F.C. Council Mulls Cutting Tax Rate Even Further

The Falls Church City Council will not cease looking for ways to lower the tax rate even more than it's already done right up to the time it is slated to vote on the Fiscal Year 2005 budget this coming Monday. Council members left this week's budget work session having tasked City Manager Dan McKeever with presenting more options for freeing up additional revenues to provide more tax relief.

As it is, the Council has already voted to drop the tax rate from $1.13 per $100 of assessed valuation to $1.09, the biggest one year drop in two decades.

Still in play, however, are last minute decisions by the Virginia State Legislature meeting in Richmond yesterday that could either add more revenues coming to local jurisdictions, or providing local jurisdictions with the option of up at a 1/2 cent sales tax increase, with that revenue going directly to the jurisdictions.

In addition, the Council may explore the legal and fiscal policy consequences of deploying up to $1 million of a surplus in the fund balance back to taxpayers. While using the funds to supplement the City's operating revenue would violate the City's own formal fund balance policy, utilizing it in the form of a one-time tax credit or rebate to taxpayers is not authorized by either City of state law, McKeever confirmed to the News-Press yesterday.

Moreover, Council members expressed concern that tapping the $1 fund balance surplus would wipe out any "rainy day" margin for the City, including an ability to move swiftly on land acquisition opportunities, either for open space or to help enable the City Center development project.

McKeever also pointed out that the City's firm adherence to prudent fund balance and debt policies were instrumental components leading to an improvement of the City's bond rating this spring, which saved City taxpayers millions by enabling City bonds to be sold at lower than expected interest rates.

A final possible source of additional revenues for the City in the coming budget lies in a reconsideration of the return on investment (ROI) that the City is taking from the operation of the City-owned water system. It was noted that the City has stuck to the figure of $4.6 million as a ROI over a number of years, and that that number is actually shrinking under the burden of inflation.

The City's right to an annual ROI from the system was established by an analysis of professional water system consultants in the late 1990s, and is fluid based on an assumption of risk and liability taken by the City's ownership of the system.

With added attention and resources being applied to the system, which serves 120,000 customers throughout Northern Virginia, in the wake of heightened post-9/11 security concerns, it was argued this week that a higher ROI is justified.

McKeever was due to provide the Council with a memorandum on these "new revenue" options by today, in advance of Monday's public business meeting of the Council and anticipated final vote on the FY '05 budget and tax rate.