March 24, 2011
At this past weekend’s town hall meeting, a number of residents asked about the FY2012 schools budget. Recognizing Falls Church City Public Schools represent approximately 45 percent of the City’s budget, they rightly wanted to see the level of detail on the schools budget presented at these community sessions as they were hearing on the City budget.
As most know, the Falls Church City School Board passed its FY2012 budget on February 15, the earliest the School Board has approved its budget in history. We accelerated our process at the request of City Council, which wanted additional time to review the schools budget as part of the larger discussion.
To meet this goal, the School Board began its budget process in November. We conducted town hall meetings and public hearings on the budget. We met with school staff in all of our buildings, including central office. We set up a website to collect public feedback. We spoke with neighboring jurisdictions to understand what would happen in other localities. And we regularly updated Council (both publicly and privately) on both our progress and our intentions.
Ultimately, we passed a smart and responsible budget. Early in the process, City Council asked us to provide a “zero growth” budget, meaning we would ask for the same amount for the schools as we did in FY2011. This was not an easy task, but it was the responsible thing to do.
But we had to craft that “zero growth” budget under very difficult conditions. Why? The first answer is student growth. For the current school year, student population growth is 150 percent higher than was projected during last year’s budget cycle. And we are looking at additional increases for FY2012. Each of those students brings costs, and those costs have to be managed in a “zero growth” environment.
In recent years, we have seen our student population grow more than 10 percent. Since FY2009, we have added nearly 200 students to class rolls. At the same time, the City Transfer to the schools has decreased by nearly $2 million. We are asking our educators to do more and more with less and less.
Like the City, we are also experiencing significant increases in our fixed obligations. For next year, our state retirement costs, mandated under the Virginia Retirement System and of which we have no control whatsoever, will increase 25 percent. Healthcare costs for the majority of our employees are up 27 percent. And we have new federal and state mandates we are required by law to meet, all in that “zero growth” budget.
The budget approved by the School Board navigates these unavoidable cost increases, and does so without cutting into the classroom or affecting the students. We have made smart choices to meet our obligations.
One of the most significant decisions the School Board made was to improve compensation for our educators. Last year, we, in effect, cut teacher salaries. Frozen pay, coupled with increased benefit costs and the elimination of professional days, translates into real pay cuts. After such cuts, and as we watch our neighboring jurisdictions increase pay for their teachers, we had to act. For us to deliver the excellent schools City residents expect, we need to support our educators.
Working closely with school employees and their representatives, we were able to act in a smart and responsible way. To retain and reward our excellent schools staff, our budget funds a mid-year, full step increase for all educators. And we did it through no staff furloughs.
Yes, we delivered a zero growth budget that requests not a penny more from City taxpayers at a time when our student enrollment has already increased more than 5 percent. And yes, we did so while also honoring our promise to our world-class educators to fairly compensate them. But our budget accomplished far, far more than that.
In the area of school facilities, we are now ready to move forward with our expansion of Thomas Jefferson Elementary, thanks in large part to our success in securing a QSCB bond from the Commonwealth. As we promised to Council in the fall, the Schools will cover the costs of these school construction bonds for the next three years. The QSCB not only saves the City $1.3 million in interest in the short term, but this specific construction project will actually save the City $20 million in previously planned long-term capital expenditures.
The budget allows us to build on our award-winning food services program by establishing a breakfast program for all of our schools. It places our marker down on e-learning, as we seek to establish Falls Church as a national leader for online instruction. And it makes revenue generation a priority for the schools, as we continue to look for additional public-private partnerships to help fund new initiatives.
We were asked to deliver a “zero growth” City transfer budget, and we did that. We were asked to provide a responsible budget, both for this year and future years, and we did that. We were asked to protect the quality and reputation of our schools, and we did that too.
The Falls Church City School Board approved a smart, responsible, and necessary FY2012 budget. This budget was carefully crafted to address all of our City’s needs, building on integrated economies of scale and focusing on return on investment. This budget request – in its totality – is essential to deliver the high-quality education expected of Falls Church.
(Pat Riccards is Vice Chair of the Falls Church City School Board.)
COMMUNITY COMMENTS are welcome on any subject relevant to the City of Falls Church. They may be submitted to email@example.com. Shorter submissions may be published as a Letter to the Editor.
February 5, 2011
As the Falls Church City School Board continues its work on the upcoming budget, there are many questions we must ask as part of our deliberations. Are we providing all of our students a world-class education? Are we meeting our City’s instructional needs, both today and tomorrow? And are we serving as responsible stewards of both the City’s resources and its residents’ trust?
