The Falls Church City Council Monday night, by a 4-3 vote, adopted an $87.4 million budget for the coming 2018 fiscal year with a 1.5-cent increase in the real estate tax rate from $1.315 to $1.33 per $100 of assessed valuation.
The entirety of the increase, amounting to $600,000, will go to a reserve fund to help defray future costs for a new high school. Under the terms adopted, the operating budgets of the City and the schools absorb a $137,000 cut below their initial requests.
The reserve fund issue was clearly the main bone of contention on the Council, and has been for weeks.
In a compromise move, Vice Chair Marybeth Connelly moved the adoption of the budget with the reserve fund component cut in half from City Manager Wyatt Shields’ original recommendation, from $1.2 million to $600,000 (or 3 cents to 1.5).
While Connelly and three other Council members — Letty Hardi, Karen Oliver and David Snyder — were willing to go along with the compromise, three other Council members — Mayor David Tarter, Phil Duncan and Dan Sze — stuck to their guns to oppose any added money to the reserve fund and voted no.
This sets the table for many more tough decisions by the City Council in the coming months, especially the amount that it will put on a school bond referendum that will be on the November ballot to fund the new high school, assuming they go ahead with the referendum this year.
Additionally, this is all in the context of an election year, when the seats currently held by four members of the Falls Church Council will be contested in November. Of those four seats, three are currently held by Council members who voted for the increase (Connelly, Oliver and Snyder) and one against it (Sze). Four School Board slots will also be contested.
In addition to the Council members who sought the boost to the reserve fund through the tax hike, City Manager Wyatt Shields was an adamant proponent of the policy that he included as a three-cent add-on in his original budget recommendations last month.
He noted that with the cost of the high school requiring a six to 18 cent increase in the tax rate (depending on how much economic development can provide an offset), setting aside reserves now will help to “smooth out” the debt curve that City will face.
But the matter was sharply contested, including from two members of the general public who spoke Monday prior to the vote. Former Councilman and School Board member Kieran Sharpe argued that adding to the City’s reserves (over and above the ongoing fund balance of over 17 percent of annual operating expenses, or about $15 million), will not make the City’s Wall Street bond rating any more secure.
The criteria for bond ratings have more to do with whether or not the City has an “adequate capacity” for incurring new debt, and not the strength of its reserves, he said.
Former City Council candidate Robert LaJeunesse argued that the City retains the power to raise money, and should not have to do so preemptively.
Money raised for a reserve fund gets put in an account where it earns almost nothing, it was pointed out, while that money kept in the hands of taxpayers can generate a far greater yield.
With the average single family home in Falls Church worth $660,000, the 1.5-cent rate increase voted Monday will add about $100 to the tax bill for such an average home.
This week, Falls Church’s neighbors voted a 1.5-cent increase on one side (Arlington) and no rate increase on the other (Fairfax County).
Further details of the Falls Church FY18 adopted budget, which will go into effect July 1, as provided by the City, include the following:
The general government operating budget is approved at $44.3 million, which is 1.1 percent growth over the previous year.
This includes a 49 percent increase in the City’s contribution to the Washington Metropolitan Area Transit Authority (WMATA).
The public schools’ transfer is approved at $41.1 million, or 3.3-percent growth over the previous year. The School Board originally requested a 3.7-percent growth, which would have required a one cent real estate tax increase.
Under City Council direction to remove that proposed increase, $400,000 was removed from the budget, through a reduction in the subsidy for WMATA, a reduction to general government operations, and a reduction to the School Board’s transfer request.
The general government reduction came in the form of freezing the hiring of a new Human Resources Director for about one year. The Assistant City Manager will reduce her duties by half and take on the Director role temporarily.
In addition to approving the operating budget for FY2018, the City Council approved the FY2018-FY2022 Capital Improvements Plan (CIP) as recommended by the Planning Commission.
The CIP will meet the following needs: Library renovation and expansion ($1.1 million funded in FY2018 and $7.4 million funded in FY2019); Mount Daniel Elementary School project ($1 million of additional funding in FY2018); Larry Graves Park turf project ($1.1 million funded in FY2018); Public safety firearms range project in partnership with the City of Fairfax ($1.2 million funded in FY2018); Voting equipment ($250,000 funded in FY2018); Fire Station 6 improvements ($200,000 funded in FY2018 and $223,000 funded in FY2019); City vehicles and public works equipment ($260,000 funded in FY2018).
The City Council will still need to consider CIP funding for the high school campus project. The City currently has $9.9 million set aside for the project from the sale of the water utility system in 2014.
The City Council also approved a one percent increase to the transient occupancy tax rate, also known as the hotel tax, to eight percent. The additional $60,000 expected from that increase will be dedicated solely for business district improvements.