MAN ABOUT TOWN: City Broke? We Resemble that Remark
It’s not often that the Washington Post deigns to report on our little City. But the budget crisis caught their interest for an instant, and a short story appeared Oct. 8:
“We’re not broke,” Mayor Robin S. Gardner said Wednesday. “It’s not affecting our bond rating, so it’s fine. It’s not affecting our ability to pay our bills, so it’s fine.”
Is the Mayor in line to be the next Treasury Secretary? That’s who has the job of saying “it’s fine, it’s fine,” in an effort to calm the markets.
It’s not fine.
The last two weeks I’ve attended meetings of City Council, the School Board, the “Gang of 8,” (see photo below) and the Library trustees, and talked with the City Manager and Chief Financial Officer. My conclusion: the City’s budget crisis is less a cyclical problem than a fundamental and systemic problem.
Of course it’s cyclical as well, and for people looking to cast blame, here’s the opportunity: We ignored the sermon about the seven years of plenty followed by the seven years of famine. (For those who slept through that one, it was the first recorded instance of a Jewish advisor (Joseph) counseling a head of state (Pharaoh) on economic policy.)
But face it: except for that one time with Joseph and Pharaoh, no government has ever saved for a rainy day. That’s just not how politicians roll. Tax more and spend less now in hopes of a better future? And what planet did you say you’re from?
When the real estate bubble burst, all municipalities were hit hard – in fact, Falls Church fared better than most, thanks to our near-recession-proof location.
What I’m saying is that it’s not the burst bubble that created the problem. Instead, the real estate bubble MASKED the problem. Absent the unsustainable run-up in property values, the City’s budgets would have bled red ink years earlier.
My concern is that the movers and shakers in this town are still drinking the Kool-Aid and sincerely believe that we just have to ride out the storm, after which everything will be OK when the economy picks up again.
One of our most distinguished civic leaders was sufficiently concerned by the negativism the Man About Town has been spewing that he spent over an hour trying to educate me. Most interesting was his statement that the economic survival of the City (and in particular the school system) depends on developing our “corridors”: North Washington Street near the East Falls Church Metro; Broad Street near the West Falls Church Metro; all of South Washington Street; and Seven Corners. Oh, and also the City Center. He further stated that the City hasn’t done nearly as good a job promoting economic development in these areas as our neighbors have in Arlington and Fairfax counties.
I think he’s got it exactly right: Falls Church can only survive as an independent City with an independent school system to the extent we continue to develop the tax base. That means build, baby, build! (Wonder if Mayberry has a mall by now?)
But – but – where are the builders? And when they were here, why did they only seem to want to build high-rise apartments and condominiums? How does that expand our commercial tax base?
A “joint work session” is scheduled for tonight (Oct. 19) for City Council, the School Board, and the Planning Commission. I’ll probably show up. These joint sessions tend to be a lot more dynamic than normal meetings – especially when the School Board mixes it up with the City Council. There are a couple of sharp ladies on the School Board who are asking some pretty pointed questions – questions I wouldn’t want to be on the receiving end of. It’s one thing for the City to postpone capital improvements, but the schools’ infrastructure is more critical. How long can you put off replacing a steam boiler? What about the $75 million new high school that people say we need? How can teacher salaries remain competitive with surrounding locales?
Chief Financial Officer John Tuohy reports that last year’s (FY09) revenue was $7 million below budget, and this year’s (FY10) revenue is projected to be $5.6 million below budget. Nothing indicates that FY11 will fare any better. As the late Senator Dirksen is so often quoted as saying: “A million here, a million there – pretty soon you’re talking real money.” Pretty soon you’re talking a real tax increase.
But we’re not broke, so it’s fine.
WHO ARE THE 'GANG OF 8'? They're a mix of elected and professional staff members of the City and School Board who meet officially to review policies. From left, clockwise around the table are: (1) School Board Chairman Ron Peppe; (2) School Superintendent Lois Berlin; (3) School Asst. Superintendent of Finance and Operations Hunter Kimble; (4) City Chief Financial Officer John Tuohy; (5) City Manager Wyatt Shields; Asst. City Manager Cindy Mester; (6) Councilman Dan Maller; Falls Church News-Press Owner & Editor-In-Chief Nicholas F. Benton; (7) Vice Mayor Hal Lippman; (8) School Board member Joan Wodiska; (Falls Church Times Photo by George Southern) . . .