The latter question is one that the School Board has worked to address through the development of its strategic plan and its annual work plans. It is one thing for us to say that our responsibilities are to: 1) set policy for the school division; 2) approve the annual budget; 3) develop a strategic plan; and 4) hire a superintendent. It is something completely different to see how those responsibilities translate into real actions that impact all residents in our City.
In August 2010, the School Board developed and approved an ambitious and comprehensive work plan to guide our work through the end of 2011. Our work was divided into seven areas – 1) superintendent search; 2) ensure high-quality school buildings capable of supporting educational goals and meeting a growing student population; 3) provide every student with a rigorous, world-class education; 4) develop a responsible budget to ensure the independence and ongoing excellence in our schools; 5) promote effective School Board governance; 6) improve Board communication with community; and 7) modernize human capital policies to link teacher and administrator evaluations to student performance. Across those seven areas, the School Board set nearly 40 specific goals to achieve by the end of this year.
Last week, we released the report card on our progress against those 40 goals. On behalf of the School Board, I am proud to report that we are ahead of schedule on the work plan and well positioned to deliver on all the promises we have made to the community. The full report card can be found on the home page of the School Board’s web site at: http://www.fccps.org/board/.
Some of the highlights worth noting:
· Developed, in partnership with City Council and the Planning Commission, a common-sense plan for meeting our growing facilities needs, particularly at Thomas Jefferson Elementary School. We now await word from the Commonwealth of Virginia as to whether our QSCB application has been approved, allowing the City to save nearly $2.5 million on the needed expansion at TJ.
· Set clear expectations for student growth in all of our schools, holding the school division accountable for results.
· Finalized a data system that can track an individual student’s academic progress while ensuring transparency and access of information for parents. FCCPS is now in the process of putting this system into place.
· Began efforts, in collaboration with our teachers and administrators, to develop new e-learning and dual enrollment opportunities for high school students, increasing both the relevance and access to such offerings for all our high school students.
· Share developments and news from our schools through our new website (www.fccps.org) and through the popular Morning Announcements emails. All City residents are encouraged to sign up for the daily email.
Additionally, after surveying a wide range of parents, teachers, school staff, and community members, the School Board launched a nationwide search for applicants for the superintendent position. After receiving an impressive pool of interested candidates, the School Board is now conducting first-round interviews of the strongest candidates. The process will move to the next phase later this month.
We do all of this as we continue to grapple with the budget realities that our schools and our City are facing. As responsible stewards of the City’s schools and of the public trust, the School Board is committed to transparency, quality, and proven success. Our 18-Month Work Plan provided the road map for our intended destination by the end of 2011. Our Progress Report demonstrates that we are on schedule to deliver on all of the priorities articulated by our staff, parents, and citizens.
(Pat Riccards is vice chairman of the Falls Church City School Board.)
COMMUNITY COMMENTS are welcome on any subject relevant to the City of Falls Church. They may be submitted to firstname.lastname@example.org. Shorter submissions may be published as a Letter to the Editor.
By DEBRA L. GEE
February 4, 2011
With acknowledgment to Robert Fulghum, all I really need to know about how to live and what to do and how to be, I learned at home, in my house of worship, and in kindergarten. Whoops! Falls Church City Schools didn’t have kindergarten when I first started through the school system, but I’m sure that Mrs. Yeager at Thomas Jefferson Elementary School taught my first grade class at least some of the following:
• Share everything.
• Play fair.
• Don’t hit people.
• Put things back where you found them.
• Clean up your own mess.
• Don’t take things that aren’t yours.
• Say you’re sorry when you hurt somebody.
• Live a balanced life – learn some and think some and draw and paint and sing and dance and play and
work every day some.
• When you go out in the world, watch out for traffic, hold hands, and stick together.
• Be aware of wonder. Remember the little seed in the Styrofoam cup: the roots go down and the plant
goes up and nobody really knows how or why, but we are all like that.
Everything you need to know is in the list somewhere. Add The Golden Rule and love and ecology and politics and equality and sane living. Imagine what a better city we would have if we all had cookies and milk and then took time for a nap on a regular basis.
Today our City’s population is much more diverse than when my family moved here in 1962. That’s a wonderful thing! We have a wide range of cultures, ages, abilities, talents, and needs within The Little City. Good things that have not changed include getting to know your neighbors, participating in community events, and volunteering.
