VIRGINIA — Days after Virginia Mayor Larry Cuffe Jr. announced he would not seek another term, ending a 12-year run highlighted by aggressive new infrastructure projects, a sobering reminder of the city’s budget challenges arrived without warning.
More than $3.7 million of a local option sales tax revenue designated for the Iron Trail Motors Event Center was missing. A oversight error was suspected to have mixed the money into the city’s general fund, where it was spent on unknown costs without council approval and against the terms of the state law establishing the 1% tax increase.
This finding came amid a nonessential spending freeze across city departments as Virginia navigated low cash flow, more than $77 million in long-term debt and a stalled hotel project, underscoring a budget and outlook that changed rapidly over a five-year period.
As the Virginia councilors weighed an independent forensic audit of the sales tax error, their meeting this week was a real-time display of trying to govern through compounding financial pressures and weakened public confidence in the city.
To wit: debates over spending ranged from a $125 library conference fee to a multi-million infrastructure project, with a push in between for better accounting transparency on the 1% sales tax fund. The hotel project was not mentioned.
“We’re giving our best effort to do so,” Cuffe said at the meeting’s closing. “We hire good people, good staff, good workers to do the work that we want done. And we’re trying to do everything we can as elected officials to do our due diligence … just give us an opportunity to do the right thing.”
Perry Forensic, a firm with offices in Ohio and West Virginia, was selected to perform the city’s audit under a six-month maximum timeline and a capped cost of $80,000. Since the sales tax fund needs to be replenished in full, and therefore likely on the back of taxpayers, some councilors pinned hopes on the audit helping them budget for 2027.
That’s the optimistic outlook of the firm’s goal to have results presented to the council in November, a four-month timeline. Six months would not only push the results past the budgeting phase, but would also turn it over to a mostly restructured city council that could enter the new year with two vacant seats.
Councilor Julianne Paulsen said the long-term impact of the audit would be worth the city’s investment. Perry Forensic’s agreement with Virginia establishes an independent assessment of how it collects and manages the revenue. She also pointed to the firm’s use of artificial intelligence to bolster audit timelines.
“They were really ready to roll up their sleeves and assist us in the process,” she said. “I do feel like we would be able to get some really good concrete answers from them.”
Still, what the city could afford to spend was at the forefront during discussions.
Early estimates placed a limited-scope audit around $50,000, which could have been covered through a professional services fund that city documents show carrying a $61,077 balance as of June 30.
With the Perry Forensics bid exceeding those amounts, councilors turned to the city’s $150,000 contingency fund. Earlier in the meeting, they tabled a $36,500 lighting purchase for the ITMEC practices arena that was considered for a contingency fund purchase.
Combined, the two expenditures would have consumed 78% of Virginia’s piggy bank for unplanned costs.
Cuffe was one of the two votes against the independent audit. He said one was needed, but the mayor wanted to go down a route with the state that could be less expensive. Councilor Steve Johnson was the other vote against.
“I do not believe we have the $80,000,” Johnson said. “I don’t think that we should be spending $80,000 when we’ve just argued over $125.”
‘I just think that’s insane’
The through lines were difficult to miss.
Discussions repeatedly returned to responsible spending, transparency and the challenge of balancing new investments during a time of shaken confidence in Virginia’s financial situation.
That dilemma was punctuated when city officials were unclear on if the council could utilize the 1% sales tax fund — the same one it is required to replenish — for the ITMEC lighting request.
The fixtures themselves, said City Administrator Britt See-Benes, would fall under the proper use of the revenue. Yet, Councilors Annie Bachschneider and Liz Motley questioned if the funds could be spent now, as opposed to when the city’s bond for the building was paid off.
City Attorney Bryan Lindsay said he believed an opinion by bond counsel allowed the present use of funds as long as Virginia was current on its bond payments. He suggested the council could pass a motion to use tax money on the lighting fixtures, with a contingency clause that it fit under terms of the bond.
“I think with this forensic audit that is being discussed later, and not knowing where the dollars are right now, and not knowing how we’re going to make our bond payment this year, I don’t think we should do it anyway,” Bachschneider said. “The ITMEC is operating at a deficit of $105,576 from what’s budgeted at this point of the year.”
With the sales tax wound freshly reopened, Bachschneider requested the city’s finance department to provide a monthly report to the council and public on the fund. It would include what revenue came in, where it was deposited and how it was spent.
She noted the totals would be monthly in nature, and not the millions currently in limbo.
“I’m thinking, just with the kind of close eye that we have from the community currently on the local tax, I’m trying to think of how we can more broadly communicate,” she said. “Not only to the council, but also to the public that we are investing these dollars like we said we were going to.”
The heightened awareness around the budget also bled into one of the city’s major infrastructure projects along the 6th Avenue corridor. Broadly, the city wants to reroute sewer and storm pipes out from under the light and power building.
Virginia has some state local roads money and grants for the street work itself, totaling around $4 million, but the full scope could exceed $10 million.
Councilors were asked to approve spec work and plans for the project to make it shovel ready for grants and bonds, a process that would provide the true total cost. It ultimately failed 5-2 with Cuffe and Johnson in favor.
See-Benes said there are some federal funding avenues being pursued that would lower the city’s obligation close to $4 million. Virginia could then pursue state funds to make it whole.
Matt Reid, a civil engineer for SEH, said the proposed cost of preparation would be $167,000. It is currently 30% designed, but some tasks could be eliminated to get the cost of plans down to $100,000. Reimagining the project would result in more engineering costs, and he was uncertain how the city could reroute pipes.
“We cannot go to the taxpayers and do a debt levy for $6 million,” Paulsen said. “I could not vote yes on that kind of debt service. I just couldn’t … I don’t know why we always have to choose the most expensive and hardest way forward. It’s for that little amount of where you’re going to be relocating … $11 million, I just think that’s insane.”
Accessing the Virginia City Council
Virginia City Council agenda, minutes and packets can be found on the city’s website. Recordings of the meetings can be found on YouTube.
