COMMUNITY COMMENT: Taken Aback by FCHC Request

By RICHARD SOMMERFELD

July 29, 2010

This comment is my personal view as a taxpayer and a voter, not as Chairman of the Long-Range Financial Planning Working Group.

I was more than taken aback by the request from the Falls Church Housing Corporation (FCHC) for the City of Falls Church to bail it out of its current financial predicament.  In no way is this a “minor modification” of the terms set forth by the City Council for the Wilden Project.  It is a major change to the terms and to the project risks.  Anybody who understands real estate development would understand that fact and Mr. Young confirmed it in his interview with the FCT.  What we now have here is an admission by the FCHC that it is financially insolvent because it cannot make payment of its $2.7 million note due on August 7.  To be clear, the definition of financial insolvency is when a borrower cannot meet its financial obligations as and when they come due.  It also admitted that it may have to sell assets at a loss to make good on the note.

The FCHC also admits that it is attempting to help the Sawner estate settle its debt to the City.  It goes on to admit that whoever the other “partners” are who invested $750,000 in pre-development work will lose their funds.  The FCHC, for reasons that defy logic, spent $1.2 million on pre-development work when it had neither complied with the very soft terms set forth by the City Council nor had it lined up all of its equity and bank financing.  By way of clarification, a loan from the City does not qualify as equity by normal accounting principles, even for a non-profit.  Now, the FCHC has the audacity to ask the taxpayers of Falls Church for a bailout caused by financial mismanagement and overly optimistic forecasting for the entire Project.  The City would not just be bailing out the FCHC, but all of the parties associated with this project, according to the FCHC memo.

Any assertion that this project ever made financial sense for the City is distinctly contrary to a thorough and well-reasoned analysis prepared by Mr. Mike Novotny of the EDA and comments made by Mr. John Lawrence, Chairman of the Planning Commission, who voted against the project.  It would cost the City at least $100,000 in lost tax revenue–when every penny counts.  If this project made that much sense, perhaps Mr. Young should advance the FCHC $1 million, inasmuch as he would be a benefactor of the total project.

To put the $1 million request into the context of the Schools’ budget, that would be the equivalent of 12 teaching positions plus 2 or 3 support staff.  Down the road, the subsidized cost of at least $100,000 per annum would be the annual equivalent of 1.5 teaching positions.  If we go through the math of the project, it is expected by the FCHC that in 15 or 16 years the City would essentially forgive the $2 million loan.  How many teachers or policemen or firemen does that equate to?

In terms of the financial gimmickry of the FCHC request, if I understand Mr. Rogers’ memo to the City Manager, taxpayer funds will flow from the City to the FCHC and then back and forth between the FCHC and the Sawner estate, with a some portion of the funding maybe returning to the City in some guise to make it appear this is nothing more than a usual and customary fiscal arrangement.  It would also allow Mr. Young to proceed with his development and then recoup $25,000 per parking space from the City.

I think that the City Council would be making a huge mistake taking taxpayer funds that were meant to restore the depleted fund balance and finance operations such as public safety and the schools and redirect funds for 66 subsidized housing units.  The City Manager even stripped the CIP of all but $385,000 of capital expenditure to fund the operating budget.  We just heard from the City Manager that he had approached Davenport & Co., the City’s investment bankers, about going to the debt markets to fund the depleted CIP.  The Assistant Director of Finance has confirmed that tax collections are running $3.5 million behind last year.

After we listened to City employees pleading for their jobs in the Council Chambers (and on the City’s TV station) just 3 months ago, this is a major insult to them and their families.  At the end of the day, the real issue is not whether the City Council would be voting on 66 subsidized housing units in the middle of the commercial district to be funded by depleting the fund balance again, but whether this Council wants to bail out the financial mismanagement of the FCHC and place further strain on the City’s operating budget.

Even if the City borrows the money from a bank, it would be sending the wrong signal to every household in the City that had to accept a 16% hike in real estate taxes to support the City’s operating budget, not bail out an entity that is admitting insolvency.  It is an audacious argument on the part of Ms. Jackson and Mr. Rogers to say that the Virginia Development Housing Authority would turn its back on Falls Church for not funding this $1 million request for an admittedly insolvent FCHC.  The Council needs to call in an independent auditor to examine the finances of the FCHA and its financial controls and not bail out the FCHC.  The City should not the “bailout banker” of last resort for a non-profit that speculates in land development.

Mr. Sommerfeld is a businessman who lives in Falls Church City

Editors’ Note:  The Falls Church Times has invited the Falls Church Housing Corporation to submit a Community Comment making the case for its request in this matter, and we invite others to share their views on this topic or others of importance to the City.  Our comment policy appears in our “About” section.  Please send your submissions to contact@fallschurchtimes.com.

