Blog posts are the personal views of Letty Hardi and not official statements or records on behalf of the Falls Church City Council
‘Tis the season to kick off the FY20 budget! While there are probably merrier things to do this time of year, our annual joint work session with the School Board sets in motion one of the most important parts of our jobs – the city budget. This week, we jointly reviewed economic trends and early budget drivers; next week we’ll officially vote on the “budget guidance” to guide priorities to be funded in the next budget.
Also shared with us this week is the annual Students by Dwelling Unit chart. Those who have been following my blog posts for the past 3+ years know that this annual chart is important to monitor student enrollment trends across the city (as funding the schools is by far our largest expense) and compare our mixed use projections vs actuals, so we can continue to get better at our modeling for new projects. The headline is that total FCCPS enrollment has actually *decreased*, the first decrease in enrollment in many years.
Before you sign off for the holidays, join me for coffee at my office hours next Monday 12/10 at 9 am and the Sunday Series Town Hall on Sunday 12/16 at 2 pm with updates on the new high school and economic development plans – you’ll be able to hear from the top ranked developer directly about the plans and ask questions. We have one last meeting next Monday, where we’ll vote on budget guidance and update our gun ordinance that I wrote about last week.
What Happened This Week:
(1) FY18 CAFR – Comprehensive Annual Financial Report – with the presentation of the FY18 CAFR, our external auditors presented us with a report of an overall clean audit. Without recapping the 200+ page document, if you have time and/or interest- the management letter in the beginning of the CAFR (pages 11-15) does a nice job summarizing the fiscal year in review for Falls Church, including development and macroeconomic trends.
(2) FY20 Budget Kickoff
The presentations are not yet uploaded, but here’s a quick recap of the financial forecasts for FY20:
- Macro-economic trends: Overall, there are some early signs of a softening economy at the federal and local levels.
- How will Falls Church’s revenues look? In line with our neighbors, we are forecasting 2% revenue growth. Arlington is predicting 1.5% revenue growth, Alexandria 1.9%, and Fairfax County the outlier at 2.9%. With 60% of our revenues coming from real estate taxes and no new commercial buildings opening next year, that revenue growth mainly comes from market appreciation (ie, your house assessment value is expected to slightly rise about 2%).
- What does 2% revenue growth really mean? 2% organic revenue growth translates to $1.7M more money, without raising the tax rate, we get to spend in the city’s operating budgets. The current total city budget, about $92M, funds everything in the city from teachers, police, traffic calming, WMATA, etc.
- Whoa, what about the big CIP? Recall that we had a separate CIP funding plan and started planning for these big projects ($17M City Hall, $8M Library, $120M GMHS, and more) a few years ago. Our new debt service will more than quadruple in the coming years as we take out bonds to pay for these big projects and the plan is to use reserves to pay for that new debt service.
- The current real estate tax rate of $1.355 (per $100 assessed value) currently has 8 cents dedicated to capital projects. The 8 cents has been used to start building up reserves so we can pay that debt service.
- Here’s where the 8 cents came from: last year we raised taxes 2 cents and the year before that, 1.5 cents to prepare for the large projects. We also tightened operating budgets during a good economy to redirect the equivalent of 3 cents to reserves. Finally, before my time – out of the $20M proceeds from the sale of the Falls Church water system, $9M was invested in the pension and we’re expecting 1.5 cents of ROI from the pension assuming market conditions hold.
- We issued the first of the 3 bond tranches ($21M) last May and plan to issue the second bond, a whopping $70M, next May before construction of the high school can start. Assuming project costs come in as expected and that the 10 acre economic development’s timeline and land transaction payments occur as negotiated, no additional new taxes will be needed to pay for the CIP. To me, those are some big assumptions so I think we need to be cautious!
- Budget guidance – based on our work session discussion, there was majority consensus on Council to guide budget development to the 2% organic revenue growth forecast, mainly in anticipation of economic headwinds and necessary prudence ahead of the biggest part of the CIP.
(3) The Latest School Enrollment Figures & Where Do Students Live?
As I’ve shared every year, the Student Ratios per Dwelling Unit chart, produced by a collaborative effort by the general government and schools, is an important piece of data to monitor. Key takeaways from this year’s:
- This year, total Pk-12 student enrollment surprisingly dropped from 2707 to 2635 students, a decrease of 72 students. This is the first time I’ve seen a decrease. This data is only readily available in the past 10 years, but it may be longer than that since we’ve seen enrollment declines.
- With the exception of single family houses and mid rise condos which saw very small increases, there were less students in all of the other housing types.
- One of the most common misconceptions is that our previous years’ of student enrollment growth comes from the new mixed use development. While there are students who live in those buildings, it is a small percentage. And 7 out of 8 buildings have seen the forecasted number of students, with Pearson Square as the outlier. This year, the number of students living in the 8 mixed use buildings dropped from 234 to 215 total students, about 8% of total students.
- 60% of students live in single family houses, 13% in townhouses, 16% in older apartments, and 2% in older condos.
What’s Coming Up:
- Monday, December 10 – Letty’s Office Hours (9 am, Northside Social)
- Monday, December 10 – City Council Meeting (730 pm, Community Center)
- Sunday, December 16 – Sunday Series Town Hall (2 pm, Community Center)
- Monday, January 7 – City Council Work Session