Even if Richmond property tax bills continue to rise over the next three years, it won’t be enough to fund City Hall’s spending, according to a new financial analysis presented to the City Council Monday. 

Heading into the next budget cycle, Richmond officials are considering rolling back the city’s real estate tax rate for the first time since 2008. However, the city is already looking at a projected budget deficit, the analysis showed, even if the tax rate is left unchanged at $1.20 per $100 of assessed property value. 

The deficit projected for fiscal year 2028 if the rate is left unchanged, according to the report, is about $17.3 million.

Taking one cent off the tax rate — as Mayor Danny Avula has proposed — would grow the size of the projected FY28 deficit to almost $21.9 million, the report says. 

Dropping it by four cents, as some City Council members want, could lead to a $35.6 million shortfall, according to the math presented to the Council.

That’s largely because the city’s spending is rising faster than the tax bills that are supposed to pay for government services, according to the consultants hired to do the latest fiscal projections.

“Revenue growth has been outpaced by your expenditure obligations,” Danielle Scott Parker, a director with PFM Financial Advisors, told the Council at a briefing Monday afternoon.

Coming out of the COVID-19 pandemic, Richmond’s general fund budget grew substantially, rising from about $780 million in fiscal year 2021 to around $1.09 billion in fiscal year 2025. That growth was funded largely by rising property taxes. In fiscal 2022 and 2023, the city saw its real estate tax base grow by more than 13% each year. For those two years, the city saw budget surpluses of $44.1 million and $56.3 million, respectively.

That doesn’t mean the city budget is in great shape, the consultants said, because fiscal pressure is being created by rising personnel and pension costs, growing transfers to Richmond Public Schools and increasing debt service obligations. Collective bargaining negotiations that are currently underway are also an unknown factor that could add to budget pressure going forward, the consultants said.

Those budget pressures have meant smaller surpluses, the report said, and could soon put the city in the red. The analysis projected deficits for the next three years, even assuming the city’s tax base will grow by 4.5%, 6% and 6% over those three budget cycles.

Speaking to the Council Monday, Avula said he’d gone over the fiscal outlook on his own several times.

“And every time it sits heavy,” the mayor said.

The consultants’ analysis said the city has “reached the limits of its organic revenue-growth capacity at the same moment expenditure pressures are accelerating.” Because of that, the report said, Richmond is entering a period of “greater fiscal constraints.”

Even though the city revenues should continue to grow, said Chief Administrative Officer Odie Donald II, it’s not going to be the same “land of milk and honey” growth like the city has seen in the last few years.

“You still got Kool-Aid, just no sugar,” Donald said. “Still got ham, no burger.”

Donald said city officials are exploring “targeted cost avoidance” options, including a possible hiring freeze.

No ‘double bump’?

Some Council members seemed taken aback by the projection of only modest tax base growth when they were preparing for steep tax assessment increases next year. Because officials skipped a reassessment cycle to better sync up its own financial processes, Richmonders haven’t had their property values reassessed since September 2025.

Because the next reassessments won’t go out until next spring, Council members said they were expecting bigger growth from almost two years’ worth of change to property values instead of the usual one year. The 4.5% growth projection over that longer period is lower than the 6% tax base growth the city saw in its last normal reassessment cycle.

“It would be very helpful to see the modeling behind the four and a half,” said Councilor Kenya Gibson (3rd District). “It seems low given the fact that we’re talking about a period of two years.”

Councilor Andrew Breton (1st District) said he too was surprised.

“This was supposed to be the double bump,” Breton said. “So rather than being larger, it’s smaller.”

City Assessor Richie McKeithen said that was his forecast based on local real estate market conditions and a national economy he described as “struggling really bad” due to higher inflation, higher interest rates and higher gas prices. Higher costs of living, he said, weigh on people who are considering buying a home for “abundantly more than what they would have paid a while ago.”

“Our market has been slowing down like most markets across the country,” McKeithen said.

Avula is asking Richmond voters to approve a new 1% sales tax to help fund major school construction and renovation projects. He has said he’ll work to reduce both the meals and real estate tax rate by one cent in the budget he’ll propose next spring.

“The cost of government goes up every year,” Avula told the Council. “So if we’re not going to raise taxes — which none of us want to do — then we have got to make sure that we are growing, that we are developing, that we are focusing on economic development so that we can develop other revenue streams as a city.”

Council Vice President Katherine Jordan (2nd District) urged the administration to consider lowering the business, professional and occupational license (BPOL) tax to help Richmond stay economically competitive with nearby counties.

“I know that’s hard to talk about lowering yet another category of taxes and revenue,” Jordan said. “But when the threat is that we are going to lose that tenant, that business, that employee base to the counties, I think it’s a discussion we have to have.”

Diamond District questions

Gibson and Councilor Sarah Abubaker (4th District) both asked about the status of the Diamond District economic development project and whether the nearly $130 million in bonds for that initiative have contributed to the debt service pressure.

Deputy Chief Administrative Officer for Finance and Administration Tanikia Jackson said she couldn’t answer that question, indicating debt related to the Diamond District was a matter for the city’s Economic Development Authority.

Gibson then noted that the monthly financial reports the Council receives list the nearly $130 million in baseball stadium bonds as debt to be paid from the city’s general fund. 

“This is the city,” Gibson said, apparently responding to the assertion that the EDA is responsible for paying off the stadium bonds.

Because the Diamond District project appears to be behind schedule and not yet generating substantial tax revenue, Gibson asked if that would add to the fiscal pressure in the upcoming budget year.

“We told residents that this project would fund itself,” Gibson said. “So if that is not true… if we have to raise taxes or keep taxes as is to fund the Diamond District… I will not do it without making it abundantly clear that this is the position that we’re in.”

Donald, the CAO, seemed to take issue with Gibson’s line of questioning, saying she had made “some very strong mischaracterizations.”

“What is probably best for us to do is you give us a list of your questions. We’ll respond to those within about 30 days and help you kind of right-size your questions,” Donald said. “Because I think you’re asking and doing an apples to tomatoes comparison. And we want to do apples to apples.”

Contact Reporter Graham Moomaw at gmoomaw@richmonder.org