Local Commentary

Guest Commentary: Falls Church’s Tax Surplus Should Be Spent

Reports that the Falls Church City Council is considering devoting an unexpected tax surplus to its “rainy day” Fund Balance are discouraging and further evidence of fiscal mismanagement. (Yes, spending too little can also constitute mismanagement.) The Council’s conservative fiscal stance has already resulted in higher taxes being squirreled away in the Fund Balance last year.

Now, we are told that we need to raise the target of these excess funds and create a sister “endowment” for capital expenditures. The Council should be reminded that they are not dealing with charitable contributions and that recent spending contractions are causing visible deterioration around the city.

Rather than prematurely raising our tax rates during last year’s alleged revenue shortfall, the City could have issued or restructured bonds, floated commercial paper, or simply negotiated a line of credit with local banks to cover any shortfall (which never materialized). Since banks are flush with reserves that they obtain at near-zero interest rates, they should be more than willing to extend a revolving line of credit to the City at relatively low interest rates. Since families, governments and businesses rarely experience a perfect synchronization of revenues and expenditures in a given month or quarter, they must rely on savings or short term credit to meet unexpected expenses. Yet when the government collects and saves excess taxes it makes it more difficult for households to save and increases their reliance on credit to cover unexpected purchases. Given its broad revenue base, the City can borrow on far better terms than any single homeowner or business and should therefore err on the side of collecting too little in taxes. Instead, some city leaders would rather homeowners and businesses scramble to reshuffle their finances in order to pay higher taxes that will be hoarded by the City.

The recent down-grading of U.S. debt and the subsequent lowering of interest rates is more evidence of the waning influence of the credit rating agencies.

Fretting over the City’s coveted credit ratings, the Council has refused to even entertain such suggestions in the past. But the recent down-grading of U.S. debt and the subsequent lowering of interest rates is more evidence of the waning influence of the credit rating agencies. The finances of our wealthy little census tract look good on paper but have the credit rating agencies or our leaders travelled the city on a bike or with a baby stroller lately? Have they navigated the tree roots on Cavalier Trail or between the library and the Cherry Hill playground? Have they seen the flooding caused by inadequate storm drainage? Have they audited street signage and lighting in the wake of police force reductions? Have they tried to borrow an e-book from the library? In short, there are plenty of worthy investment projects that would increase our wellbeing and property values far more than hoarding away some more cash. Indeed, we should not only be spending our surplus on little things, but taking on more debt to build big public projects while the cost of finance, labor and materials is low. How about extending the W& O.D. pedestrian bridge across West Street to make the intersection easier and safer for drivers and trail-users alike? How about installing more storm drainage to help older neighborhoods cope with the additional runoff caused by greater mixed-use development? How about a public swimming and ice-skating center? How about any public works project other than parking structures? Surely we can aspire to more than public parking!

Finally, the notion of stashing away excess tax revenue begs the question of “where will it be invested?” Presumably, not in the volatile stock market! But if the funds were placed in U.S. Treasury or state and municipal bonds, the City would be in the very odd situation of taxing itself to help other jurisdictions invest in their infrastructure rather then its own. Better to spend the money on our own development or reduce and simplify taxes so homeowners and businesses can afford their own private lighting, drainage, and recreation expenditures. (Social solutions to these problems are preferable to individualistic solutions, but saving tax dollars reduces the likelihood of there being any solutions.)

After all, we are no longer talking about how to manage a fiscal deficit, but how to dispose of a surplus. I’m sure there are plenty of worthy expenditures that Falls Church residents could suggest to their leaders and I encourage them to do so – without accepting the excuse that the City has given me on many occasions that “we don’t have the money.”


Robert LaJeunesse is a resident of the City of Falls Church.