City Council to Consider Different Budget Options

Shown below is the agenda for the April 22 meeting of the Falls Church City Council, to occur at City Hall at 7:30pm.

AGENDA FOR THE REGULAR MEETING OF THE CITY COUNCIL OF THE CITY OF FALLS CHURCH, VIRGINIA
HELD IN COUNCIL CHAMBERS, 300 PARK AVENUE AT 7:30 P.M.,
MONDAY, APRIL 22, 2013

 

1.	CALL TO ORDER

2.	PLEDGE OF ALLEGIANCE

3.

ROLL CALL

4.	VALIDATION OF NOTICE OF SPECIAL MEETING

5.	ADOPTION OF MEETING AGENDA

6.	PROCLAMATIONS

(1)	Proclamation Declaring April 22, 2013 as Earth Day

Earth Day Proc.

 

(2)	Proclamation Declaring April 22-27, 2013 as Relay for Life Week

Relay For Life Proc.

 

(3)	Proclamation Declaring May 2013 as Building Safety Month and Green Home Awards (Doug Fraser, Building Official)

Building Safety Month Proc.

 

(4)	Proclamation Declaring May 5-11, 2013 as Public Service Recognition Week

Public Service Recognition Proc.

 

7.	OATH OF OFFICE TO NEW BOARD AND COMMISSION MEMBERS

8.

RECEIPT OF PUBLIC COMMENTS, REQUESTS, AND CONSENT ITEM COMMENTS. [The public may address Council for one 3-minute period.  The Mayor may shorten the time allowed each speaker, depending on the length of the agenda and number of speakers. A chair or representative of a board, commission, or committee may make a 5-minute oral summary of the written report.]

(a)	Summary of Written Comments.

 

(b)	Council Requests

 

9.	REPORT OF CITY MANAGER TO COUNCIL

10.	BUSINESS ON THE AGENDA

(a)	Second readings of ordinances and other items requiring public hearings

 

(1)

(A) (TO13-07, Option2) ORDINANCE FIXING AND DETERMINING THE BUDGET OF EXPENDITURES AND REVENUES, APPROPRIATING FUNDS FOR THE FISCAL YEAR 2014: GENERAL FUND; SCHOOL OPERATING FUND; SCHOOL COMMUNITY SERVICE FUND; AND SCHOOL FOOD SERVICE FUND; WATER FUND, SEWER FUND, AND ENTERPRISE FUND; AND AFFORDABLE HOUSING FUND (Wyatt Shields, City Manager)

(TO13-07) Budget Ord. Option 2

 

(B) (TO13-07, Option2b.) ORDINANCE FIXING AND DETERMINING THE BUDGET OF EXPENDITURES AND REVENUES, APPROPRIATING FUNDS FOR THE FISCAL YEAR 2014: GENERAL FUND; SCHOOL OPERATING FUND; SCHOOL COMMUNITY SERVICE FUND; AND SCHOOL FOOD SERVICE FUND; WATER FUND, SEWER FUND, AND ENTERPRISE FUND; AND AFFORDABLE HOUSING FUND (Wyatt Shields, City Manager)

(TO13-07) Budget Ord. Option 2b

 

(C) (TO13-07, Option 3) ORDINANCE FIXING AND DETERMINING THE BUDGET OF EXPENDITURES AND REVENUES, APPROPRIATING FUNDS FOR THE FISCAL YEAR 2014: GENERAL FUND; SCHOOL OPERATING FUND; SCHOOL COMMUNITY SERVICE FUND; AND SCHOOL FOOD SERVICE FUND; WATER FUND, SEWER FUND, AND ENTERPRISE FUND; AND AFFORDABLE HOUSING FUND (Wyatt Shields, City Manager)

(TO13-07) Budget Ord. Option 3

 