Falls Church City Council Members Roll Out Financial “Blueprint for Action”

By FALLS CHURCH TIMES STAFF

July 1, 2010

Four Falls Church City Council Members and Members-Elect rolled out a “Blueprint for Action” document yesterday aimed at improving the City’s financial planning and responsibility processes.

Sitting Council Members Nader Baroukh and Lawrence Webb and Council Members-Elect Johannah Barry and Ira Kaylin describe the document as a “discussion draft” designed to set priority areas for the Council in the coming term.

The Baroukh-Webb-Barry-Kaylin draft proposes the following action items for the City:

1)      Develop a five-year projection of the City’s financial situation;

2)      Undertake a comprehensive review of the City’s operating structure and organization;

3)      Develop revenue enhancing measures in the form of cost savings and additional net revenue from appropriate application of user fees;

4)      Adopt a three-year rolling budget though the budget approval process will be undertaken on a yearly basis;

5)      Align City budget preparation process that coincides with that of the School System in order to identify possible long term funding gaps (starting with the 5-year financial projections);

6)      Receive monthly & quarterly financial reports;

7)      Develop a minimum effort policy for capital investment;

8)      Develop a policy for a “Rainy Day” or Reserve/Stabilization Fund Policy;

9)      Continue to proactively and creatively market the City, including additional resources for the Economic Development Office;

10)   Adopt an Area Planning Process. Read more

City Council Reluctantly Approves Capital Improvements Plan

By GEORGE BROMLEY
Falls Church Times Staff

May 25, 2010

Monday evening the Falls Church City Council approved the budget for the FY 2011 Capital Improvements Plan and a related resolution covering the years FY 2012-15.  The CIP for the coming fiscal year will be funded primarily through federal and state grants and the local funding matches necessary to activate the grants.  The extended program, which is non-binding, would require debt financing to achieve its major objectives.

Although the measures passed unanimously, both clearly were constrained by the City’s financial situation.  Councilman Dave Snyder referred to the FY 2011 program as driven “by extreme necessity; we have no choice.”   Councilman Nader Baroukh concurred, stating that “the decision was made last year when we had the shortfall.”

Councilman Dan Maller, who chaired the meeting in the absence of Mayor Gardner and Vice Mayor Lippman, seemed initially reluctant to vote on the CIP, going so far as to ask City Attorney John Foster the consequences of deferring a vote on either measure.  Mr. Foster advised that under the City’s charter such plans must be approved within 28 days of the passage of the budget and that Monday therefore was the deadline for such action.  He further stated that if a vote were delayed, any program subsequently adopted would likely be void.

Prior to passage of the extended CIP the Council amended the resolution to include language stating that the plan would be subject to periodic review.

Before the vote Mr. Maller stated, “We’re all disappointed . . . I recognize the great fiscal uncertainties that are facing the City right now, and I hope that by establishing an ongoing process we can address the lack of  a true long range plan .  .  .  I was prepared to not vote in favor of this, but I think we’ve established a very large placeholder and on that basis and on the basis that we’re going to have a continuing process, I’m prepared to support it.”

Most of the FY 2011 funding is for storm water management improvements.  The extended plan calls for $30 million for school construction (FY 2014), $10 million for City Hall renovations (mostly in FY 2013), and $1.6 million for storm water improvements (spread over four years, the majority set for FY 2012-13).  Some observers have estimated that the school costs could be as high as $50 million.

The related documents on the FY 2011 plan and that for the following years are available as part of last night’s meeting agenda on the City’s website.

Finance Guru Discusses Concerns for Falls Church

May 2, 2010

The Falls Church Times recently posed questions to Richard Sommerfeld, chairman of Falls Church City’s Long-Range Financial Planning Working Group (LRFPWG), regarding his views on financial issues important to the City.   In the interview, Sommerfeld notes his concerns over the City’s financial situation and the action the City should take to address that situation.  Our conversation with him appears below.

FCT:  Why was the Working Group created, and what is its mandate?

Sommerfeld:  The Working Group was established by the City Council in October 2009 to work with the CFO in developing forecasts of long-range revenue and expenditure requirements, as well as analytical tools and reports.  We are there to analyze the potential ramifications of revenue and expenditure policies and budgets on the City’s financial condition.  Our analysis and recommendations within the context of capital spending options and whatever those implications may be. Read more

Council Passes Budget & Tax Rate Increase Unanimously

By GEORGE BROMLEY
Falls Church Times Staff

April 26, 2010

Tonight the Falls Church City Council unanimously approved the FY 2011 budget and a 17 cent increase in the property tax rate.  The vote marks the end of an long, arduous process that involved three public hearings, four town hall meetings, and 11 work sessions, plus numerous “Gang of 8″ meetings and discussions with City and School Board staff.

The $62.4 million dollar budget is $4.5 million dollars lower than that for FY 2010, a decrease of 6.8%.   City Manager Wyatt Shields had proposed a higher number in March, but the Council trimmed his request by $924,000 and cut 3 cents off the proposed tax rate.

