New Commercial Development Helps Offset Residential Growth Nosedive
Something happened between Monday and Thursday of last week to convince the Falls Church City Council that it could pass a new fiscal year budget with no tax rate increase while still granting the School Board the full amount of its budget request. On Monday, it did so with a unanimous vote.
On balance, it was a remarkable achievement. The School Board budget included the lowest rate of growth in years, yet was able to introduce fresh incentives for attracting good new teachers in a highly-competitive regional environment.
The City-side budget, the beneficiary of $1.6 million in fresh revenues from the new commercial development in town, included the addition of five new positions to handle the business development and population growth trends in the City.
It included $2 million designated in the Capital Improvement Projects fund for leveraging the City’s ability to create or acquire affordable housing.
The tax rate remained identical to this year’s $1.01 per $100 of assessed valuation, which means that for many residents of the City, including those in town homes, their net tax bills will go down significantly as their assessments fell.
This was all achieved despite the nosedive experienced in the last year of the growth rate in residential real estate values. From annual growth rates close to 25% four years ago, the City enjoyed annual double-digit growth in values until this year, when it suddenly dropped to barely above breakeven. Faced with similar experiences all across the U.S., thousands of jurisdictions have had to respond with hefty increases in their real estate tax rate, something Falls Church was able to avoid.
The big hero in all of this is the new development in the commercially-zoned corridors of the City. Properties with recently-completed mixed-use projects or now under construction enjoyed a leap from a total taxable assessed value of $15 million in 2003 to $240 million now.
That has led to a boost in revenue of $1.6 million for the current budget. And this is with all but one of the projects still not completed. The assessed values will continue to rise as they approach completion, and then there are more in the pipeline waiting for approvals to get under construction.
City Council members made a lot of this new revenue component at Monday’s meeting, when they finally voted unanimously to approve the budget package totaling $70,790,648 for the fiscal year beginning July 1.
Monday of last week, the Council grappled with options to try to reach a budget with no tax rate increase, but left with an array of options still on the table. Mayor Robin Gardner was most adamant that the School Board allocated too much for its contingency fund, and insisted it could be cut without hurting school programs. Only Council member David Chavern was insistent the school budget should not be cut.
But by Thursday, at another work session, the Council members were all on the same page and in agreement that, after all, the school budget should not be cut and the last amount of savings in the budget needed to keep the tax rate even could come from the City’s own contingency fund.
As Mayor Gardner explained to the News-Press in a telephone interview yesterday, the Council came to realize that there was $140,000 left over in this current year’s contingency fund that could be spent between now and July 1.
It determined, then, to use as much of that as needed to relieve the pressure on the next fiscal year budget, thereby saving half-a-penny on the tax rate. The other half came from a combination of increasing the cigarette tax and an unexpected boost in the amount of revenue coming from the state. City Manager Wyatt Shields also found savings in financing, rather than buying outright, needed new police vehicles.
The Council also agreed last Thursday to giving verbal consent for a $40,000 grant to the Falls Church Education Foundation (FCEF), a citizen-based non-profit set up to raise funds to augment programs in the city schools. The money for that, they agreed, will come from the new fiscal year budget’s contingency fund.
That was another funding item that caused considerable heartburn for many in the city in the period since Shields introduced his proposed budget in early March.
Given the stake that hundreds of leading city residents and supporters of the schools have in the FCEF through personal contributions and endowments, the Council’s reluctance to re-up its seed grant for the fledgling organization was puzzling to many.
The non-profit’s track record of success in its fundraising efforts, and deployment of funds to vital new programs at the schools, ultimately prevailed, however.
But funding the full School Board budget, which grew by 5.2% to $35,391,002, was key to the overall success of the Council’s effort. Councilman Chavern called the School Board’s package “extremely smart,” noting its ability to surgically increase certain entry level teacher salary categories to improve the system’s ability to compete for the best new teachers while holding the line on other salary categories.
Councilman Hal Lippman focused on the role that the new commercial development played in easing the pressures on the tax rate and the school budget, alike. Councilman David Snyder said, “The budget is a statement of values. Falls Church is well-served by this budget.”
Mayor Gardner praised the School Board for “doing an excellent job” with their budget, calling the precision in salary adjustments to keep the schools competitive “brilliant.” But she cautioned, in her remarks to the News-Press yesterday, that the City is not out of the fiscal woods. “Next year may be a little worse,” she noted.