(D) (TO13-07, Option 4) ORDINANCE FIXING AND DETERMINING THE BUDGET OF EXPENDITURES AND REVENUES, APPROPRIATING FUNDS FOR THE FISCAL YEAR 2014: GENERAL FUND; SCHOOL OPERATING FUND; SCHOOL COMMUNITY SERVICE FUND; AND SCHOOL FOOD SERVICE FUND; WATER FUND, SEWER FUND, AND ENTERPRISE FUND; AND AFFORDABLE HOUSING FUND (Wyatt Shields, City Manager)

(TO13-07) Budget Ord. Option 4

 

(2)	(TO13-09) ORDINANCE TO CREATE ARTICLE VII, “STORMWATER,” UNDER CHAPTER 42, “UTILITIES,” OF THE FALLS CHURCH CITY CODE TO ESTABLISH A STORMWATER UTILITY (William Hicks, Public Works Director)

(TO13-09) Create Stormwater Utility

 

(3)	(TO13-08) ORDINANCE FIXING AND DETERMINING THE FY2014-FY2018 CAPITAL IMPROVEMENTS PROGRAM BUDGET AND APPROPRIATING EXPENDITURE AND REVENUE FUNDS FOR THE FISCAL YEAR 2014 (Cindy Mester, Assistant City Manager)

(TO13-08) CIP Budget Ordinance

 

(4)	(TO13-06) ORDINANCE SETTING THE RATE OF TAX LEVY ON REAL ESTATE, PERSONAL PROPERTY, MACHINERY AND TOOLS AND ALL OTHER PROPERTY SEGREGATED BY LAW FOR LOCAL TAXATION IN THE CITY OF FALLS CHURCH VIRGINIA FOR THE TAX YEAR 2013  (Wyatt Shields, City Manager)

(TO13-06) Ordinance Setting Tax Rate

 

(5)	(TO13-05) ORDINANCE TO AMEND CHAPTER 42, “UTILITIES,” TO REVISE SEWER RATES AND FEES AS OF JULY 1, 2013 (William Hicks, Public Works Director)

(TO13-05) Ord. Revising Sewer Rates

 

(6)	(TO13-10) ORDINANCE TO AMEND CHAPTER 28, “MISCELLANEOUS OFFENSES,” ARTICLE VII, “WEAPONS,” OF THE FALLS CHURCH CITY CODE BY THE ADDITION OF SECTION 28-202, DISCHARGE OF PNEUMATIC GUNS IN CERTAIN PLACES PROHIBITED; EXCEPTIONS (Mary Gavin, Police Chief)

(TO13-10) BB Gun Ord.

 

(b)	Resolutions and first readings of ordinances

 

(1)	(TR13-12) RESOLUTION TO APPROVE THE PLAN OF FINANCING AND THE ISSUANCE OF BONDS BY THE CITY OF FALLS CHURCH ECONOMIC DEVELOPMENT AUTHORITY FOR THE BENEFIT OF EASTER SEALS GREATER WASHINGTON-BALTIMORE, INC. (Richard LaCondré, CFO and Director of Finance)

(TR13-12) EDA Bonds for Easter Seals

 

(2)

(TR13-13) RESOLUTION TO (1) APPROVE A VOLUNTARY BOUNDARY    ADJUSTMENT AGREEMENT (“AGREEMENT”) AND MEMORANDUM OF UNDERSTANDING (“MOU”) BETWEEN THE CITY OF FALLS CHURCH, VIRGINIA AND FAIRFAX COUNTY; AND (2) REQUEST THAT THE COMMISSION ON LOCAL GOVERNMENT REVIEW AND PROVIDE A FAVORABLE RECOMMENDATION ON THE AGREEMENT AND NOTICE OF VOLUNTARY SETTLEMENT AGREEMENT. (John E. Foster, City Attorney)

(TR13-13) Res. Approving Boundary Adjustment et al.

