Virginia city councilors on Tuesday will consider seeking alternatives for their ambulance department, law enforcement and fire department, a sign that cash flow and budget concerns may be heightening.

Three discussion items on the 4 p.m. June 23 agenda include seeking requests for proposals for ambulance and police services, while also directing city staff to research and make recommendations on the creation of a hybrid fire department.

No other was information was provided in the agenda packet.

Public safety spending amounted to more than $9 million of the city’s $21 million general fund budget this year. A special revenue fund for ambulance expenditures totaled more than $4 million, but the line item is outside the general fund.

Members of the Virginia Fire Department, in a Facebook post Thursday, said they recognized the city’s challenges and despite their opposition believe the discussion items are being brought up in good faith.

“We disagree strongly with any structural changes to, or contracting out of, current emergency services including those provided by our brothers and sisters at the Virginia Police Department,” the post reads. “If they are approved, proposals could/will be received from private and/or county alternatives for both Ambulance and Police service.”

For the city, outsourcing police and ambulance services could ease budgetary woes by shifting operational expenses off its books. Remaining debt on the public safety building would remain the city’s responsibility.

Councilors on May 26 asked city staff to provide a more detailed look at ambulance costs and where the city provides services. Virginia provides service and transfers across northern Minnesota, which generates some revenue, but also puts a strain on staff and equipment.

The discussion on fire, police and EMS comes as Virginia’s financial outlook, as it stands, appears to be in dire straits.

At a working session this week, staff projected to the city’s auditing firm that they would soon receive Virginia’s cut of property tax payments, but cautioned the funds may only last through September.

A review of the city’s budget shows a general fund line of more than $21 million and about $35 million when the special revenue funds are included. The general fund is essentially the city’s checking account that funds day-to-day services, and where councilors determine where to set its tax levy year to year.

According to the most recent audit in 2024, Virginia paid more than $3 million in interest. It’s long-term debt obligations are projected to be more than $77 million at the end of this year, more than double of the city’s budget.

Both Moody’s and the S&P Global downgraded Virginia’s credit rating in 2024, citing low fund balances and most of the city’s liquidity being tied to Virginia Public Utilities.

Ambulance services and the Iron Trail Motors Event Center were also cited. The ITMEC has operated at a loss every year since 2022, according to previous city audits, to a total around $3 million. That number does not include potential gains or losses from 2025, as the audit is not finished. It also does not include any gains or losses from 2021, when the ITMEC first opened.

“The underperforming events center and ambulance services fund have more than depleted available reserves across governmental operations,” wrote Moody’s.

Virginia implemented spending and overtime freezes in April after transferring $2 million from an investment fund to the general fund to cover cash flow.

Councilors on June 9 also approved moving ahead with a forensic audit to investigate where $3.7 million of sales tax funds were improperly used, without approval of the council. The sales tax money was generated to pay for the ITMEC, and reserves were supposed to be set aside for maintenance of the building.

Mia Thibodeau, an attorney Fryberger Law, told the council on May 26 that it would require special legislation to allow those funds to be used for cash flow assistance.

Virginia Mayor Larry Cuffe Jr. said on June 9 that he believed the funds were spent out of the general fund. Replenishing the account could fall on taxpayers through an increased levy next year.

An update on the forensic audit is also on the June 23 agenda.

Councilor Steve Johnson, at the same meeting, said much of the city’s financial problems stem from not addressing and acting on higher levies in past years.

Virginia approved a 4% increase in 2023, a 5.5% increase in 2024, a 0% increase in 2025 and a 7.54% increase in 2026. In 2023 and 2025, the preliminary levy was set around 20%, but lowered. Residents last had a double-digit levy increase in 2017 (14%).

Over the last 20 years, according to St. Louis County, Virginia has had the highest levy increase in the northern half at a rate of 223.6% since 2005. Eveleth (223.1%), Aurora (222.8%) and Babbitt (218.6%) were the only other cities higher than 155% during that span.

Other items of note

• The city will be discussing an early retirement package proposal at 7:30 a.m. Wednesday, June 22, during a personnel committee meeting. The city sees the option as a way to “strategically reduce payroll obligations, restructure departments, and avoid future workforce reductions through attrition rather than layoffs.”
• At the same committee meeting, it will have a discussion on how proposed budget reductions will impact AFSCME-represented employees.

Accessing the Virginia City Council

Agendas, packets and minutes can be found on the city’s website. A stream of city council meetings is generally available on YouTube.