New Development Buffers Impact of Housing Downturn
It came as a startling revelation to some on the Falls Church City Council Monday that, despite prospects of raising the real estate tax rate from $1.01 to $1.04 to balance the coming fiscal year budget this spring, the result will be that homeowners in Falls Church will pay an average of $112 less in taxes.
That’s due to the fact that a sharp average drop in residential real estate values will more than offset the three-cent increase in the tax rate.
The Council will have a month, until its April 28 meeting, to deliberate and hold public hearings on the budget proposed by City Manager Wyatt Shields earlier this month.
In its first action on the budget, the Council approved on “first reading” an ordinance to set the tax rate. By putting the $1.04 rate per $100 of assessed valuation, into the ordinance, the Council is now bound not to exceed that amount in its final budget. It can lower it, but not raise it.
Still, the $1.04 rate represents a far more modest impact on citizen pocketbooks in Falls Church than that in some surrounding jurisdictions, where the collapse in housing values is requiring a combination of draconian cuts in services and huge tax rate hikes. In Loudoun County, for example, a rate hike of as much as 22 cents is being contemplated.
Shields told the Council Monday that, for the second year in a row, the preliminary contribution of some of the new large-scale mixed-use projects recently completed or under construction has made a major difference.
This year, the tax contribution from these sources has been roughly the equivalent of two cents on the tax rate, according to the City’s Chief Financial Officer John Tuohy. A penny on the real estate tax rate raises about $366,000 for the City’s operating expenses.
Last year, taxes on new construction covered about three cents on the tax rate, and in the coming years, as new projects are completed and occupied, the impact will be far greater.
Therefore, in a small jurisdiction the size of Falls Church, even the current level of new development has a disproportionately significant impact on the tax base, compared to larger surrounding jurisdictions.
The City is also relatively protected from major budget cuts at the state level, since its reliance on state funds for its schools and other programs is proportionately far less than that of many other jurisdictions in the state, Tuohy pointed out Monday.
On the expenditure side of the proposed budget, there is zero growth in City operations costs and zero growth in school operations and administrative costs. The only increase has been in teacher salaries, designated to maintain the quality of the schools here by maintaining competitiveness.
“The school budget is incredibly prudent,” George Mason High School teacher Joel Block, president of the Falls Church Educators Association, told the City Council Monday. He was backed by more than a dozen teachers who sat quietly in the Council chambers.
“This year’s school budget was particularly difficult. The school board was extremely mindful of the changes in the real estate market, and used that information to make an extremely tight budget,” he said. As a result, the proposed budget, “has the smallest increase in over a decade.”
He added, “When you adjust for inflation, there is no growth in this year’s school budget. To accomplish this while keeping the quality of our schools intact is impressive. Then to know they added programs like the Primary Years International Baccalaureate program by trading off other positions and costs is incredible. It is an incredibly frugal budget.”
He went on to note, “What is included for salaries is the minimum that is acceptable to our members without bad consequences. Many of the surrounding districts already pay more.”
Councilman David Chavern agreed. Holding the school budget down this year, “shows a lot of good work,” he said. “The school board did a fantastic job lowering the Superintendent’s proposed 7% increase to only 3%.” He noted the increase was only in teacher salaries, that personnel costs account for 80% of the total school budget. “Even that may not be enough to keep our schools competitive,” he added.