In a letter dated December 8, 2006, Mayor Betsy Davis officially notified the "citizens and businesses" of Middleburg that "several tax increases" and a "10% increase in our water and sewer rates" would be the subject of a public hearing at the next regular meeting of the Town Council on December 14. (See full text of the Davis letter on page 5)

The Town's Personnel and Finance Committee and, later, the full Council, unanimously supported the proposed changes.

In a preliminary report Town Auditor, CPA Jeff Mitchell of Leesburg, had warned Council to expect a "sobering" report on the state of the Town's finances. Mitchell delivered a draft of his final audit late on Wednesday, December 6.

"Not Easy Decision"

Mayor Davis said increasing taxes was "not an easy decision" for anyone on the Council, and "one we wish we didn't have to consider."

Following the public hearing, Council is expected to: 1) levy a new tax of 35-cents-per-pack on cigarettes sold within the Town limits; 2) increase the "meals" tax, a tax not just on restaurant meals but on "customers purchasing prepared foods" by 33%; and increase the "occupancy tax," charged to "overnight guests in hotels and bed and breakfasts" by 66%.

Mayor Davis described the proposed 4% tax on meals and 5% "occupancy" taxes as in line with those of surrounding jurisdictions.

Describing the proposed 10% increase in water and sewer rates as "probably the hardest to understand," Davis termed it "a necessity" due to steadily increasing costs and stagnant revenue.

Audit "Highlights"

Mitchell's full audit report confirmed his earlier warnings of serious cash, cash-flow, spending and financial oversight problems (See cover story in the November edition of the Middleburg Eccentric: http://www.mbecc.com)

Total Assets Decline

Technically, the town is still "in the black." According to Mitchell, Middleburg's total net assets (most in the form of real property and equipment owned by the Town rather than cash) still exceed liabilities by more than $4 million.

The total value of the town's assets, however, decreased by nearly $77,000 in fiscal year 2006.

Overspending, Cash Crunch, Rising Debt

When the Town's fiscal year ended on June 30, 2006, "the Town of Middleburg's governmental funds reported combined ending fund balances of $25, 503," according to Mitchell, "a decrease of $911,388 in comparison with the prior year."

After spending $219.726 more than had been officially budgeted and/or approved (termed by the auditors, the "available amount for spending at the government's discretion") the town was compelled to borrow money to pay its bills over the summer.

That borrowing, against a $500,000 line of credit from Middleburg Bank, added to what was already a one-year, $1,178, 637 increase in the Town's total debt.