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Housing Crisis Shows Up as Sudden Fiscal Deficit for F.C.

Council Learns of $640,000 Deficit; Still Spends More

The harsh fiscal reality associated with the residential real estate market decline throughout the region broke in on the Falls Church City Council at its meeting Tuesday night.

A memo from the City’s chief financial officer John Tuohy to City Manager Wyatt Shields last week was shared with Council members and indicated a $645,000 revenue shortfall for the current fiscal year that could rise to $1.1 million by next summer. It also projected a decline in revenue of $1.3 million for the next fiscal year commencing July 1, 2008.

“Residential sales prices for the first half of 2007 indicate that assessed values will be reduced by 3.7% below calendar year 2007 values. There has been a significant variation among the sales; 3.7% is the average,” Tuohy wrote in the memo.

Tuesday night, the memo was made public in comments by Council member David Snyder, who protested a motion to spend $241,000 on improvements on the East Wing at City Hall in the context of the shortfall.

Other Council members, and Tuohy himself, present to discuss the City Hall project, seemed unprepared for Snyder’s objection, reacting by asserting the two issues, the expenditure and the shortfall, were somehow unrelated.

When Mayor Robin Gardner suggested that the money for the City Hall work could not be used to reduce the deficit, Tuohy corrected her, saying it could if the Council voted to “move it” from one fund to another.

That, however, would override the city budget that has contributed to its high bond rating. 

Councilman Hal Lippman then chimed in, saying the deficit was only a “potential,” and that the Council should not act “in a Chicken Little sense.” The deficit “hasn’t happened yet,” he said, adding it would be wrong “if we don’t act because something may happen.”

Tuohy reiterated what he said in his memo, that the shortfall was due to the fact that residential assessments “were lower than expected.” He then added that “it will be a much larger issue for the ’09 budget (the budget the Council will adopt next spring-ed.).”

“This is a long-term phenomenon,” he went on, and said that, “I don’t know how we will close the deficit.” He said that he has been in talks on the subject with City Manager Wyatt Shields, who was not at Tuesday’s meeting, away at an International County and City Manager Association convention in Pittsburgh.

“I would feel uncomfortable discussing with you now what things we’re putting on the table pending a final decision,” Tuohy said.

Councilman Dan Maller said, “This is unsettling, something we have to deal with,” adding, “David Snyder’s point is fair. We have to deal with the fact that events have changed.”

Assistant City Manager Cindy Mester remarked, “This is a crucial issue,” reminding the Council that Tuohy would present a more detailed picture of the shortfall projections at a public work session next Monday.

Funding the City Hall improvements under the circumstances of the projected deficit “is not the best approach,” Snyder insisted. “We have a significant shortfall looming and it is not acting like ‘Chicken Little’ to start tightening our belts.”

Lippman came back, “All of a sudden the budget numbers show real red flags. But do they mean what we’re doing comes to a screeching halt?”

Snyder said that the City Hall project should be considered along with other cuts that the City Manager and Tuohy are mulling to reduce the deficit.

Snyder was overruled by the Council majority, however, concerned that its failure to appropriate the money for the City Hall effort could result in a voided contract with the company that had won the bid for the work.

With Councilman David Chavern absent, and Snyder abstaining, the funds were approved for the City Hall work, 5-0-1. The construction will commence Oct. 19.

In Tuohy’s memo, he suggested that his gloomy forecast would hold “barring a radical change in the real estate market in the second half of the (fiscal) year.”