A far cry from distressed fiscal conditions in neighboring Prince William and Fairfax counties, the City of Falls Church ended the last fiscal year June 30 only $355,000 in the hole, the City’s Chief Financial Officer John Tuohy reported Tuesday.
Tuohy’s report, the official buttoning up of the last fiscal year, included promising news of a big hike in the City’s restaurant meals tax, meaning that local restaurants did significantly better than expected last year.
It is proposed that the deficit, out of a budget of $70 million, be made up out of the City’s fund balance, City Manager Wyatt Shields said at the Council work session. Formal Council approval of the step will be sought at its first regular business meeting of the month on Sept. 8.
Shields said he will get the first snapshot of how revenues are going in the current fiscal year, beginning July 1, in the next few weeks. Then, he told the News-Press yesterday, “We’ll see if we have to trim our sails a little bit” in the current year, given the on-going economic downturn. He said he expected about $400,000 will have to be cut from the current budget.
But the problems Shields anticipates are nothing like the $400 million deficit facing Fairfax County this fall, triggering 20 extraordinary public hearings that the Board of Supervisors will hold this fall to determine how and what programs to cut.
Prince William County’s problems are even more severe, proportionally speaking, Tuohy told the City Council Tuesday. He noted that a whopping 83 percent of the home sales in Prince William County are “distress sales,” either of foreclosed homes or of people seeking to avoid foreclosure with dramatically-reduced costs.
The figure is even higher, at 90 percent, in the City of Manassas Park, and is 30 percent county-wide in Fairfax.
By comparison, four percent of home sales in the City of Falls Church are “distress sales,” he reported.
“In my 25 years in this kind of business, I have never seen anything like this,” Tuohy said of the housing crisis in the region, in remarks to the News-Press. “These are truly Depression numbers.”
He added that in his view, the situation will still get worse. “The majority of the adjustable rate mortgages taken out by sub-prime borrowers reset in August,” he said, noting that it will take a few months for the ballooning new monthly payments to drive a new wave of homeowners out of their homes.
Tuohy said his personal view is that it will “take three to four years” for it all to play out.
But it was been widely reported that the situation inside the Beltway is vastly different, with home values dropping only slightly at best. With the region-wide turnover coming in the aftermath of the November federal elections, demand for housing inside the Beltway may begin to drive home values up.
Tuohy projected that in Falls Church real estate assessments next year will “remain unchanged or slightly below” the current calendar year, and as new large-scale mixed use projects come on line, their contribution to the revenue base will keep the overall numbers from falling below breakeven.
The two brightest spots in the last year’s numbers were the higher than expected incomes from the restaurant meals tax and the water fund.
The meals tax, Tuohy said, brought in $595,000 more than projected. Shields remarked to the News-Press that he suspects the surprising gain was due to the City’s offering of fine restaurants, adding that some consultant studies indicated the City is a good location to prosper from even more restaurants here.
The trend countered a modest decline in overall retail sales and use tax revenues to the City, more expected given the economic slowdown.
The water system benefited, among other things, from the decision by the Town of Vienna to purchase all of its water from the Falls Church Water System, instead of only part of it as in the past.
Extended dry weather was also credited with driving water sales higher than average.