 

(c)	Consent items

 

1)	Appointments

 

a)	New Candidate: Elizabeth Hanson – Retirement Board – 5/1/12 – 4/30/15 (Unexpired Term)

 

b)	Reappointment: Larry Little – Retirement Board – 5/1/13 – 4/30/16

 

c)	Reappointment: Dennis Szymanski – Tree Commission – 4/1/13 – 3/31/16

 

d)	Reappointment: Robert Donaldson – Tree Commission – 4/1/13 – 3/31/16

 

2)

The City Council is requested to make the recommendation that the City Attorney submit a Praecipe and Order to the Arlington County Circuit Court requesting the appointment of the following candidates to the City’s Board of Equalization: Mr. James Craig for the unexpired term of February 1, 2013 – January 31, 2016; Mr. Brian LeBlanc for the unexpired term of February 1, 2012 – January 31, 2015; Mr. John Nixon for the unexpired term of February 1, 2012 – January 31, 2015; and Mr. Paul Handly for the unexpired term of February 1, 2011 – January 31, 2014.

 

(d)	Items removed from consent

 

(e)	Other business

 

11.	BUSINESS NOT ON THE AGENDA

12.	COUNCIL MEMBER COMMENTS

13.	APPROVAL OF MINUTES OF PREVIOUS MEETINGS

14.	ADJOURNMENT

 

 

Council Endorses School Bus Camera Monitoring

By FALLS CHURCH TIMES STAFF

January 28, 2013

Editor’s Note: Actions taken by the Falls Church City Council are reported by the City Clerk in a “Legislative Update” typically published  within a few hours of adjournment of a City Council meeting.   Video and minutes (1 hour and 12 minutes) from this Council meeting are now available online.  Other materials including agendas, working materials, past minutes, and  the schedule of upcoming meetings are available from City website. (click Read More to access links).

The following legislation was considered and acted upon list evening by the City Council of the City of Falls Church.

(TO13-03)-Rev Ordinance providing video enforcement of law against passing stopped school buses with the addition of Section 26-20, “Use of Photo-Monitoring Systems to Enforce Law Against Passing Stopped School Buses, Penalty.”

PASSED on roll call vote, unanimously 6-0.  (Ord. 1887) (Mr. Snyder was absent.)

(TO13-02) Ordinance to amend the FY 2013 Budget of Expenditures and Revenues of the General Fund and the School Board operating budget by appropriating grant revenues, contingencies and School Board fund balance.

PASSED on roll call vote, unanimously 6-0. (Ord. 888) (Mr. Snyder was absent.)

Consent Calendar

Reappointments

Howard Stoodley – Board of Zoning Appeals – 01/01/13 – 12/31/16

Brent Krasner – Board of Zoning Appeals – 01/01/13 – 12/31/16

New Applicants

Dan Sze- Board of Zoning Appeals – (01/01/13) – 12/31/16

Barry Buschow – Economic Development Authority – (12/01/09) – 11/30/13 (unexpired term)

CONSENT ITEMS PASSED on roll call vote, unanimously 6-0.  (Mr. Snyder was absent.)

City Property Assessments up 2.9 Percent – Individual Assessments Coming Mid-February

By CITY OF FALLS CHURCH COMMUNICATIONS
Monday, January 28, 2013

The total taxable assessed value for all properties in the City as of Jan. 1, 2013, is $3,324,120,300 ($3.3 billion), a 2.9 percent increase from January 1, 2012. The City plans to mail assessments for 2013 in February, so property owners should receive the notices on or after Tuesday, Feb. 12. Updated assessment information will be posted on the City website Monday, Feb. 11. Individual assessment information will not be available until after the mailing.

Overall residential real estate values increased 3.1 percent over the last year. Single family home values increased by 3.5 percent, townhomes increased by 3.6 percent, and residential condominiums had varying changes.

Overall commercial property values increased 1.6 percent since January 2012. The real estate value of multi-family apartments increased 5 percent, large office buildings are up 0.2 percent and large retail properties are up 3.9 percent. The value of City hotels remained flat.

As set forth in the Virginia Constitution, real estate is assessed at 100 percent of fair market value. The City’s Office of Real Estate Assessment calculates property value annually using mass appraisal techniques that are standard in the real estate assessment industry.

Real Estate Taxes and Public Hearings

The notice of assessment is an appraisal of the fair market value of the property; it is not a tax bill. Property tax payments will be due in two installments on June 5 and Dec. 5; property owners will receive bills prior to these dates.

