Updates from Letty – April 20, 2017 – Budget Edition #4

Blog posts are the personal views of Letty Hardi and not official statements or records on behalf of the Falls Church City Council

Dear Friends,

Updates are a day early this week – mainly as a quick reminder that I’m holding my final office hours this morning from 830 – 930 am at Rare Bird Coffee (corner of Broad and Maple). Before you head to work – if you have input on the budget prior to next Monday’s budget adoption or have other topics in mind – feel free to drop by.

Our only topic in work session this week was the markup of the budget. Read on for my take on where we stand with the originally proposed 4 cent real estate tax increase (1 cent for operating, 3 cents for capital reserves) going into next Monday night. Since I didn’t send out updates last week, I also included a recap of our Mt. Daniel vote from last week and why I voted to fund an additional $2M to the project, and the implications to additional school capital needs.



What Happened This Week:

(1) Operating Budget Proposal (originally 1 cent required to fully fund both school and general government budgets)

As requested by several members of Council last week, the City Manager proposed a revised operating budget doesn’t require additional pennies on the real estate tax rate, ie reducing operating budgets by $400K. This was possible through several revisions since the original proposal:

-WMATA requested budget expected to decrease $125K
-Remaining gap of $275K split between school and general government – reduction of $137K each

The remaining school transfer would be an increase of 3.3% instead of the requested 3.7%. As we understood from the Superintendent, that should still fund the requested instructional needs and new teachers needed to keep class sizes below policy.

On the general government side, the City Manager proposed an option to freeze vacancies to plug the $137K gap. In the immediate future, it would require the Assistant City Manager to job share across her role and the vacant HR Director role. Several of us spoke with concerns about that being a permanent solution. Letty’s thoughts: While I support keeping operating budgets lean in order to meet our ambitious capital plans – and that requires creative solutions and efficiencies from everyone – I would like us to reconsider other options and vacancies that appear in the coming year.


There was a majority on Council who supported the new option for operating budgets, so I expect that will be the version adopted next Monday.

(2) Capital Reserves (originally 3 cents recommended by City Manager)

We had a difficult time wrestling with the proposed 3 cents (about $1.2M) recommended to go into the Capital Reserves to fund the GMHS project. The proposal is that the money would be earmarked to pay for the expected debt service for the bonds of the project, especially the peak years of debt service when multiple capital projects would be occurring.  Some quick facts:

-The original capital reserves from the water system sale was $10M. About $700K in reserves has already been spent on the campus work so far. After the current feasibility studies are complete this spring, we expect about $800K in total will be spent out of reserves, which is about 2 pennies on the real estate tax rate.
-1 cent tax rate increase for an average $650K house in Falls Church is about $65-70/year.

Letty’s thoughts: I heard from many with thoughts on the 3 cents for reserves, and I can see both perspectives on whether or not to pre-fund the capital reserves. At the onset, I believe that 3 cents right now is too aggressive, especially before the current feasibility and market studies are complete which we expect will give us more refined cost estimates and economic development levers. However, I don’t believe that any of that work will result in a free school or that the rest of our capital needs will disappear. Those costs are coming. We know we have those needs and I believe it would be irresponsible to spring a spike in tax rates on citizens in a short period of time. I believe it’s prudent that we plan for the future by funding the capital reserves at some level, as they’re decreasing by the minute. Finally – I believe that a strong capital reserves ultimately saves us money. We’ve been told by our financial experts that having a strong capital reserve fund helps maintain our AAA bond rating which means we can get the best interest rate, which means less debt service we have to pay. 

We don’t yet have consensus or a majority vote on whether to fund capital reserves, so your input is critical! Feel free to email us or speak at Monday’s meeting.

(3) CIP

We didn’t spend much time discussing the CIP this week. With a blank placeholder amount for the GMHS project and the new Thomas Jefferson/elementary need (see Mt. Daniel below if that’s news to you), we expect that we will have to revisit the CIP in June as we wrestle with how to prioritize the aggressive capital plans.

(4) Mt. Daniel

Last week, we voted 6-0 to approve additional $2M to the Mt Daniel project. I had posted this on Facebook already, but in the spirit of transparency, I want to share how I came to my vote and make sure everyone is aware of the implications and additional school capital needs.

With elementary age kids and one who advocated for the MD referendum in 2015 as a parent, I share the community’s disappointment and frustration with where we are. MD was billed as solving the elementary capacity issue for $15M so that MD could be a K-2 school. Now it will cost $2M more, be a smaller building, potentially be a PK-1 school, and we still don’t solve TJ being overcapacity – in other words, we’ll need more money on top of the $18M to solve it elsewhere. I spent most of last weekend hearing from citizens that this new plan feels very sudden to them. It’s Spring Break and many people are out of town. So I get it.

The reality is that the negotiated 660 cap at MD has been a fact for over 6 months, so it’s especially frustrating that we’re finally taking a look at whether 2nd grade makes sense to move there. I am glad to see the discussion now underway for a holistic capacity plan at last Thursday’s School Board meeting. We need to be strategically addressing facilities and capital planning across the city and not fire fighting every year. And with this new elementary need (estimated to be a minimum of $10-12M), we are going to have to make some difficult prioritization calls in the CIP.

Over the past month, city and school staff have been working diligently on bringing down the new MD cost down and explored options to reduce scope, delay the project, or even walk away altogether and defease the bonds. Last week, I asked Dr Schiller again if we could have more time especially in light of the new grade configuration proposal to hear from the community.

Unfortunately it became apparent that we have no good options for MD. Contracts for the project expire at the end of this week and Dr Schiller cautioned that a delay would mean pushing out the project a full calendar year and result in the need to re-bid at even higher costs. I know you’re never supposed to consider sunk costs ($3M is what’s been spent to date) in decision making, but walking away with nothing to show for it after spending that kind of taxpayer money also feels like a terrible and irresponsible financial decision.

It’s clear that we need the square footage somewhere, and MD is the farthest along in terms of being construction-ready out of all of our schools. So I don’t see how we solve a district wide capacity challenge without adding the space and doing some sort of grade re-jiggering, even if the original plan of 2nd grade from TJ to MD no longer makes sense. So I believe that moving forward with construction to address the ADA issues at MD and adding 300+ seats while considering a different use of the new space at MD (ie, moving preschool) has merit, especially if it reduces our operating and overhead costs.

We certainly need more discussion on what configuration makes sense and how/when/where we add more elementary capacity; Chairman Webb committed to having thorough community engagement after spring break. So I see proceeding with MD construction, coupled with this draft capacity plan, as “making lemonade out of lemons.”

Your thoughts?


What’s Coming Up:

(budget-related meetings in blue, with links to more info where available)

  • TODAY, April 20 – Letty’s Office Hours (830-930 am, Rare Bird Coffee)
  • Monday, April 24 – City Council Meeting – Budget Adoption 
  • Monday, May 1 – City Council Work Session – Cottage/Railroad Ave walking tour, Mason Row