$5.6 Million Cut So Far, FY11 Grim
One by one, Falls Church City Council members were summoned to City Manager Wyatt Shields’ office at City Hall last weekend for a behind-closed-doors introduction to just how bad the upcoming Fiscal Year 2011 budget might be.
Shields told the News-Press yesterday he chose to meet with all seven Council members in such a fashion to help, among other things, convince them on the need to put the $5.6 million in mid-year FY 2010 cuts behind them with a vote on Monday night. “We needed to get that done, because of the daunting task that lies ahead,” Shields explained.
It worked. The Council voted 6-0, with one abstention, to approve Shields’ plan for cutting $5.6 million out of the current budget, the result of a whirlwind of Council discussions and proposals that broke out in late September when City Hall suddenly found itself in such a deep hole.
The overall economy, described by F.C. Vice Mayor Hal Lippman, as “the worst since the last Great Depression,” was acknowledged as the culprit, although the City’s revenue projection model also failed to adequately forewarn the Council when it crafted the budget last spring.
The cuts were accomplished through delaying $4.1 million in capital expenditures and another $1.5 million in operating cuts, including $500,000 from the City’s school system. But they involved no layoffs of City or school staff, or salary cuts.
Whether a similar outcome for the next budget will hold, however, is far from certain.
Commenting on their one-on-one meetings with Shields last weekend, Councilman Nader Baroukh said only that the projections for the coming year are “staggering,” Councilman Dan Maller called them “unsettling at the least,” and Lippman called them “jaw dropping.”
While the projections were not made public, and are scheduled to be revealed at a Council work session Monday, Shields told the News-Press that they’re based on “really raw numbers,” which will “continue to move,” and that he hopes the Council “will have a tolerance for change” as the state of the economy continue to move.
While trends impacting other taxes, such as sales and business license taxes, will be factors in the next budget, it is the value of residential real estate that will be the primary and most important variable in the next budget’s revenue projections, he said. A really solid number will not come until the first week in February 2010, when actual assessments will be made by the City’s Assessor and sent to homeowners.
“If people have been paying attention, the numbers that will be revealed Monday should not be a surprise,” Shields said, adding, “They will be consistent with the trend” of declining assessments and revenues the last few years.
Shields said the highly tentative nature of the numbers right now made him reluctant to reveal any projections, but the Council said it wanted them. The plan is to take the first serious stab at addressing the implications of the numbers at a joint City Council and School Board work session Monday, Nov. 30.
In an interview with the News-Press yesterday, Councilman Maller said he “strongly disagreed” with the approach taken by Shields in presenting the preliminary numbers last weekend.
The shortfalls were projected, Maller said, based on keeping the current residential real estate tax rate the same. “When you do that, then your revenues will be determined by the assessments, and you are helplessly whip sawed by that,” he noted.
“The proper approach would be to determine what tax rate is required to stabilize the revenue line to provide the community with what it demands,” he said.
He indicated the early projection shows about a 10 percent decline in real estate tax revenue, accounting for a $3 million drop. “We’re dealing with several millions of red ink,” he said, “and we’re not going to fix that by a one-time cut in the Halloween carnival.”
Maller noted that initial projections show the value of single family homes remains relatively stable, but that the steepest declines come in the values of town homes, rental units and commercial real estate. “That means that adjustments to the tax rate will disproportionately hurt the single family homeowner.”
But he said the decision on the upcoming budget should be “political ones,” and not based on an assumption about holding the tax rate. “Nothing we do in the City is superfluous, but we need to decide what the taxpayers expect us to continue to do that is fundamental to our quality of life.”
“For example,” he offered, “No one is standing up and yelling that we’re spending too much on the schools” even though they represent a high proportion of the City budget. But what about Parks and Recreation, or Public Safety, he asked.
“We must play offense, not defense” on the upcoming budget, he suggested. “We should talk to the business community about the City’s capacity to place a surcharge on the tax rate for commercial real estate. If that could be coupled with offers of greater density, or of a designated fund to build a parking garage, this would be a pro-active approach.”