The City of Falls Church’s chief financial officer Kiran Bawa reported to a work session of the Falls Church City Council this Monday a whopping (for a jurisdiction Falls Church’s size) $4.05 million surplus at the end of the last fiscal year that ended June 30.
The projected annual budget of revenues and expenditures of $101,798,892 came in at an actual $100,993,152, a difference of that four million. The biggest single contributor was general fund revenues that came in 3.5 percent above budget and was reflected in a healthy meals tax growth of 34 percent above budget, even as the growth in sales taxes was only 3.5 percent above budget.
Most of the elements of the budget were measured against the ghastly impact of the pandemic on all operations in the City the last couple years, and the City clearly came through it all with shining numbers.
Economic conditions also look good throughout the 8th Congressional District of Virginia, according to a report released yesterday by the Congressional Joint Economic Committee chaired by U.S. Rep. Don Beyer. The report says that 19,500 new jobs were created in the district since Biden was sworn in, and the benefits of the development of Amazon’s second headquarters just down the road are expected to continue to be felt in a positive way.
On the other hand, challenges remain for Falls Church. One of the most important will be assessing and acting on the completion of a compensation study due this week that is aimed at examining salary structures and their relationship to equity standards in the government.
Also, City Manager Wyatt Shields has reported that the City’s real estate assessor Erwving Bailey is meeting with his counterparts in the Northern Virginia region this week to compare notes, with the aim of being able to report rough projections for the coming fiscal year to the City Council and School Board at their annual joint budget guidance meeting in early December.
It was noted this Monday that the City will have to grow in value by 4.4 percent in the coming year to avoid shortfalls, such that even though the surplus reported this week seems like an abundance, the realities of the world is that it is not so much that.
This may be a good time to observe caution and prudence more than usual, Bawa and Mayor David Tarter indicated this week due to the headwind pressures on the wider economy, including the impacts of inflation, supply chain pressures, the war in Europe, rising fuel costs and rising interest rates.
The Bawa-Shields message to the Council this week noted the $4.056,615 surplus, it set a cautionary tone by saying, “While this shows economic recovery from the pandemic, we also need to exercise caution amidst signals of slowdown in economic growth. It would be prudent to hold a portion of the year-end balance in the fund balance for use during the next year’s budget development.”
There is also the more localized issue of how deep the General Assembly may go to reduce or eliminate the grocery tax, which will not be known until next spring. Another factor of uncertainty will be the degree to which residential real estate values will continue to rise, or not, and actual real estate assessments will not come out until next February.
So, in seeking actual budget amendments from the Council in November on how to appropriate the surplus, the City staff is initially pointing to using the funds for capital improvement projects in lieu of issuing debt, core transportation infrastructure needs, the coming year’s “work plan” initiatives, replacement of necessary equipment past its useful life, and investment in employee learning and development. On top of these are the results of this week’s compensation study and the need to project a 4.4 percent growth in the coming year to meet all the budget obligations. That includes the fact that nothing was said about furthering the City’s commitment to affordable housing.
Out of the current $4.1 net balance, Shields and Bawa are currently recommending adding $770,000 to the unassigned fund balance to bring it to almost 20 percent of the overall budget, and assigning $1.1 million to the City schools under the terms of the newly-minted revenue sharing program between the City and the schools. That leaves $2.1 million available for the potential uses outlined in the paragraph above this one.
There is no way to tell at this stage if the City Council will be able to cut the real estate tax rate further when it decides such things late next April for the new fiscal year beginning July 1, 2023. The rate was cut by 12.5 cents to $1.23 per $100 assessed valuation in the last two years.
The Council also took a look this Monday at the deployment of over $18 million that has come the City’s way in the form of the American Recovery Plan Act funding. Big items in the use of those funds include addressing stormwater infrastructure with $7.6 million and an “Affordable Housing Acquisition Strike Fund” deployment of $1.9 million, premium pay for City and school employees operating above and beyond the call during the pandemic of about $1 million, small business economic assistance of $500,000 and a new HVAC for the Henderson Middle School of $500,000.
Under the terms of the ARPA assistance, the City must officially commit, or “encumber”, all the funds by December 2024 and expand them by December 2025.