The real estate tax rate will be determined on April 22, 2013, when the Falls Church City Council adopts the Fiscal Year 2014 Operating Budget and Capital Improvements Program and sets the tax rate. Public hearings on the Fiscal Year 2014 Proposed Operating Budget will be held on March 25, April 8, and April 22 at 7:30 p.m. in Council Chambers (300 Park Ave.). To see the complete budget schedule, visit www.fallschurchva.gov/Budget.

Assessment Appeals

Individual assessments will be mailed in February. After evaluating the assessment, homeowners wondering if their assessment is correct should ask the question, “Would my home sell for the assessed value if I put it on the market?” If the answer is “yes,” the assessment is probably accurate. If the answer is “no,” contact the Office of Real Estate Assessment at 703-248-5022 (TTY 711).

Deadlines for assessment appeals are Friday, March 15, 2013, for an Office of Real Estate Assessment review and Friday, July 5, 2013 for a Board of Equalization review. More information about the assessment review process is available online at www.fallschurchva.gov/AssessmentProcess.

City Council Passes 3-Way Split of Surplus

By FALLS CHURCH TIMES STAFF
September 10, 2012

The Falls Church City Council approved by a 4-3 vote tonight a motion to split the City’s $2.8 million budget surplus three ways, providing money for the schools to buy new computers, giving real estate taxpayers a rebate, and using the balance to increase the City’s “fund balance.”

The motion was a victory for Council Member David Tarter, who received support from Vice Mayor David Snyder and Council Members Ron Peppe and Phil Duncan. Voting against Tarter’s proposal were Mayor Nader Baroukh and Council Members Ira Kaylin and Johannah Barry.

Tarter’s motion had failed weeks earlier on a 3-3 vote when Vice Mayor Snyder was absent. Snyder announced on his return that he would support Tarter’s proposal, providing the impetus for Tarter to raise it again at tonight’s Council session.

Q&A: FCCPS Superintendent Jones on New Computer Technology

By FALLS CHURCH TIMES STAFF
September 10, 2012

The Falls Church City Public Schools’ purchase of new computers has been the subject of much debate recently.  We asked Superintendent Toni Jones for details.

FCT:  FCCPS is purchasing new computer technology for students. Can you tell us exactly what will be purchased? Laptops? iPads? How many?

Jones:  700 laptops (Macbook Air) , 500 iPads

FCT:  What will they cost?

Jones:  Right now, until the equipment arrives we have not experienced any cost. However, we are working with an equipment total value of $700,000 – either paid in full this year if the city surplus comes through- or $200,000 from our current technology budget with the balance being paid through lease.

FCT:  Will they be used equally across grades?

Jones:  Yes.  Every school building will benefit from this new equipment.

FCT:  Why do our students need this new technology?

Jones:  There are countless reasons why technology is a critical investment for our children and schools. But most importantly, it’s the world that our children live in right now. The highest volume of apps available at the Apple Store are actually books. Children love books that can talk to them and help them read a word when they get stuck. Children can read a fictional story about a dinosaur, and then out of sheer curiosity, click on the link to read factual information about a T-Rex or a Stegosaurus. Information is at their fingertips. In the upper grades, technology greatly enhances their research capabilities. It doesn’t mean they need to be on the computer all the time. It does mean that when they are engaged in an activity that can be enhanced by technology we shouldn’t be afraid to embrace it. Student engagement, without question, has been proven to be heightened when technology is infused at school. We want children to learn, and we want them to love school.

This is a sample clip from a large school district who started with machines, and then after 3 years moved to “bring your own device.” It has some good informational points and they have documented how student engagement has increased at all levels. This is just an example.

This is a clip that is primarily focused on how technology can enhance instruction for special education.

This is a clip about the iPad and textbooks.

This is a clip from a few of our teachers who were working with our summer school this year.

FCT:  What’s the useful life of this technology before it needs to be upgraded to a newer version?