By George Southern
October 19, 2009
I think we all agree the current situation isn’t fine, but it is not dire. As you said in your commentary, all governments have trouble saving for a rainy day. It is hard to save when different constitutents constantly look for funding for their issues during the good times. The cycle is good times equal spending/new programs and bad times mean a reality check and belt tightening.
Building is not completely dead. The BJs is on its way (drive by Wilson) and Akridge is talking to the neighbors at Gresham Place about a revised Gateway. Northgate still has a good chance of going forward. The City Center South is probably a wash, but I think a second go at City Center might be a good thing.
For the long-term viability of the city, we need to get better at budgeting, more realistic expectations for services, and to get better at negotiating with builders. We need to kickstart Economic Development by setting the ground work now for when the economy recovers. We also have a chance with the Zoning Code rewrite to set expectations for builders and better define the design components to get better developments.
I see this time as a chance to correct course and move strongly into the future.
George, when I read commentaries like this I often come away thinking, “okay, so what should we do?” I assume your answer is still that we should become a town within Arlington County, right?
We certainly wouldn’t want to be part of Fairfax County. Today’s Post talks about their $176M shortfall for the schools and the idea of closing some of them: http://www.washingtonpost.com/wp-dyn/content/article/2009/10/18/AR2009101801991.html
Andy’s correct – if you think its bad here, try Fairfax! If the Council moves forward on a tax increase, it would make good sense. With declining values, the tax rate has to go up to maintain status quo. To make up budget shortfalls (at least some of it based on tough choices, it must go up a bit more. What I don’t get is why it is poison to suggest such a thing. We all benefit from the results of the City services and sometimes we have to pay for it.
What the economic development office needs to do is agressively market our town – there is a lot of economic buying power in our little burg and the retailers need to realize that people from Falls Church really hate to go far (ie, across Seven Corners, to Merrifield, to Ballston, west of Whole Foods). Bring that economic spending power to our town and tax revenue will follow.
Absolutely, we must increase our taxes. We are able to afford billions for bankers and wars — borrow it, what the heck. But health care and schools are way too expense and we just can’t afford those kinds of things.
Gordon has a good point, we do like to buy locally and support our towns business’s as do a lot of folks in areas around here. So if that’s the case not only do we need to promote buying locally we need to attract residents from those other areas around Falls Church. We need to build destinations that they want to come to, that we in the city want to go to… and that doesn’t mean more CONDO’s!
Marketing the City is a good idea – both to retailers and shoppers – but it costs money.
At the last EDA meeting we had the consultants in who developed the fiscal models that the City uses when considering the economic impact of new developments. I think the main use of these models is to extract proffers and other concessions from developers when considering different proposals. The interesting thing that I learned from that meeting was that all new construction (condos, apartments, etc.) actually has a positive net effect on tax revenue. This is due to various reasons but the main issue seems to be that even though these new developments bring more kids to the City (a major cost) they bring enough more revenue than the things they replaced (duck pin bowling, Red Lobster, for example) to more than compensate for the added costs.
Now, I have concerns about that strategy over the long run because we’re getting dangerously close to needing more school space – which would trigger a large new expenditure – but it was interesting to hear how it works out. Also, keep in mind that these new developments house part of the population that we’re tempting retail businesses with.
One problem we have right now is the economy stinks so retail businesses aren’t opening stores anywhere – so a lot of our mixed use space hasn’t been filled. But we’ve had some luck – we’re getting that large brew pub. Plus, don’t forget BJs – that’s not a condo.
So, I think we can have luck attracting certain kinds of businesses. I really like the mixed-use model – although I wouldn’t mind seeing a larger portion of non-retail commercial space in that mix. However, I think that’s a tough sell unless we can get that build as close as possible to the Metro (or reconfigure GEORGE or other transit to better serve commuters coming into the City).
