The Falls Church City Council reaffirmed its commitment, first made in August, to the 174-unit new affordable housing complex planned for the City’s downtown Monday.
It voted a preliminary approval for fee and tax exemptions and a $2 million subsidy by 4-1 margins in two votes Monday. A second and final round of votes is due in early December, in time for the Falls Church Housing Corporation to apply for tax credits from the Virginia Housing Development Authority (VHDA) worth $12 to $16 million to build the project, known as the City Center South Apartments.
But despite the willingness of the Council majority to fund the project despite the troubled economy might not be enough to ensure it actually happens. “It’s still all only on paper,” said Carol Jackson, executive director of the Housing Corporation, who worked arduously to piece together a complicated four-way agreement to make it happen.
In particular, two major hurdles remain beyond the Council’s second vote in December. The first is whether or not the tax credits are approved by the VHDA next spring. The second will be the state of the credit markets next year, as City Manager Wyatt Shields cautioned Monday.
While the interest rate on municipal bonds could rise to six percent, that would not be as prohibitive as rates the Housing Corporation might have to pay for its loans could be, he told the News-Press yesterday.
The enthusiasm exhibited by the four Council members who voted to push ahead with the project, however, had not waned since the first vote in August. Mayor Robin Gardner, Vice Mayor Hal Lippman, Dan Maller and Lawrence Webb all spoke strongly in favor, while Nader Baroukh, as he did in August, voted against. Council members Dan Sze and David Snyder were not present.
Shields reiterated to the Council points made the week earlier (and reported in the News-Press) of a projected 2.5 percent net decline in assessed real estate values, a five percent decline in sales and business license taxes, and a projected 15 percent decline in state funds. That will leave the City $1.3 million short in revenue going into the next fiscal year beginning July 1, 2009.
The City will also incur added costs, due to rising health care costs and its requirement to maintain the value of pension funds despite declines in their market values. But he said that a concerted effort is being made by Chief Financial Officer John Tuohy to come up with a concrete number on those added costs in the next days.
“It’s going to be very important that the community has good information going forward, in order that it can make the best decisions,” he said, noting that the year after “won’t be any easier, either.”
Still, the approval of the City Center South Apartments will not impact the City budget for the next couple years, as the existing balance in the City’s Affordable Housing Trust Fund can cover the annual debt service costs on the planned $2 million bond issue for a time.
“Compared to our neighbors, we’re moving forward with significant strengths,” said Councilman Maller. He said the decision to affirm the affordable housing project in tough economic times is based on “qualitative, not simply quantitative, judgment.”
“As I said before, I want to live in a city that wants to do this project,” he said. “It comes down to the question of whether or not the city has a soul.”
Assistant City Manager Cindy Mester noted that current development projects approved for the City could bring in 1,500 new employees, and the project will make housing available for a significant number of them.
“This is a very, very ‘half full,’ and not ‘half empty’ project,” Lippman said.
Webb said the project “will make the city a more friendly place,” and Mayor Gardner added, “For eight years, affordable housing, despite our on-going expressions of support for it, has taken a back seat. Now, it’s a top priority.”
Baroukh, while saying he supports affordable housing, voted against the project, he said, because it is “not prudent in the current economic climate.”
Shields said Monday that Falls Church’s strengths compared to surrounding jurisdictions in tough times include its prime location, its diverse economy and its competitive tax rate, the seventh lowest in the region and the second lowest among small jurisdictions.
He also cited the City’s “prudent financial management,” including its compliance with its own debt and fund balance policies, its fully funded pension funds and its near-perfect (AA-plus) bond rating.