In FY13, F.C. Collected $2.8 Million More in Revenues Than Projected

Final Report: City Didn’t Need Last Spring’s Tax Hike

The final financial report for the fiscal year ending last July 1 showed the City of Falls Church generated another huge budget surplus, aided by a 3.5 cent increase in the real estate tax rate that was apparently not required to balance the budget last April at all. The City wound up with $2.8 million more in collected revenues than it budgeted for its $70 million annual budget, and would have had a significant surplus even without a tax rate increase that generated $1.7 million.

Falls Church’s Chief Financial Officer Richard LaCondre presented the final numbers at a work session of the Falls Church City Council Monday night, however the big surplus numbers that showed up were well-covered with a series of caveats in the presentation of those numbers that made the City seem barely able to make it in the end.

A year ago, when the City Council was confronted with a similar, even larger, surplus, a huge dust up occurred when the School Board insisted that it had “encumbrances” in its budget to pay for technology upgrades and wanted some of that surplus deployed for that use. After a summers-long tangle over that, the School Board got its request, and another chunk of the surplus was returned to taxpayers in a one-time rebate.

Following that experience, this time no one at the meeting tonight was willing to concede there were grounds for another such battle, nor even for taxpayers to complain that the 3.5 cent tax rate increase they were hit with last spring was unnecessary.

LaCondre came up with the notion of a “true surplus” at the prompting of Mayor Nader Baroukh in which, subtracting the $1.7 million from the real estate tax increase and $514,000 in existing “encumbrances” not expended in FY13, left only a $600,000 “true surplus.”

The Council also agreed tonight to pay for the existing “encumbrances” that were left over from the last fiscal year simply because they didn’t come up for payment in time. They included $250,000 in “carried forward” costs, ranging from renovation of the Gage House ($85,000), to Hutton Avenue sidewalk and road paving ($50,000) to rent relief ($5,000) and a “light-timing device for Council meetings ($1,500).

With the current surplus, LaCondre noted that the City’s fund balance, the amount of money that is sitting in its bank account, had swelled to 21 percent of annual budgeted expenditures, way above the range of 12-17 percent that is City policy.

But among the caveats that LaCondre cautioned the Council about was the decline in the rate of growth of certain taxes, including personal property taxes, which grew at an annual rate of 16 percent from FY2011 to FY2012, but by only three percent in FY13. Similarly, meals taxes gained by six percent FY2011 to FY2012, but only by two percent in FY2013, and business gross receipts taxes from six percent from FY2011 to 2012 to two percent in FY2013. Sales tax revenues actually declined by seven percent in the last year.

LaCondre couldn’t provide exact numbers, but he said one of the City’s biggest sources of sales tax income, the BJ’s Wholesale Warehouse, “hit their target” numbers for sales in the past year.

Part of the surplus this year was $414,000 in legal fees that did not have to be expended because of the settlement deal between the City and Fairfax Water, and Councilman Ira Kaylin insisted that “the fiscal situation remains very tenuous, and FY2015 will be very difficult.” He cited the heavy capital improvement expenditures the City plans to undertake for school expansion and City Hall renovation.

According to LaCondre’s “FY2013 Year End Unaudited Financial Report:”

“Overall, revenues exceeded budget projections by $2.8 million, or four percent. Key local tax revenues met or exceeded budget targets for the year except for sales tax. However, FY13 local tax revenues were only .52 percent above FY12 revenues. What is apparent is slower revenue growth as compared to FY2012 and previous years.

“Personal property taxes for FY2012 increased by 16 percent over FY2011, but FY2013 increased only three percent over FY2012…As indicated in the third quarter report, sales and meals taxes were both running ahead of budget, but year over year figures were flat or negative. Sales tax unfortunately has continued this pattern and when compared to FY2012 is down almost seven percent.”