If Nick Benton is really a part of the “Gang of 8″, then we’ve got some problems.
Way to go George! You’re telling it like it is.
The “pie-in-the-sky” blather about things not being so bad by people that should know better is amazing—and sad. All the high-density residential “cash cows” pushed by the City for the last decade have done little or nothing to avert the current fiscal crisis or to prevent it from getting worse, which it will. That’s a fact. They have, however, pushed school overcrowding, already at the tipping point due to McMansion conversions, over the edge. (The City has little or no control over McMansion conversions; it has total control over whether or not to authorize construction of condos and apartments on commercial land.) Not to mention aggravating already grave traffic, parking and pollution problems.
Saving money? An unheard of concept for our City. They make $2 million dollar loans and then decline to seek repayment when they can and should. They let builders out of $2.8 million dollar performance bonds by “renegotiating” contracts. They spend unknown amounts (when will we know?) on frivolous lawsuits against powerful neighboring jurisdictions with whom the City should be negotiating, not suing. When it comes to money, our City leaders care more about builders’ return on investment than the public interest. And of course, now that builders aren’t available to build high-density residential anymore, the sudden interest in truly expanding the City’s commercial tax base can’t be accomplished because most of the economically buildable commercial land already has condos and apartments on them!
What is this called? It is called poor planning and mismanagement. What causes it? Well, certainly not well-meaning, educated and intelligent city officials. We have had many of those. Rather, and you have not gotten into this yet, so I”ll just drop it in the mix and wait for the indignant and self-righteous reaction: a major cause is the decades of political dominance by one-party in the City of Falls Church, which, as in all such cases, leads to pursuit of continued power for power’s sake and neglect or dismissal of dissent and new ideas that could avoid or minimize problems such as the City now faces.
Keep up the good work!
There are a lot of empty retail spots in the city, some have been empty for quite a while now. I’m thinking of all those storefront spots on Maple Ave., that big retail space at the Eden Center that used to be Zayre’s a long time ago, the old Chicken Out building in the Giant parking lot, and now the Syms building, and I know there are others.
I don’t know what kind of incentives we can give retailers to entice them into these spots. Maybe offer them free condos to live in?
We have all been spoiled over the last several years with prosperity in the markets, but does anyone really believe we would not soon hit a down cycle? Its basic economics and the fact is we just did not prepare for it. Had we requested a sustainable city center design, one not so high and wide, perhaps the ecomomics of building it would have given us a better chance to succeed. No, we fought for what the developer wanted, to maximize his profits, and with all the delays we fell into the recession pit. Does anyone really think we will become a Tysons Corner or Bailey’s? We need to focus on development that is sustainable for our community. That means big enough to support and not so big that if it goes out of business we go broke. That type of analysis does not happen, because we always just wait for the developer to tell us what he wants and not what we can support.
We have other unusual problems like the State Department having a contract with Oakwood Apartments so employees can land here for a year or two, put their children through a fine school system, pay no real estate taxes and then leave. We live in a great location and so problems like that will occur.
Anyway, sustainable development with rents that businesses are attracted to will bring retail. Broadway and Byron are good for our community as we age and want to keep living in the city without yard work. Pearson Square is attractive and only 6 stories and provides a nice rental community. Now we need a way to increase the business tax base in a sustainable way.
I’m not familiar with the Oakwood Apartments situation – they don’t pay real estate taxes?
BARRY BUSCHOW RESPONDS: The owners of Oakwood pay taxes but not the individuals families that live there and bring their children to our schools.
ANDY RANKIN RESPONDS: Barry, that makes sense (that the owners pay the taxes, not the renters) – but how is that relevant to the situation?
LOU MAURO RESPONDS: Andy, here is how Barry’s statement is relevant. Oakwood is an apartment building. The Oakwood apartments traditionally have had a substantial number of transitional renters, including State Department families. That is, people who, for one reason or another, are only there for a few years and then move on. Barry was merely pointing out that, while their children attend our schools for those years, at a cost of nearly $20,000 per student annually, the parents, because they are just renters, pay no real estate taxes. That’s it. TPX175, whoever you are, no negative implication was intended. While they are here, their children are entitled to an education—- and they get it.
