With the annual budget process winding down, it seems appropriate to use this commentary to provide some perspective on where we are one week before the Council’s scheduled April 26 final vote.
While it has almost become trite to say so, in framing this discussion it is very important to again stress that like local governments in Northern Virginia and everywhere around the country we are experiencing the effects of the worst economic downturn since the Great Depression of the 1930s. For example, over the last year the assessed value of the City’s commercial real estate unexpectedly declined by 13 percent. Just as importantly, the recession has stalled the City’s efforts to continue to grow the tax base and increase revenue. Most notably, for example, is the case of the $320 million City Center South Project passed by the Council in early 2008, which upon completion promised to bring in more than $3 million annually in additional revenue.
The situation we face – a projected $8.9 million budget gap – has also been a result of a one-time “perfect storm” of unforeseeable factors. First, is the adverse ruling in the City’s litigation with the Fairfax County Water Authority, which denied the City use of more than $2 million for government operations. Second, is the $1 million “tax situs” bill from the Virginia Department of Taxation arising from the case of a shopping center in Fairfax County making tax payments to our account in Richmond we were unaware of. These two items alone account for 10 cents of the City Manager’s 20 cents tax rate increase in his proposed budget.
To close the projected budget gap, spending reductions on a scale not seen for decades are under consideration by the Council. The proposed spending reductions amount to about $2.85 million and will be achieved by: 1) freezing pay for City employees for the second consecutive year; 2) increasing employee pension and health care contributions; 3) downsizing the City workforce from 200 to 184 positions (about the same level as the mid-1990s); and, 4) reducing the amount of the City’s transfer to our public schools by the more than $1.3 million reduction reflected in the School Board’s adopted budget.
To close the projected budget gap, spending reductions on a scale not seen for decades are under consideration by the Council.
This week in the final work session of the budget development process, the Council will be considering a variety of options and additional cuts to the Manager’s proposed 20 cents tax rate increase. A proposal to reduce the Manager’s rate increase by half to 10 cents has already been taken off the table because of the unacceptably severe consequences it would have generated for key City services and programs (e.g., elimination of our Senior Center and drastic curtailment of library hours and services). A similar proposal to reduce the Manager’s rate increase to 15 cents is being discussed and the Council has developed a list of some 20 or so specific additional cuts to be considered to meet this target. The likelihood, however, is the Council will agree on a reduction somewhere between the 20 cents proposed and the 15 cents target under discussion. It is worth noting that for the two scenarios – the 20 cents and 15 cents increase – the effect on the tax bill for the median home owner will be $976 and $682 respectively.
So, what does all this suggest regarding the larger questions that have arisen because of the proximity of the budget development process to the upcoming Council/School Board election on May 4th: is our City sustainable and what can we do to continue to grow our tax base and be best positioned in anticipation of a hoped for economic recovery? In my view, the first question – sustainability – can be dispensed with quickly. The combination of more than $3 billion of assessed property in our 2.2 square miles, high per capita income of our residents, and the City’s low debt to expenditure and debt to assessed value ratios, among other key indicators, strongly suggest that we are indeed sustainable.
As to the latter two inter-related questions, what we should and can do is build on and expand the foundation we already have in place through an intensified effort on the part of the City’s Economic Development Office and Economic Development Authority. Even in this worst of economic times, revenue producing development has been ongoing in the form of the big box BJs store on Wilson Boulevard, the arrival of the Mad Fox Brewery in the Spectrum, the imminent opening of Pizzeria Orso in Pearson Square, and the coming this summer of a Chipotle restaurant in the Broaddale shopping center. Likewise, there is reason to think that the just-approved Wilden project promises to promote development activity in the surrounding area and elsewhere in the City also because it is being done at this economic low point. In short, it can be well said: “Falls Church City is Open for Business.”
Hal Lippman is the Vice Mayor of the City of Falls Church. He has served on the F.C. City Council since 2006 and is running for re-election as a member of the CBC in the May 4 election.