The FY 2011 property tax rate will be $1.24 for every $100 of assessed value.  This rate, though higher than that in neighboring Arlington and Fairfax Counties, is somewhat lower than rates in other local jurisdictions.  However, as property values are higher in Falls Church, the typical tax bill is often higher as well.  Under the new budget, the average Falls Church home owner will face an increase of $798 or 12.3%.

Council members generally felt that the budget represented their best effort in what Mr. Shields described as “a very tough year financially.”  Councilman Dan Sze, who had earlier suggested a 10 cent tax increase, acknowledged that that was “not the sense of Council.”  Councilman Dave Snyder referred to the finished product as a “budget nobody loves”, but said he was optimistic about the future.  “If we pull together we’ll pass on to others the same quality of a city that we inherited.”

Vice Mayor Hal Lippman stated ”For the second year in a row the Council has delivered in every sense on what our citizens have hoped for and expected.  .  .  .  I can sleep well for the first time tonight.”

Councilman Nader Baroukh, who cast the only dissenting vote at first reading of the budget, felt that the process, though collegial, had not been ideal and that the Council should have devoted more attention to budget matters sooner, rather than focusing on issues such as the election date change.

Public comments prior to the vote, though few, were hardly sanguine.  Read more

Council Settles on 17-Cent Tax Hike, Raises Fund Balance

By GEORGE BROMLEY
Falls Church Times Staff

April 23, 2010

At literally the eleventh hour the Falls Church City Council last night concluded a marathon work session by tentatively agreeing to a 17-cent tax increase for FY 2011.  The Council also raised the City’s projected fund balance to $8.2 million, slightly above its target level.

The Council now appears likely to approve a tax rate of $1.24 after a final public hearing next Monday evening.  City manager Wyatt Shields’ proposed budget had called for an even higher rate of $1.27 for every $100 of assessed value, which would have been a 20-cent boost over FY 2010.    The 17-cent increase tentatively agreed to by the Council is likely the largest in Falls Church City’s history and one of the highest in the area.  On Tuesday, Fairfax’s Board of Supervisors raised the County’s tax rate five cents to $1.09 for FY 2011.  Arlington County has advertised a tax rate of 96.5 cents for CY 2010.

The Council also agreed to sell the Pendleton House, but not the adjacent lot.  The sale is projected to earn $600,000, but that estimate may be conservative as several area realtors have estimated the property would sell for considerably more.

The Council decided to retain the $426,000 “school adjustment” received from Richmond, allocating $326,000 to operations and the remainder to fund balance restoration.  Vice Mayor Hal Lippman did not concur with the decision.  The School Board had hoped to receive the entire allocation.

GEORGE bus service was funded only through September.  The fate of the service will be one of the first issues facing the Council when its new term begins on July 1.

Sensitive to public safety issues, the Council decided to retain the police positions of community resource officer, records clerk, and parking enforcement officer.

Library hours will not be reduced but periodicals and data base subscriptions will be cut back.  Special events such as the Easter Egg Hunt and the Halloween Carnival have been dropped.

The Council’s final deliberation and adoption of the FY 2011 budget begin at 7:30 pm, Monday, April 26 in the Council Chamber at City Hall.

City Council Hopes to Cut Proposed Tax Increase by 25%

By GEORGE BROMLEY
Falls Church Times Staff

April 20, 2010

With its deadline only one week away the Falls Church City Council last night continued its efforts to trim as much as five cents off the proposed tax increase for FY 2011.   City Manager Wyatt Shields’ proposed budget calls for an increase of 20 cents on each $100 of assessed value.  The current property tax rate is $1.07.

The Council’s work session produced no definite conclusions but a list of potential cuts gradually emerged.  After lengthy discussion, Mayor Robin Gardner reviewed the following list of items for consideration.

GEORGE Bus Service -  The buses would continue running after June 30, but service may be further curtailed.  The Council briefly discussed the question of “decommissioning” the buses by giving them to Arlington.

Pendleton House and Adjacent Lot -  Sale of one or both properties now appears more likely though some councilmen have been lukewarm at best.

Recycling or Solid Waste Carts -  Implementation of one or the other may be deferred, saving perhaps $30,000. Read more

VIDEO:
Businessman to City: Can’t Afford It? Do Without

April 16, 2000

Our second video clip of last Saturday’s Town Hall budget meeting features local businessman Steven Wertime, who told the gathering that he faced a double whammy: higher City taxes and lower business receipts.

Wertime said he learned from his parents after they lived through the Depression: “If you can’t afford it, do without.”

He asked City Manager Wyatt Shields, “At what point does a tax increase become onerous and unfair . . . Are we getting to the point where we’re no longer financially viable?”

Watch the 3-minute video below.

Read more

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