserve by $950,000.

Last year the city lurched from crisis to crisis after the discovery in 2016 that it was running a $20 million deficit. After bringing in consultants with the Robert Bobb Group, the city slashed funding across the board, cut salaries, and laid off administrative employees.

The proposed fiscal 2019 budget is $1.1 million smaller even than last year’s, yet it manages to increase public safety by $3 million and schools by $0.3 million. The city bond rating has been upgraded from junk to bond status, reports the Richmond Times-Dispatch.

The budget is spartan, no doubt, and many Virginia localities would find it unacceptably austere. One could argue that the budget fails to invest enough into K-12, one of the worst-performing school systems in the state. One could further argue that the budget is still fragile, thus vulnerable to a slowdown in the economy and tax revenues. But there is no nay-saying that Petersburg has survived one of the worst fiscal disasters experienced by a Virginia locality since the Great Depression. Government administration is far more disciplined as as a result, and the city is fiscally stronger than it has been in years.

Most remarkable of all, Petersburg pulled off this fiscal feat without benefit of government bail-outs or reneging on its debt. Kudos to Fredericksburg, to the Robert Bobb Group, to the citizen activists who kept the pressure on, and to the city officials who did what they had to do.

Bacon’s bottom line: There are two lessons to be learned here. First, Virginia’s system of government worked. The McAuliffe administration didn’t panic. The Secretary of Finance provided some professional assistance but didn’t turn the city’s fiscal plight into a broader political crisis. The Commonwealth made it clear from the beginning that Petersburg’s problem was Petersburg’s to solve. And rather than expend its political capital on blaming others and seeking bail-outs, Petersburg’s political leadership submitted to the discipline imposed by the Robert Bobb group.

Second, Petersburg’s resurrection serves as an example for other governments to emulate. Illinois, Chicago, and Hartford, Conn., are one recession away from fiscal collapse, and a dozen other states and localities are not far behind. Here in Virginia, we forced poor, economically struggling Petersburg to face the music — and it did. When the inevitable occurs, our congressional delegation must steel itself to the inevitable crocodile tears and special pleading from other jurisdictions and say, “If Petersburg did it, so can you.”

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7 responses to “Petersburg Backs Away from the Precipice

  1. Well.. perhaps a THIRD lesson and that is gloom & doom Armageddon are not necessarily forgone conclusions and I do commend you for noting the successful navigation of the problems without boomergeddon!

    Cities and municipalities are run by people , the same way we, as individuals run our own budgets and yes some do so irresponsibly while a lot of others actually do so irresponsibly.

    The difference with a municipality is the “caretakers” who are human – do rotate.. and someone who was at the helm and irresponsible can be replaced by a successor who knows how to and will bite the fiscal bullet.

    That’s why out of thousands and thousands of municipalities.. while there are some spectacular fiscal failures – the vast majority are not so “boomergeddon” is more of a boogeyman in the closet rather than a nation full of totally broke municipalities.

    Gotta keep that glass half full on our perspectives.

  2. The story describes The Robert Bobb Group as some DC consulting firm but of course Richmonders of a Certain Age remember him as a very good city manager for the Holy City, before we went off on this mad Strong Mayor tangent. I’m sure that history helped Petersburg leaders accept the hard but necessary advice they were getting from him. It ain’t rocket science, but you only have to go a couple of years with unrealistic revenue projections combined with poorly-supervised spending and lax debt collection to wake up in a deep hole.

    One of my many memories of my father, who spent more than 15 years as an assistant city manager and then manager, was of him sitting in the evening reviewing every single invoice and check, month after month. It was quite a stack when he was manager in Roanoke. No summaries, thank you, he wanted the full invoice and the paperwork.

    We can celebrate that Petersburg didn’t go over the cliff, but the long term prospect might still be a challenge. Is there any way the city tax base will grow? New industry or some strategy to bring up investment in the housing stock? Is there any retail to speak of with Southpark Mall just across the river in Colonial Heights? Despite the issues with Richmond’s schools, the real estate market is hot, hot, blazing. I doubt the same is true for Petersburg neighborhoods of similar age.

  3. Very impressive achievement. Hopefully, there is a follow on plan to build and strengthen economic base, as Steve suggests. I recall that perhaps the town’s unique history offered some potential in that regard.

  4. Would that Fairfax County would move as quickly in the right direction. The County has engaged in two “lines of business” reviews but has not found a single program or function that is not necessary. Of course the people who operate the programs or perform the functions did the analysis.

    And unfunded pension liability is $6.1 billion significantly larger than bonded debt of $3.4 billion. The ultra-wealthy will stay, while the middle and upper-middle classes are getting smaller, while the number of low-income people is growing. That explains the many, many illegal boardinghouses being operated in the county.

    • Does Fairfax County or George Mason still publish the vacancy rate figures as they fluctuate month to month, and the leasing activity in various markets? What do they show and for how long? These are legal boarding houses in commercial properties or private homes too? One assumes that someone somewhere is working on a grand redevelopment plan, or subsections hereof, if matters continue to decline without relief or abatement, while other markets nearby flourish. Are things out in the open? Are outside consultant of any sort being brought in. Of course, until Amazon is resolved perhaps there is a hiatus of sorts. Obviously, I am just speculating. But time runs out.

  5. Petersburg just went from junk status to the next level up…Fairfax has a AAA rating.. one of only 7 in Virginia.

    It’s hard to believe that Fairfax is anywhere in the same ballpark as Petersburg or for that matter the other 126 county/city/towns in Virginia.

    Is Fairfax really in danger of loosing it’s AAA rating?

    • On December 26, 2017, Moody’s Investors Service cited “inability to increase pension funding” as one of three factors that could lead to a downgrade of [Fairfax] County’s AAA bond rating,” and noted that the County’s “relatively underfunded pensions” are “counterbalanced by a favorable debt burden and overfunded OPEC ARC.” Also, pension plan unfunded liabilities as a percentage of covered employee payroll rose for each pension plans in which County and FCPS employees participate increased significantly between FY 2014 and FY 2017. OPEB ARC being Other Post Employment Benefits Annual Required Contribution.

      As I noted, bonded debt constituted $3.4 billion, while unfunded pension liabilities were $6.1 billion.

      Fairfax County is clearly not Petersburg or other clearly financially troubled localities in Virginia. Yet from a General Fund disbursement budget of $4.3 billion and a total all-fund disbursement budget of more than $8 billion, Fairfax County could find only $3.4 million in cost savings. And its excessively generous pensions and general inability to eliminate less-valuable programs and functions, when coupled with stagnant income growth among its residents keeps the County’s AAA bond rating at risk.

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