Again, I would add that, like the McMansion situation, the school children generated by the State Department assignments are beyond the control of the City, but they too have over the years contributed to bringing the school overcrowding situation to the tipping point. That is why, knowing this, the City’s stubborn and continuous approval of student-generating high-density residential buildings on scarce commercial land, over which they have TOTAL control, has been misguided and foolish and pushed the overcrowding situation over the edge.
MBX RESPONDS: RE: “The owners of Oakwood pay taxes but not the individuals families that live there and bring their children to our schools.”
This is part of the problem about Falls Church – “bring THEIR children to OUR schools” – doesn’t everyone deserve a fair education? The mentality that OUR schools are so great, but YOU can’t use them is unfair and selfish.
GORDON THEISZ RESPONDS: If you knew Barry, you would know that he did not mean the context you are emphasizing.
This Oakwood thing is ridiculous.
If the renters pay rent, and therefore the owners are able to pay their taxes, then it’s the renters’ money that eventually ends up as taxes. The fact that the State Department pays the rent means nothing as well. It’s a perk of the job, part of the compensation the employee receives for the work they do. The bottom line is, the owners of the Oakwood Apartments pay real estate taxes which goes toward supporting the schools. Sheesh.
I think it’s also fair to say that many of the children of State Department employees achieve high test scores in our schools.
Those fixated on school overcrowding being exclusively driven by ” student-generating high-density residential buildings” need to take a closer look at the increase in school population being driven by the turnover of 3-4 bedroom homes in our City from current owners with no children and/or whose children have long since graduated from our school system to younger families with kids who will be enrolling. The existing data just doesn’t support the notion that high density residential development is the sole driving factor of increased enrollment in our schools. And I too urge some restraint in suggesting the renters living in our City as somehow being less deserving of access to City services offered to all City residents.
BARRY BUSCHOW RESPONDS: Whoa — my point was that 50 families living in 50 houses, condos, townhouses, anything that pays RE tax, the city collects around $6k per household avg. (look at your own bill and do your own math) vice living in a rental apartment and not paying that tax. Yes the owners of Oakwood pay a tax but our city income stream is reduced by the other families with children that do not, while we pay the $19k or whatever per child to go to our schools. I’m NOT saying they don’t have a right to go to school, this discussion has been about Revenue or lack thereof. Every time someone tries to point school economics out they get jumped on, which leads to No discussion of how to make it work….I am a ‘67 Grad of GM!
ANDY RANKIN RESPONDS: I really don’t think there’s any difference between a renter (of an apartment or house) and an owner in terms of tax revenue to the City. The same RE tax is paid by whoever does own the property regardless of whether the owner lives in the building or rents it. Barry, you seem to suggest that our tax stream is reduced because these people are renters – I don’t see how that’s true.
So, maybe the argument is the revenue (and costs) of a multi-unit building (apartments, condos, etc.) vs. the revenue (and costs) of single family homes and non-residential buildings. That’s a valid argument, but I’m not sure people have the facts straight on that either. Certainly a 5 story office building would have a much better net tax benefit on the city than a 5 store apartment building. The office building would generate basically the same RE tax but not generate the same expenses (i.e. school kids).
However, for example, the Pearson Square development (even with it’s retail spaces empty) has a net benefit to the City’s bottom line as compared to what it replaced (dilapidated warehouses and a run down duck pin bowling alley). The tax revenue generated by Pearson Square, minus the expenses (mostly kids) generated by Pearson Square is more than the tax revenue that had been generated by the old structures. The same is true of The Byron and The Spectrum.
What can’t be ignored is that at some point the addition of kids (via McMansions, townhouses, apartment buildings, turn over, etc.) will require us to build new schools – and that is potentially a big problem.