Jones:  That’s a challenging question, in that the life of a machine is actually quite long. The point at which a school- or individual- upgrades their machine depends on what they want to do with the machine. The average lifespan to upgrade is 3-5 years for laptops, but that is not the lifespan of the machine. We have some laptops that are 8-10 years old right now. While they can’t be used to create video and run other instructional programs, we have kept them for web only SOL Virginia mandated testing. In fact, they have been a lifesaver in terms of getting us through testing. For that purpose, they are excellent. Our goal is to reinstate a strong replacement cycle which was reduced during the last three budget cycles. This will make purchasing more manageable during the annual budget.

On another note, the laptops that we are purchasing are new on the market and were just released with the newest version about 6 weeks ago.

FCT:  Does the purchase price include service and maintenance?

Jones:  Yes, It’s a typical warranty like we purchase with every machine in the division, and have done so for many years.

FCT:  What’s your view of how student IT needs will evolve over the next few years. For example, in five years do you think our students will still be using basically the same kind of laptops and tablet computers they use now, or will they be operating off a cloud infrastructure, or what?

Jones:  We are already operating within the cloud. Our learning management system, Google apps, and other teaching and learning tools are cloud based. In fact, almost everything for education is moving in that direction. We have also utilized Virtual technology to repurpose older desktop machines. Utilizing Virtual technology can take an old machine and make it run like a brand new one. We began that process last year so that we could extend the life of our machines for those web based only programs.

There are some great clips from Intel Corporation and other companies that demonstrate the “future” of education. Below are two links that you may find interesting.

A clip from Intel showing technology in the future (in general…not specific to schools).

Another clip from Intel showing a project from start to finish utilizing a future focused vision of what we can do.

FCT:  Where will the new computers be located? Will they remain at school or come home with students?

Jones:  The computers are housed at each individual school site. For the most part, the computers will stay at school because we are not purchasing enough computers to have one for every child.

FCT:  Can you talk to us about how FCCPS makes technology decisions? Is there a staff technology person who designs our approach? Or a group? Do we pay an outside consultant? Are any parents involved in the process?

Jones:  We have a large Technology Innovation Team who are highly proficient in technology, understand the educational needs, and are familiar with our system. We have 3 very highly skilled technicians- a Director, and 2 systems engineers. We have a communications specialist who helps us with aspects such as Google Apps and the web. We also have technology assistants at every building, as well as an instructional technology team which is lead by our Curriculum Instructional Resource Teacher who is based at GM. We come together as one large group so that instructional and infrastructure needs are considered in tandem. Our instructional leader is also one of our parents in the division. In addition, if needed we contract with a few companies who deal almost solely with schools and are highly skilled with complex networking issues. One of the great aspects of working with Apple is they provide free professional development, and with our purchase they provide an implementation specialist who will be onsite with us (here at FCCPS) as we image our new machines and launch out the products for our schools. We have an outstanding team of individuals who work to stay on the cutting edge and watch what is taking place around the country, and around the world.

FCT:  We understand that FCCPS and Falls Church City government do not use a common IT approach or platform. Do you expect more commonality over time, or are the functions of the two organizations just too different to gain efficiencies of scale?

Jones:  We actually work very well together, but our clients, services, and needs are vastly different. Our Director of Technology works with the Falls Church City Director of Technology to see how we can coordinate and share ideas and services. For instance, our phone systems are tightly coordinated. We also work on infrastructure pieces together and when we can coordinate we do. We also share software when we can, such as our financial system. Our IT departments have a great working relationship. However, what we need for a 10 year old and what they need for a court system are not the same. Our infrastructure is designed for a school, and that’s very different than a business or government agency. We have been able to hire and retain technology specialists’ who are accustomed to the needs of schools. Our technology use is not just staff, but every person who is our client (our students) must access technology on a daily basis. We have approximately 2,600 daily users who need to access our system with staff and students from within our organization. Each group of people also need varying degrees of filtering and access rights. Our children have a filtering system that must be incredibly tight.

