Even Deeper Tax Rate Cut Mulled by F.C. Council

There appear to be no major obstacles to the Falls Church City Council’s move to prepare its final version of its Fiscal Year 2023 budget at its public business meeting this coming Monday. But that doesn’t mean there still might not be some significant modifications to the version recommended by City Manager Wyatt Shields last month.

As Shields proposed, the budget will fully fund the School Board’s request and offer significant salary boosts for City employees while slashing the real estate tax rate by a whopping 8.5 cents from its current $1.32 per $100 assessed valuation to $1.235 to partially, at least, offset the 11.4 percent hike in overall assessments that the City’s new assessor visited upon everyone in February.

But based on discussions among Council members at this past Monday’s virtual work session, if anything the tax rate may be cut even further and no one on the Council appeared to have an appetite for the introduction of a new “Commercial and Industrial” tax on commercial interests included in Shields’ plan that would generate about $420,000 in added revenue.

The Shields plan would introduce this new business-specific tax for the first time in the Little City, even though almost all other jurisdictions in the state have implemented it since it was first permitted by the state with a local option to opt in or out and to set the rate.

In order to sustain a robust pro-economic development profile that has contributed to the booming real estate value growth rate here, the Council has routinely ruled out the implementation of a “C and I” tax, and despite Shield’s recommendation, will probably do so this year as well.

The new tax proposal did not go over well when Shields made a special presentation on it to the executive board of the Falls Church Chamber of Commerce last week, and the City’s Economic Development Authority (EDA) came out strongly against it as well.

Echoing the comments of others on the City Council, Council member Caroline Lian said “the timing is off” for introducing the new tax this year, as its impact will undoubtedly pass through to the many small businesses that have been struggling through the two-year pandemic. Council member Phil Duncan added, “It sends the wrong signal for small businesses, and Vice Mayor Letty Hardi agreed that action on such a new tax should be delayed. Councilman Marybeth Connelly said the new tax idea “came out of the blue” this spring, and underscored that the EDA opposed it.

Duncan spoke out about the need for the City to adopt a $15 per hour minimum pay rate for City employees, noting that some are reportedly getting only $11 per hour here now. In that context, he also called for a mid-year evaluation of inflation impacts on the economy and asked about the status of the funds allocated for advertising, specifically in the News-Press, in the last year.

A strong sentiment among Council members was also expressed for more money to go to tax relief for the elderly and infirm. Duncan said that more funds to help keep people in their existing homes is important not just as a meritorious public service, but also because it will deter the conversion of residential properties into mega-mansions that hinder, among other things, stormwater mitigation efforts.

City Treasurer Jody Acosta said the current plan is to allow tax deferrals for up to $110,000 of annual income, the highest rate in the region.

It was also noted that funding for road repaving in the City is, at $50,000. woefully short of need. Added funds would shrink the rate of repaving from having all streets done from every 80 years to every 50 years. But that is far less than the standard rate of once every 20 years, it was pointed out.

However, Public Works chief Zack Bradley said there is only so much his staff is capable to doing despite what funding may be available.

It was proposed to lower the car tax (personal property tax) rate to offset the current explosion in assessed values for vehicles, including used ones, in the City, probably best done by reducing the overall personal property tax rate.

The addition of a full time equivalent employee to the Mary Riley Styles Public Library was mulled, and $100,000 for more speed cameras aimed at catching those speeding in vehicles on City streets.

More money for sidewalk improvements and bike lanes were also discussed.

Attention was paid to the fact the City is awash in cash, with unassigned fund balance numbers topping 17 percent (the very top end of the 12 to 17 percent range as outlined in City policy documents) of total annual revenues and with capital reserves and other factors ballooning that number to almost 30 percent. That number, which could even be closer to 40 percent with additional funds still due to be added, including as-yet undesignated federal pandemic-related American Relief Plan funds and developer property lease payments, puts the City “way, way above targets,” said Hardi, and is “very healthy.”

That includes a $4 million payment due imminently from the West End Gateway Partners, developers of the City’s massive 10 acre west end mixed use project, to proceed with their plans.

Such high levels of reserves is what Council members like Duncan point to in suggesting that the real estate tax rate could be cut even further, by as much as an additional four cents, he intimated.

The final version of the FY23 budget is due to be adopted at the City Council’s May 2 meeting.