Issues of Projections, Under-Spending Still Vexing F.C. Council
By the expected 4-3 vote Monday night, the Falls Church City Council acted to split a $3.4 million surplus from the previous fiscal year in three parts divided among the schools, City operations and taxpayers, including the $500,000 requested by the City Schools for technology upgrades, and a $933,000 rebate to real estate taxpayers.
In a separate part, $600,000 was set aside for legal fees, with the City anticipating pending legal fights over water-related matters with Fairfax County.
The ‘three-way’ option was introduced by new Council member David Tarter and was backed in the final vote by another newcomer, Phil Duncan, as well as Ron Peppe and veteran Vice Mayor David Snyder.
Mayor Nader Baroukh and Council members Johannah Barry and Ira Kaylin voted “no,” preferring an alternative so-called “hold harmless” option that the Schools opposed. The “hold harmless” option, which would have delayed allocating funds requested by the schools until next spring, did not come up for a motion after the passage of the ‘three-way’ option was moved, debated and voted on.
The adopted ‘three way’ ordinance allocates $3.4 million in the revenue surplus left over from the fiscal year that ended June 30 in the following way: 1. $600,000 for legal fees, 2. the remaining $2.8 million split evenly three ways as $933,000 to the schools, $933,000 to the City’s general government, to be used to pay down already-approved debt-funded capital improvement projects, and $933,000 as a rebate to taxpayers.
The school portion includes $433,000 to accelerate the funding of capital replacement and modernization projects, and $500,000 for the schools’ requested technology upgrades, in the form mostly of laptops and iPads for students.
School Superintendent Dr. Toni Jones and School Board chair Susan Kearney sat in the audience to witness the outcome they’d preferred, but did not speak.
The tax rebate, according to the language of the adopted ordinance, “will be a real estate tax rebate to be included in the taxpayers’ December 2012 bill,” adding, “the manner in which it will be implemented will be presented separately to the City Council at a later time.”
The 4-3 vote Monday ended two months of highly-contentious debate on the Council made worse by the absence of Snyder until after Labor Day that led to a series of deadlocked 3-3 votes. For example, in arguing to delay the schools funding, Kaylin continued to contend that the schools had all the money they need in a fund balance, but simply refused to spend it.
It was also confirmed Monday night by Richard LeCondre, the City’s chief financial officer, and City Manager Wyatt Shields that expenditures in the fiscal year ending June 30 were $2.6 million below budget, and that only $1 million of that was due to planned expenses that technicalities prevented from being spent before June 30.
This suggested that if the $1.6 million of unspent money was added to the $3.4 million in surplus revenue, the total size of the surplus from the FY2012 budget year that ended June 30 was $5 million, or roughly 7.5 percent of the $67 million total size of the budget and equal to a whopping 15 cents on the real estate tax rate.
In other words, a balanced budget of actual revenues and expenditures for the just-ended fiscal year could have been funded with a real estate tax rate of $1.13 per $100 of assessed valuation, not the $1.27 that taxpayers had to ante up.
Moreover, at its annual day-long strategic planning retreat Saturday, the Falls Church City Council heard a report from LeCondre projecting a “best case scenario” for the coming year, and five years out, of only a two percent annual revenue growth that would require an increase in the current real estate tax rate from $1.27 to $1.30 next spring and to $1.37 in four years.
LeCondre’s projections showed a much harsher scenario for the City with zero growth or negative growth. But he said he considered a two percent growth his “best case” despite the fact it grew four percent for the City in the last year, exceeding zero-growth projections used to build the FY12 and FY13 budgets that led to the $3.4 million surplus.
LeCondre cited a decline in the rate of increase of meals and sales tax revenues as part of his justification for a low projected growth estimate. In addition, City Manager Wyatt Shields told the Council that while some new businesses are coming on line in the current fiscal year that will add some revenue, but “nothing real big” as occurred in the early 2000s, at least not until the following year, when some plans for $50-$75 million projects “will move the needle.”
It was noted that, with the current surplus deployed to fund balance, that fund balance (money sitting in a bank account) has ballooned to 23 percent of total annual expenditures. However, according to City policy, any amount higher than the City’s target of 17 percent for fund balance will be redeployed to use in drawing down capital expenditure debt.
Another concern, expressed by Kaylin, dealt with the unknown future of the City’s obligation to the Virginia Retirement Fund. However, it was noted that the problem, in the hands of Richmond legislators, will continue to “be kicked down the road” until some “day of reckoning” that even Kaylin conceded may by 10 to 15 years down the road.
Saturday’s retreat was held at the Technology Learning Center on the George Mason High School campus. Representatives of the Schools and the Planning Commission were also present to observe the discussion.