FCT:  What level of bandwidth is available within FCCPS?

Jones:  We have 30 megabits per second going out, and 50 megabits per second coming in. Right now, it is the maximum that Verizon can provide. They are at their maximum. We are actually requesting that they upgrade so that we can increase.

FCT:  As you know, funding for the new computers has been controversial. The School Board requested $500,000 from the City’s current budget surplus for the purchase of the technology, and there has been a lengthy debate about that within the City Council. However, you were able to proceed with the purchase before the City Council approved the request. How were you able to do that?

Jones:  It’s important to note up front that the school has $200,000 in our current budget for technology, and that is what we are actually spending. That’s why we don’t need City Council to approve the purchase. What is different about this option, is that we are leasing. Our leadership team began discussing this approach early last year when we knew it was another tight budget season, and technology was on our unfunded needs list presented in the budget. The lease concept has been around for years, and it has helped schools all across America stay current and progressive with technology. While it’s not our first choice, it is a great option.

FCT:  There is a school of thought that says young people are becoming too dependent upon computers and smart phones, and would be better served spending more time with books – the paper kind. What do you say to those who make this argument?

Jones:  Personally, I am not sure that it matters if a child reads on a Kindle, an iPad, or reads a paper book. I believe the goal is to get a child to love reading. Children are motivated by technology, and if an iPad visual can help a child find a love for reading, then I hope that we will continue to embrace it. The world is changing, and while we need to be wise about how we use technology with children, we can’t deny that it’s here. Smart phones are no longer just phones. Just eight years ago a child had a calculator, an iPod, a computer, a book, and a phone. These were five separate items that were found in their backpacks. Were they less dependent on the items because they were separate? From watching children in schools, I would say no. The child who loved reading snuck the book under his desk in the middle of Algebra class. The child who loved music had an iPod hanging out of their pocket every minute it was allowed. Now, it’s one device. The key is, what are they doing on that device. Perhaps, they are actually reading an article about the environment or searching for colleges they want to attend. It’s not the technology, it is what they do with the technology that counts.

FCT:  Thanks very much for taking time to provide this information and share your thoughts.

Council Keeps City Tax Rates Steady

By GEORGE BROMLEY
Falls Church Times Staff

April 23, 2012

The Falls Church City Council voted this evening to hold tax rates at their current levels.  The real estate tax will remain at $1.27, the personal property tax will stay at $4.84, each rate for every $100.00 of assessed value.

Prior to the vote Vice Mayor Dave Snyder introduced a motion to reduce the tax rate to $1.26, calling the higher rate a tax increase.   Snyder advocated reducing reserves and removing all proposed non public safety related positions from the budget, achieving a net estimated savings of $560,000.  ”I don’t believe in holding the tax rate today artificially high to make it easier for politicians in the future to pass on taxes,” he said.

Councilman Ira Kaylin, who had seconded the motion, then spoke in opposition.  ”The only thing I agree with is that the tax assessment increases are tax rate increases,” he said.  Earlier Kaylin warned that the City’s finances are still fragile and projected a $1.9 million budget shortfall next year, which could result in a tax rate of $1.33.

Mayor Nader Baroukh said that to get the rate down would impact critical initiatives such as storm water management and could have consequences on the City’s borrowing capacity.  “As much as I’d like to do a one time reduction in the tax rate I don’t think it would be prudent or in the long term interests of the City,” said Baroukh.

Snyder’s motion was voted down, 6-1.  The Council then approved the tax rates and the FY 2013 budget, with the vice mayor dissenting.  The Capital Improvements Program (CIP) for FY 2013-17 was approved, 7-0.

In a statement to the Times the mayor said that the budget and the CIP are the product of a great deal of discussion and work and meet the critical needs of the City in these
difficult financial times.  “This budget and CIP strikes a healthy balance between the City’s fund balance and the needs of City employees, schools, and services.  And it meets the Council’s policy objectives including strengthening economic development, providing greater resources for infrastructure improvements to address items such as school facilities and stormwater managemen,” the mayor said.

