Virginia City council votes to move 1% event-center sales tax to investment account, directs repayment options

The Virginia City Council voted May 26 to begin transferring the city’s dedicated 1% event-center sales-tax receipts into a 4M investment account, labeling the amounts as restricted and directing staff to return options for repaying prior amounts that had been used for cash-flow purposes.

The action followed more than an hour of debate about legal limits, cash flow and bookkeeping. Mia Thibodeau of Freiburger Law told the council the special legislation that created the event-center sales tax narrowly limits how those receipts may be used. “The special legislation is very specific about what you can use that for,” Thibodeau said, adding that while the city should keep bookkeeping in a sales-tax fund, the dollars may be invested and bookkeeping can show separate credits for debt service.

Councilors raised practical concerns about near-term cash shortages and the outstanding bond balance tied to the 1% tax. Councillor Buck Schneider said the city currently shows a $3,722,429.10 balance owed on the 2020 A sales-tax bond and that the event-center fund had a negative cash balance in recent projections; he argued the council should not create a procedure that simply moves funds away from an operational shortfall without a repayment plan. “If we transfer this on a monthly basis, we are going to be transferring it right back to assist with our cash flow,” he said.

After discussing bookkeeping options and whether the transfers should be monthly or annual, the council first considered a motion that failed for lack of support. Later, with additional clarification from staff and counsel, the council approved a motion to transfer monthly receipts into the 4M investment account and to flag those funds as restricted for the statutory purposes of the Iron Trail Motors Event Center. The council then unanimously approved a motion directing the city administrator and finance director to present options to replenish or repay the previously used portion of the 1% sales tax.

City staff and several councilors said the transfer is intended to ensure compliance with the statute and to create clearer bookkeeping so that money intended for event‑center capital purposes is identifiable and invested when not immediately needed for debt service. Councilors also asked for an auditor’s review and for a written plan showing how the city will handle months in which cash flow is tight.

The council’s next step is for administrative staff to return with a written repayment plan and cost analysis that lays out timelines, projected cash flows and any accounting adjustments. The council asked staff to include how invested funds would be credited toward debt-service payments and to identify any statutory or audit risks.

The council’s motion carried; staff will return with options to restore prior draws on the 1% sales-tax fund and with bookkeeping steps to prevent future ambiguity.