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F.C. Council Jittery as Housing Slump Portends Fiscal Squeeze

Six major mixed-use development projects worth a half-billion dollars have been OK’d, completed or are under construction in the City of Falls Church since 2001, and in the fiscal year ending June 30, they contributed tax revenues the equivalent of 10 cents on the real estate tax rate.

But one Falls Church City Council member said Monday it will take “at least another half-billion in development” to make the City solvent over the coming period. “We’re going to need a lot more of this,” said Councilman Dan Maller, as the Council reviewed a special report from the City’s Economic Development division at its last business meeting before Labor Day.

“Our goal is to remain independent as a jurisdiction as far into the future as we can see,” added Vice Mayor Lindy Hockenberry, “but future budgets won’t be easy.”

The Council will have to wait until the end of the first quarter of the current fiscal year to get a read on the impact of the slowing housing market on anticipated revenues for its next budget, and everyone is a tad nervous. City Manager Wyatt Shields told the News-Press last week that his expectations are for the real estate revenues to be “flat at best.”

Still, the report of Rick Goff, the City’s economic development director, offered a bright spot, showing the robust impact that the development of mixed use projects can bring.

Even in that area, however, the future is clouded by what’s going on in the wider housing market. In the past 12 months, nearly 20,000 condominium units have been removed from the Greater Washington, D.C. area market, according to an Alexandria-based real estate research firm quoted in yesterday’s Washington Post. Gregory H. Leisch, chief executive of Delta Associates, told the Post that in the second quarter of 2007, alone, developers abandoned plans for 22 local condo projects.

In Falls Church, the Council was compelled earlier this summer to give its blessing to a switch-over of 230 condos under construction at the Pearson Square site on S. Maple St. to rentals. As the giant Spectrum project progresses toward completion at 444 W. Broad St., sales efforts for its 195 condo units were terminated last year.

The Waterford Development, Inc. does not yet know what it will find when it resumes sales efforts, which president Jan A. Zachariasse says will re-commence this fall. But Zachariasse had told the News-Press two years ago, before the housing crunch was evident, that he’d built into the Spectrum the ability to switch the condos to rental units if the marked tanked.

Among the six approved mixed-use projects included in Goff’s report, all but one are either completed (Waterford’s The Broadway) or under construction. One, however, has not yet started, the rental-based “Northgate” project by the Hekemian group at 472 N. Washington, site of the old Pearson Funeral Home.

That was the first of the projects approved by the Council for rental units in advance, and much attention was given to the fact that it would provide the City with a much-needed, more affordable rental product.

But that approval came on March 26, only three months before the Council OK’d the Pearson Square’s switch to rentals. Some have intimated that City Hall was aware, even as the Hekemian rental project was OK’d, that Pearson Square would revert to rentals.

Nonetheless, the Hekemian project remains approved but not yet under construction, and another project on N. Washington proposed by the Akridge Company received a favorable reception from the City Council earlier this year, but no formal requests for approvals have yet shown up at City Hall.

The same goes for the City Center redevelopment plan by Atlantic Realty. The biggest project of all, it calls for a hotel, major supermarket, age-specific condo housing, a tall office building and hundreds of residential rental units. The conceptual plan for the project has come before the Council, but no formal filings for zoning or “special exception” approvals have.

Finally, another potential threat to the City’s revenue base could be a resumption of Fairfax County plans to intrude across the historic boundaries separating the City of Falls Church’s water system from Fairfax’s. While an appeal of a lawsuit filed by the City of Falls Church to prohibit such instructions awaits a court verdict, if it goes badly in court for Falls Church, then Fairfax could begin to aggressively compete for water customers and deprive the City of vital revenues.