Earlier the Council voted unanimously to withdraw the controversial “Ped Plan”, deferring further action until at least June 25.  Many residents spoke against the plan, particularly its proposal to eliminate street parking on Hillwood Avenue, Lincoln Avenue, and West Street.

In his report to Council, City Manager Wyatt Shields advised that representatives of six prospective bidders for the City’s water system attended an informational meeting today that included a tour of the system.

COMMUNITY COMMENT: Why We Should Sell the Water System

By IRA KAYLIN
February 20, 2012

This week the City of Falls Church announced that Requests for Expression of Interest for possible purchase of the Falls Church Water System had been broadly circulated to potential buyers.  I believe this is a great opportunity to convert a problem into a benefit.

At the same time it was mentioned that the process of a possible sale would be deliberative with all options being considered and citizen input sought.  Clearly, any process that involves the possible sale of the City’s largest single asset should be a careful, thoughtful process. There can be no argument with such an approach.

However, there are really only two available options: sell the system or don’t sell the system. There is no range of options. It makes little sense to continue to operate a water system under the legal challenges that have been imposed upon us by the Judge Ney decision and, more recently, by the adoption of an ordinance by the Fairfax County Board of Supervisors that purports to establish an exclusive service area in Fairfax County for the Fairfax County Water Authority and to improperly and unfairly regulate the City’s water rates even though the City is in full compliance with Judge Ney’s rulings.

It is important to emphasize that we are in no way operating in a stress situation.  There will be no fire sale, subsidized sales, or giveaways to anyone.  The court’s decision is counter intuitive in the extreme as it states, in effect, that the owner of an asset is not entitled to a return on equity. Nevertheless, it is what it is.

The decision converted a water system that was generating over $2 million per year for the City’s General Fund into a system that generates zero income to the City. On top of that Fairfax County is attempting to add another blow in the form of the new ordinance, the result of which would be the City’s water system generating negative income from service in Fairfax County, a loss that would have to be funded by the citizens of Falls Church. At the same time, the City was and is providing clean and affordable water to over 100,000 County residents and businesses. Unfortunately, the water system has become an engine of litigation and associated costs.  Falls   Church citizens are being treated like a Pinata whose hidden treat just happens to be our water system.

I believe the best approach is the same as the one any business would employ. Sell the non performing asset and invest the proceeds of the sale into another asset—one which does make money on a periodic and long term basis.

Ultimately, there will be four issues involved in the sale of the system: 1) to whom might we sell it; 2) the terms and conditions of a possible sale including the determination of best price, 3) impact on water rates and, 4) possible uses of future proceeds.  While it is premature to discuss the first two issues, it is appropriate to discuss the latter two.  First,  will water rates increase?  And second, what is the best use of the water sale proceeds?

Rate Impact

The rate impact of the sale of the water supply system is not possible to predict.  It could go up or it could decrease depending on a wide variety of variables including the long term business strategy of the purchasing firm or authority.

It is useful to note that water rates, subject to Council approval, are already scheduled to increase by 8% for the years 2012 and 2013, 3% for 2014 and 2015.  These increases are based on an outside consultant analysis of the financial status of the system which requires significant infrastructure maintenance and upgrades if reliable and safe water is to be provided to all customers.  No matter what path we pursue, we can expect continued  interference from Fairfax County making it increasingly difficult for Falls Church to be able to continue to provide water service to its valued customers in Fairfax County.  Fairfax County officials may believe it is their destiny to wrest the water system from Falls Church for free, and to monopolize water service in Fairfax County through its own water authority. That is why it is prudent now for Falls Church to explore its options in the open marketplace, free from duress, for the sale of its water system, so that it can obtain the best price for the water system. Fairfax County and its water authority have been invited to participate in that fair and open process.

Use of Proceeds

The question is, how can the citizens be assured that the funds will not be poorly spent? I believe that is a totally justified concern.  Even though I am an elected official, it is recognized that, over time, there is the magnetic attraction of elected officials to spend money until it is no longer available.

