Virginia Beach proposes FY2027 budget that pairs tax relief with workforce, infrastructure investments

Kevin (budget director) told the council the proposed FY2027 operating budget is “positioned to maintain all existing services while avoiding service interruption delivery,” with a total operating budget shown at roughly $2.88 billion and schools representing about 43.4% of that total.

The proposal frames three council priorities from an earlier retreat as top drivers for allocations: (1) provide tax relief where possible, (2) invest in workforce recruitment and retention, and (3) address capital maintenance and infrastructure backlogs. Staff said an unexpected reduction in the city’s VRS contribution (about $11.3 million) combined with stronger projected real‑estate assessment growth (6% vs. an assumed 2.8%) created approximately $33.4 million in near‑term capacity for tax relief or investments.

On tax relief, staff presented two modeled options. A hypothetical 2‑cent reduction in the real‑estate tax rate would translate to an average median savings of about $77 per residential unit and would reduce combined city and school revenue by about $9.18 million. By contrast, the staff‑draft ordinance establishing a 10.1% local credit on personal‑property tax (applied to the first $20,000 of a vehicle’s value and not limited per residence) would yield an estimated average savings of about $96 per residence and reduce city revenue by about $12.8 million (approximately $6.8M city; $6.0M through the school‑funding formula).

Kevin said the personal‑property credit was drafted to “maximize the amount of tax relief to the highest number of Virginia Beach residents,” which councilmembers repeatedly cited as a guiding principle during the discussion.

Council reaction was mixed but broadly supportive of targeting relief to more residents: one councilmember said the personal‑property approach “will hit more people,” including renters and single parents, and another advocated for guaranteeing the credit for at least two years while the VRS savings persist. Several members asked staff to confirm sustainability assumptions and signaled they would want the option that benefits the broadest set of households.

The proposed operating budget also includes a 3.5% base compensation adjustment across the workforce (about $17.3 million in general‑fund impact) with step‑plan employees receiving a step equivalent; staff proposed $7.5 million to implement the remainder of a market salary survey mid‑year for non‑public‑safety employees, effective January 2027.

Next steps: staff outlined workshops, two public hearings, a reconciliation workshop beginning May 5 and a final adoption vote scheduled for May 12 to meet the state deadline. Council did not take a final vote on the budget during this session.

Ending: Council members commended staff for the presentation, raised follow‑up requests on the sustainability modeling and distributional impacts of each tax option, and reserved detailed policy decisions for forthcoming workshops and public hearings.