Blog posts are the personal views of Letty Hardi and not official statements or records on behalf of the Falls Church City Council
It’s hard to believe that budget season is already around the corner. This week, the City Council and School Board met for our annual joint session focused on budget planning for FY19 and other money matters. While we’re several months away from actual budget votes, staff has been hard at work on revenue and expenditure projections so that next week, Council can issue “budget guidance” for the FY19 school and general government budgets to be developed. We also spent a fair amount of time discussing new fiscal policies with our financial consultants, in preparation for the large capital plan. Finally – we finished our work session with updates on transportation grants and discussion on the City Hall project, which will be up for a final vote next week as well.
Budget matters typically get a lot of public attention in the month of March and April, but I believe that budgets (and associated priorities) are an important year-round discussion. A key theme of our discussion this week was preparing for the tax rate increase to pay for the capital projects, and how we’ll need to tighten operating budgets accordingly. While not the most exciting topic around the holidays, I encourage you to read on, start getting engaged, and share your thoughts with us on priorities for your tax dollars.
Next week is our last meeting of 2017 with some key votes on the agenda; public comment is always welcome. Everyone is also invited to attend the outgoing/incoming Council member reception at 630 pm before our regular meeting.
What Happened This Week:
(1) FY 2019 Budget Discussion
The FY19 Preliminary Forecasts presentation was our first look at next year’s budget drivers. As the City Manager put it, the operating budgets look like a pretty typical year in Falls Church and our forecasts put us in line with neighboring jurisdictions. The stand out is the large capital plan with GMHS, city hall, library and other capital projects and the pressure from the debt service of those projects. Key takeaways:
- FY19 revenue expected to grow 2.5-3.5%, with about $2.6M new revenue available to spend across the city
- Expenses will grow, largely due to debt service for capital projects. We expect to add $2.5M in debt service next year.
- Current tax rate benchmarking on slide 6 is a good refresher of where our tax rate stands (note the “comparable tax rate” column – many of our neighbors have a base rate + add on taxes making their effective tax rate higher than what’s published)
- Besides increased debt service, the other key cost drivers will be Metro, health insurance premiums, school enrollment growth, and desire to increase compensation for general government and school employees to maintain competitiveness.
- Current school enrollment (2017-2018 school year) is flat. We only saw a 0.3% growth, or +8 students, from last year. See my previous blog post that included the data for students by housing type data that had some very interested trends behind this flat year of enrollment. Weldon Cooper is projecting a 2.4% increase in enrollment for next year as we expect a continued healthy growth in student enrollment despite this year’s anomaly.
- May 2018 – that will be the first planned bond issuance for city hall, library, architecture and engineering fees for GMHS, and other projects in the CIP. We are expect it will be around $32M, which will be the largest debt issuance in city history, with our debt issuance typically around $10M.
- Modeled tax rate increases – for those who followed the CIP discussion in the spring and summer, this slide is familiar. It shows the projected tax rate increases needed to fund the full CIP, with and without a land transaction for the 10 acres at GMHS. It is projected we’ll need to increase taxes by 6 cents next year (4 cents for GMHS, 2 cents for the remainder of the CIP), assuming operating budgets don’t require additional increases.
Draft FY19 budget schedule – good dates to mark on your calendar now!
Budget Guidance – we discussed a draft of the “budget guidance” document that we’ll vote as an official resolution next Monday. The guidance is meant to do exactly that – guide the City Manager, School Board, and Superintendent in their budget development, noting areas of focus, priorities, and ultimately a budget growth target. Note some key language in the draft, including a 10 year planning horizon that I’ve been advocating,
“It is the Council’s intention to maintain appropriate discipline on operating budgets for General Governments and Schools with a vision toward reserving financial capacity for the major capital projects in the City’s immediate future, including the George Mason High School and Mary Ellen Henderson Middle School projects, the Mary Riley Styles Library project, and the City Hall Public Safety project.
The FY19 General Fund operating budget, inclusive of both general government and school operations, should be no more than X% growth relative to the FY18 budget. Any revenue above that budget level should be dedicated to accomplishing the approved capital program.”
(2) Fiscal Policies – new proposal
For long time readers, you may recall a proposal to amend our fiscal policies last December. The decision was deferred until we had the outcome of the referendum. With the GMHS project now kicking off, staff and our financial consultants presented a new proposal to amend our fiscal policies so that we have appropriate measures in place to manage the increased risk and maintain our bond rating. The proposed change involves setting a target range for total reserves, should we exceed our long-established policies for debt and payout ratios (which we expect to exceed with the $120M debt for GMHS). As you recall, we already have a policy in place to target unassigned fund balance (aka, the rainy day fund) at 12-17% of expenditures. The new proposal is to target total reserves to equal 15-20% of expenditures (total reserves = unassigned fund balance + assigned fund balance + capital reserves). The staff report details the recommended policy change and for those really interested, the discussion with our financial consultants (see video from our work session) will be useful.
(3) City Hall – we received the news that in the negotiations for a guaranteed maximum price (GMP) for City Hall, several items put the project over the $13M planned budget. Staff identified tradeoff areas in order to stay below the $13M, and we’ll be asked to vote on the construction contract as the final gate before the renovation/construction starts this winter. Next Monday’s staff report details the options that we’ll consider.
What’s Coming Up:
- TODAY – Friday, December 8 at 730 am – Campus Economic Development Working Group (Dogwood Room, City Hall)
- Monday, December 11 at 730 pm – Last City Council meeting of 2017
- Wednesday, December 13 at 730 pm at GMHS Mustang Cafe – the 1st Campus Project Interactive Briefing. It will be the first of several meetings to update our progress and gather civic input as we continue to fine tune the plans that were the basis of the referendum.
- Save the dates – FY19 budget meetings