A basic consideration when selling an equity asset is retention of the long term income generating capacity of the new equity asset.  Use of the proceeds of an equity sale for capital and/or operating cost coverage is a reduction in the value of an equity asset. Such transformation is frequently by used firms that are on the brink of failure.

Virginia statutes prohibit Cities from investing General Fund resources in long term assets.  Rightly so. Some long term assets are not easily converted to cash without paying a penalty. Also, well-intentioned, but not well-informed officials may be tempted to engage in market speculation with taxpayer money.  Only the largest cities would have “in house” capability to understand and monitor large scale, long term asset management.

Because of the above constraints, under current market conditions cities receive virtually no return on assets sitting in bank accounts eligible for General Fund uses.

One Approach to be Considered

I believe we should consider investing the proceeds in a yet-to-be-created Falls Church City Teacher Pension Plan whose returns would be used to help pay for the City’s Virginia Retirement System obligations and add to the City’s existing pension plan.

Pension plans are expected to invest primarily in long term assets that earn much higher return than short term assets. These funds are never mixed together with General Fund resources.  Pension plan returns fluctuate with market movements but can be expected, over the long term, to generate annual returns of 6% to 8%. To put it in another way, for every $10 million of sale proceeds we can be expected to earn $600 to $800 thousand per year.

The business climate is unusually good for a utility sale.  Cash rich companies can not place these funds in easily accessible, low risk securities that generate a decent rate of return.  If funds are to be borrowed, long term bond rates are now at historic lows.  In the current market environment, Falls Church becomes even more interesting as an investment opportunity.

Importantly resources used to fund pensions can not be directly accessed by a City Government for current expenses.  They are effectively “lock boxed”.

Impact on Tax Rate

The pension-generated income would lessen transfers from the City’s General Fund to cover pension expenses by an equivalent amount.  These returns could amount to two to three cents on the tax rate for every $10 million in proceeds.

It is possible that the City’s employment attractiveness would be enhanced since our pension plans would be well funded and more robust than other municipalities.

We should recognize the caveat, however, that returns generated by the pension plans would effectively represent a new revenue stream that will greatly help in the short and medium term, but is in no manner sufficient to cover Falls Church’s long term needs.  Economic development must proceed at the fastest prudent way possible.

A Start to the Discussion

There may be other viable approaches which could be presented during the deliberative process. The information and opinion presented above is provided to help start the community discussion.

Ira Kaylin is a member of the Falls Church City Council.

City Council Increases Financial Buffers

By CITY OFFICE OF COMMUNICATIONS
December 13, 2011

The Falls Church City Council adopted a resolution last night to increase the City’s fund balance from 12 to 17 percent and to establish a Capital Reserve Fund for the General Fund and the Utility Funds to provide for continued investment in capital infrastructure. 

“These actions are part of the City’s efforts to develop more robust long range financial planning capability,” said Finance Director Richard LaCondrè.   “These fiscal policies are developed to guide both short-term and long-term fiscal strategies.” 

The City Council last adopted fiscal policies in January 2009.  Until FY2008 the City maintained an undesignated fund balance well above the policy target which enabled the City to use that excess funding to support the Capital Improvement Program.  Due to the recent economic downturn and revenue shortfalls, the fund balance was drawn down below policy levels and resulted in a significant curtailment of the Capital Improvement Program.    The new fund balance level of 17 percent represents approximately two months of expenditures. This action will mitigate the impact of revenue shortfalls and economic downturns affecting assessed real estate values and other local tax revenues.

Establishment of a Capital Reserve Fund for the General Fund and the Utility Funds will provide for continued investment in capital infrastructure. The current policy of using surplus fund balance to fund “pay as you go” capital projects makes those projects a lower priority than other items in the operating budget. This new policy establishes a minimum level of effort utilizing both current revenues as well as fund balance appropriations to address both “pay as you go” and debt service funding. This type of policy will also make absorption of new debt service for capital projects less difficult.

For more information, contact CFO Richard LaCondrè rlacondre@fallschurchva.gov or 703-248-5092.

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