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F.C. Council Tussles Over Final Tax Rate for FY22

Jeannette Chapman, with Stephen F. Fuller, at a presentation in 2017. (Photo: Courtesy Stephen F. Fuller Institute via Twitter)

This Monday, the Falls Church City Council is scheduled to adopt its Fiscal Year 2022 budget, and while former years saw struggles over trying to hold the line on real estate tax rate increases, the opposite is true this year. It’s not a question of whether, but how much the rate will be cut below its current $1.355 per $100 assessed valuation rate.

City Manager Wyatt Shields initially recommended a one-cent reduction, which given the robust increases in real estate assessments reported in February, will still mean significantly increased dollar sums for most City property owners. Now, he’s going to present an option for a two-cent cut.

The question will be around how cautious or not the Council will be in anticipating some big Covid-19 assistance funds from the federal government’s $2 trillion American Rescue Plan Act (ARPA) and pending $2 trillion American Jobs Act. Right now, no one is sure how much that assistance will add up to for Falls Church, what it can or cannot be used for, and when the money will get here. An added complication for the City is that, given its independent city standing, its allocation will necessarily be filtered through the Virginia General Assembly.

According to the law, it is not expected that such questions will even begin to be answered before May 11, weeks after the Council, also by law, must adopt its formal budget. Of course, adjustments to the budget can surely be allowed later, but the optics of setting the tax rate next Monday apparently matters to all on the Council.

As of this week’s work session “mark up” of the budget, Shields said he will plan to offer two options for the Council on budget adoption day next Monday, one at his original recommendation of a one-cent cut and another for a two-cent cut to $1.335 per $100 of assessed valuation.

But two on the Council think those options are both way too little to cut. Ross Litkenhous and Phil Duncan were talking about cutting the tax rate all the way down to $1.315, a four cent cut. That would mean many in the City would not have to pay, in net dollars, any more than in the current year, and many actually less. (With the value of homes in the City now so varied, it is hard to derive any meaning from an “average” impact.)

Litkenhous challenged his fellow Council members, “Do you have the courage to dig deeper on the tax rate?” he asked. “With all the economic development benefits and the boatload of benefits we have coming from the Feds, it will be shameful not to set the tax rate lower,” he said.

“We are flush with cash and have a great smorgasbord of options right now. Can we have the heart, the courage, to get it to $1.31?” he said. “This is a challenge to everyone. It would be shameful and an embarrassment if we don’t.”
He noted that voluntary concessions from the Founders Row project now under construction will add up to $1.8 million and City Chief Financial Officer Kiran Bawa said that all revenues to the City in the current fiscal year are 1.3 percent above projections.

Duncan said that while he favored $1.32, he could agree with Litkenhous’ approach.

Vice Mayor Marybeth Connelly responded, “I appreciate the optimism, but there are still too many unknowns.” She suggested that since City voters passed the school bond referendum to add taxes just a few years ago, they’re not averse to taking a more cautious approach on tax cuts.

Councilman David Snyder said “we’re making progress” on lowering the rate, although he cited the importance of “protections for unknowns.” Still, we are potentially in reach of going lower.” Council member Letty Hardi said she favored a $1.33 rate.

Mayor David Tarter said that “we should provide as much relief to the taxpayer by keeping the tax rate as low as possible.”

The big regional picture appears to favor a more optimistic approach, at least as the forecast from Jeannette Chapman, an analyst with George Mason University’s Stephen F. Fuller Institute, indicated at Tuesday’s virtual joint meeting of the Falls Church Chamber of Commerce and Greater Merrifield Business Association.

Duncan, who sat in on the meeting along with Council colleagues Hardi and Connelly, concluded from Chapman’s projections by telling the News-Press, “If things regionally unfold as Jeanette Chapman predicted, the City of Falls Church should be in a particularly great position to thrive.”

He explained, “Growing values for homes in the City will mean our residential assessments and tax revenues remain strong. That will enable us to continue lowering the property tax rate while still maintaining excellent City services and schools. A lower tax rate and a growing population (stay tuned for our Census count in August) will help the City attract new restaurants and retail and service businesses to our legacy shopping centers and to existing and new mixed-use developments, including those coming online in the immediate and near future — Founders Row, Broad and Washington, and the 10-acre West Falls development on the site of the old high school that’s now being demolished.”

He continued, “Add to all that a soon-to-arrive infusion of ARPA cash from the federal government, which will give us at least $3 million and maybe more — money that I’m hopeful we can deploy into an unprecedented surge of City investments in: stormwater infrastructure to improve our climate resilience; more robust traffic calming controls on our neighborhood streets; and additional sidewalks and other accommodations to improve safety and access for pedestrians, cyclists and transit users.

“All that work funded by external sources will complement the local infrastructure projects we have finished in the past decade or so: an ambitious capacity-building construction program for all five of our schools; completely renovating and expanding City Hall and the Library; and increasing our public open space and upgrading City parks.

“What’s been accomplished in the past decade, and the great things to come just around the corner, will set up Falls Church to be a healthy and prospering community into the 22nd century.”