Seldom has a vote by the Falls Church City Council, or any governing body, reflected more ambiguity and indecision than the one taken Tuesday night by the F.C. Council when, after a lengthy discussion, it passed by a 4-3 vote a plan for the deployment of over $20 million in cash proceeds from last winter’s sale of its water system. The vote was not four “yes,” and three “no.” It was four “yes” and three abstaining in one of the most bizarre tallies in City history.
Nobody on the Council was happy with the way it was rushed into the vote, which will not become final until a second vote the end of this month, and no explanation was given for why the vote was needed so urgently.
The complexities of the options for deploying that much cash all at once led most to feel they needed more time and analysis, but why they didn’t opt for that approach was never made clear. An unofficial reason is that resolving the matter this month will make it easier to win passage of the Mt. Daniel School bond referendum in November.
As a number of Council members pointed out, with the markets as volatile as they are this week in particular, it may not be the best time to put half the money irrevocably into the City’s pension fund.
The morning after the vote, the New York Stock Exchange opened down 370 points, reflecting the instability in the markets that has persisted since late September.
But there are two weeks before the second vote on the deployment of funds to reconsider. Among the problems with dedicating up to $10 million to the City’s pension fund is the fact that once put in, there is no way for the City to get the money out.
The assurance that taking that approach would yield the City $700,000 on average a year is also far less than stable. The actuarial analysis is that the City would average that amount over time, with no assurances on any given year, or decade, how that yield might look.
Vice Mayor David Snyder, who led the mini-stampede to the safe harbor of an “abstain” vote Tuesday, said he would go that route because of the market volatility, and especially because of the well-known factor that interest rates are being held down by the Federal Reserve, and as such are a stimulus to the economy that is at its core not free markets at play, but artificial.
Since late September, there has been a growing verbal concern for another hydra head of potential economic woe – deflation. Market analysts on CNBC, for example, were saying that if the yield on the 30 year bond goes below 2.2, then the specter of deflation becomes real. It went far below that when the market tanked early yesterday.
A couple of moves were made to limit the City’s exposure on pension funding. With the help of the City’s new city attorney Carol McCoskrie, attending her first Council meeting in her new job, the prospective policy on funding the pension fund was modified to state it would apply to fully funding the fund only, with a sum up to but not exceeding $10 million.
With up to $10 million of the $20.5 million cash from the water sale going to the pension fund, the remainder would, under this policy, go to the city’s capital reserve fund for large scale infrastructure projects, such as school or new civil building construction, with only $1 million available for smaller capital projects in the coming year.
It was stressed that the City Council remains eager to receive public input on this subject by mail or attendance to speak at its Oct. 27 meeting when the final vote will be taken. A town hall meeting on the subject last Saturday morning had very little input from citizens beyond those “usual suspects” who routinely bring their known opinions to such events.
On the vote to preliminarily OK the currently proposed plan, those who voted yes Tuesday were Mayor David Tarter, former Mayor Nader Baroukh, Phil Duncan and Karen Oliver. Abstaining were Vice Mayor Snyder, Marybeth Connelly and Dan Sze.