As for the turn over issue, has anyone ever studied what’s actually happening? For example, I bought a house last year and moved into the City with my two kids. The people we bought the house from had lived here for a while, their kids had gone through the schools but had been done for a number of years. This kind of turn over seems normal. They lived in the City for years, paying taxes, without kids in the schools – and then they sold their house to me. Is that the turn over we’re talking about (the recent post about school enrollment numbers that I commented on seemed to suggest, statistically at least, that this is the kind of turn over we’ve been seeing for the past 10 years or so)?
Or, are people moving out of the City (selling their houses to new families with young kids) as soon as their kids get out of high school? If that’s the pattern than there’s a huge burden on the City.
I guess the stat I’m looking for is over time what percent of the household in the City have school aged kids? If that number is fairly steady then I’d consider that “normal” turnover. If that number keeps going up then that means we’re in trouble!
As for Oakwood, I actually think it’s really cool that my kid will go to school with kids who have lived around the world with parents doing cool and interesting things. I think it adds valuable diversity to our schools.
BARRY BUSCHOW RESPONDS: Andy, I think you get the big picture. In the limited space here it is difficult to express all parameters of the discussion. My original remark about Oakwood was just an example of how our little city cannot maximize revenues. Dan Maller, I know you’re out there — how much revenue does Oakwood generate for the city, how many school children are in Oakwood? Basic math stuff. If those families lived in houses, how much would that generate? I know we don’t have the housing stock and probably don’t want to have that many more houses. But what if? City turnover a couple of years ago was 50% every 5 years. In the old days families with children lived in houses and young folk, single folk, and old folk lived in apartments or condos. Today it is different, the State Dept likes us and sends many families here. That is GREAT, no question, but we have to examine the economics to this little village that has limited revenue resources. Andy, I believe you took over for me on the EDA — has there been any recent analysis done to give us an idea of the extent of potential city burdens?
ANDY RANKIN RESPONDS: The financial model that the EDA commissioned (before my time on the EDA) and the City uses when looking at new development projects attempted to determine the net financial impact of those new developments. My understanding is that all new residential developments (like Pearson Square) have a net positive impact on the City’s bottom line. That’s because even though Pearson Square brings more kids, it brings a lot of households without kids and a lot of RE tax revenue that the City wasn’t getting before.
In fact, I think the Oakwood info (number of units, number of kids, tax assessments, etc.) could be plugged into the model to determine the impact of Oakwood. It’s certainly possible that it does not have a positive net impact on the City – if, for example, that building has a higher than normal rate of school children in it. Maybe someone at the economic development office could track down those numbers and plug them in?
Your question (what happens if you put the Oakwood residents in houses instead of an apartment building) isn’t a valid one – specifically because the City lacks space for all those houses. In fact, the consultants who developed the financial model say that in most places the assumption is that apartment buildings have a net negative impact on revenue is a valid assumption – but in a small place like Falls Church where there isn’t enough space for a bunch of houses it doesn’t work out that way.
If the space currently taken up by all the mutli-unit housing structures in the City was magically converted to single family homes (however many could fit in the same area) the City would be in a worse financial position than it is today. The schools would be less crowded but the money saved by teaching fewer students would be less than the extra money we get from RE taxes on these larger structures.
As for that turn over stat – that means that every 5 years 50% of the population moves out? That suggests there are a good chunk of kids that don’t make it all the way through the school system. I’d still be curious to see what percent of households in the City have school age kids.
Thanks Barry, I can’t complain for being expected to have all of the facts and figures at my fingertips. Unfortunately I do not but I will find out. I do know that the Schools track where the students come from to forecast population, and the Oakwood discussion is because there was an increase in students from Oakwood this school year. I think that apartments are taxed as commercial properties so the tax basis is a bit different, but it should be fairly easy to generate the data using the EDA model and knowing the school population.
With respect to mixed-use developments and the school capacity, please keep in mind that in addition to the analysis of OPERATING cost, that we have required developers to proffer the estimated share of school CAPITAL cost. This means that while we added 600 kids capacity by building MEH Middle School (for ~$30 million), we received one-time capital money (which has been applied directly to defray this cost). IMHO we probably did not charge the right number for the cost (~$50,000 per seat) but we do have a process for evaluating and assessing this cost based on real data, and I am grossly oversimplifying. I do not believe that we have the power to charge these fees for apartments, although since the costs are financed they do eventually hit the operating budget.
While I am on this subject, I know that we do not have the power for single-family development, which is why I believe the only real threat to the long-term viability of the City is infill, where each additional home comes with a one-time price tag for capital cost as well as a deficit in operating cost of around $10,000 (a $1 million home will generate annual service costs of ~$20,000+ vs. tax revenues of $11,000). Even if I am oversimplifying and double-counting, this is not a sustainable model.
BARRY BUSCHOW RESPONDS: Thanks Dan, good insight as always. Andy, yes, half of Falls Church moves every 5 years. No, that does not mean kids don’t get through the system. My observations have been that they get here in middle school and leave after high school. But I don’t have, and I don’t believe the School Board has, any hard numbers on such a trend. I just look around my neighborhood. Thanks guys for good discussion, and sorry to “R2D2″ (or whatever your cloak is). I have worked many years for Lions, VPIS, and others to raise funds for scholarships and school programs that otherwise would not be affordable. (Oh no, there’s that word again.)
OK, so 50% every five years. Realize that some move away and some come back. But Dan’s point is the most important, and as I recall was supported by the school board when they came in favor of the city center – the biggest threat to our school capacity is residential infill. This is development of empty lots (there aren’t many) but also creation of empty lots (the substandard issue).
The former city manager once was quoted in the paper as saying that we needed to maximize the tax revenue of every property in the city. While that may sound good, building two large houses where there was once one (a la East Broad Street “twin towers” near Buxton) on two substandard lots is a net tax revenue loss as Dan illustrates.
I hope to see a zoning code rewrite that eliminates this abuse of the existing laws. It may be only one step, but it is a big one.
To Mary Lynn HIckey: I challenge you to find the words “exclusively driven” or “sole driving factor” in either of my comments on this subject. You will, however, find the words “tipping point” and “pushed the overcrowding over the edge.” Try reading them again and see if you get the point.
To everyone: good discussion. Arlington will be glad to have all you caring, civic-minded folks among its residents. See what you started, George!
I definitely get the idea that residential infill has a negative impact on revenue (most of these houses will have kids – therefore costing more than they’re bringing in). What I don’t get is how infill has a bigger impact on school capacity than large residential buildings (like Pearson Square). How many school kids currently come from Pearson Square? 40? 50? That’s 20-25 two kid single family homes.
How many infill houses were built in the past year (not tear downs where one house is replaced by one house)? Maybe I don’t realize how many of these infill houses are actually going up.
Don’t get me wrong, it sounds like there are real problems with these substandard lots – I’m just wondering how many there really can be in the City (I’m guessing someone actually knows this, or could figure it out)?
To Lou Mauro: If. your comments about ” student-generating high-density residential buildings” don’t seem to suggest that the ‘sole driving factor’ in school overcrowding is ‘exclusively driven’ by this source of new students, why no mention of the scores of new students coming from new homeowner families in the City or, a most relevant reference to the proportionate increases in school enrollment coming from each of these sources? Thank you for inviting the opportunity for a clarification of my apparent misunderstanding.
Wow — we haven’t had this many comments since our “Goodbye Tall Trees” story about developing the lot across from the library. My comment makes a total of 30 submissions (we combined some above), and I think that’s enough for now, so comments on this story are now closed. The Man About Town admits to mixed feelings of excitement and jealousy when the tipping point was reached yesterday and the comments became longer, more read (and no doubt more interesting) than the original story. Thanks, all of you — whichever side of the fence you’re on, you are all an informed, civic-minded group that does our City proud. Maybe this newspaper is in a small way reviving the old New England town meeting concept, where residents stood up and spoke their mind. Everybody of course knew who they were, and that makes all the difference, which is why we continue to politely remind our readers to identify themselves. And by the way, you all are invited to submit a LETTER TO THE EDITOR at contact@fallschurchtimes.com. Again, thank you!
POSTSCRIPT: Readers have let me know I was wrong to close the comments. In my defense, even a town meeting has time limits. But, due to popular demand, comments have been reopened!