At the Town Hall meeting on Saturday, January 29, one long time resident suggested starting a Volunteer Corps to help provide front line services at City Hall. The suggestion was made because with continuing deficits and budget reductions, persons (staff) and programs must be cut year after year. This means that telephones might go unanswered, services might take longer to deliver or be eliminated altogether, and lines of citizens waiting to speak to staff might form in all City facilities – City Hall, Schools, the Library, and the Community Center.
I’m proud to serve my City and my fellow City employees both in the position for which I am paid and as Chair of the Employees Advisory Council (EAC). For the first time, members of the EAC met with members of the Schools Professional Employees Advisory Committee last fall to discuss a common message to send to our community. Unfortunately, the joint message upon which we agreed (we all need to work together for the City in which we serve, and a reduction of staff requires reduction in services) was forgotten as the School Board and teachers disagreed with the Superintendent’s proposed budget and began seeking additional compensation for School employees.
While the City Manager considers ways in which volunteers might assist in providing services, we already have a number of opportunities for volunteers. Contact the City Clerk, email@example.com or 703.248.5014, for information on the wide variety of boards and commissions that need more members. Combine your interests/passions/time on just about any topic from trees to history to development to streambank restoration to serving as an election official to, well you name it! You’ll not only provide valuable input to a board or commission, but you’ll also get to know the staff member who is equally enthusiastic about the same topic and the many duties, responsibilities, and tasks for which they are responsible. You might become an advocate for greater funding in that area!
Just so you know, I, too, have served as a volunteer on a City commission and as an election official. I also volunteer for community projects through my house of worship. (Note: Pastor Dave will call my name from the pulpit if I don’t mention Dulin United Methodist Church within this letter.)
I was encouraged to reach out to our community on behalf of City employees, but I also speak to you as a long term City resident. I accepted the challenge that one person can make a difference, but there is a risk. The last time I wrote a Guest Commentary as the EAC Chair, I received a number of calls at home from angry citizens who disagreed with my comments. I hope that after reading this Commentary, you will not become angry, but instead consider how you might serve our community to create the change that you desire.
Thank you for your consideration and, please, attend future Budget Town Hall meetings at 10 a.m. on March 19 and April 16. Both events will be held at the Community Center. We want and need your ideas and input on the services that you receive. Finally, let’s all strive for a good mark for “plays well with others.”
COMMUNITY COMMENTS are welcome on any subject relevant to the City of Falls Church. They may be submitted to firstname.lastname@example.org. Shorter submissions may be published as a Letter to the Editor.
BY GAIL LANG
January 26, 2011
The School Board held its first public hearing on the budget proposed by school superintendent Dr. Berlin last night. While I understand everyone is busy and attending meetings can be time-consuming, your participation and involvement in this year’s school budget process is critical for a number of reasons.
Dr. Berlin has proposed a budget at $37.7 million, which is 0.8 percent over last year’s budget. While the budget does not cut any positions, it also does not include even a minimal cost of living allowance (COLA) adjustment for teachers for the second year in a row. Read more
November 21, 2010
Return on investment, or ROI, is a term I find myself using a lot with regard to education and school improvement. Here in Falls Church, we regularly ask our schools and teachers to do more with less. In recent years, our student population has increased while our annual budget has decreased. But our expectations of the schools remain as high as ever.
With each dollar we spend, it is important to ask what the ROI is. Every taxpayer dollar we have is significant, and we must ensure we spend it wisely. So when an opportunity comes up where we can earn income for our schools while improving our instructional offerings, it is one we simply cannot afford to let slip away.
Last week, the Falls Church City School Board submitted its application for a Qualified School Construction Bond (QSCB) to the Commonwealth of Virginia. Falls Church is one of many school divisions across the state now competing for $229 million in zero percent interest school construction dollars. With the unanimous support of the City Council, the Planning Commission, and the Long Range Financial Planning Work Group, we are seeking $5.95 million to rightsize and expand our facilities at Thomas Jefferson Elementary School.
By now, we’ve all heard that TJ will reach capacity by the 2012-2013 school year. The School Board’s efforts will alleviate that very real concern, expanding the school’s cafeteria while adding 12 new classrooms. Should we win a QSCB (decisions will be made by the end of the year), we will save City residents nearly $2.5 million in interest costs for the project.
In putting together the strongest application possible, the School Board paid close attention to the scoring criteria put forward by the Commonwealth. We are expanding, and not just rehabbing. We are eliminating trailers. And we are increasing the Internet connectivity on the site.
The issue of Internet connectivity for students in the City has gained great interest here on the pages of the Falls Church Times. So let me give you a little glimpse into what the School Board has been working on for months now, how it fits into our QSCB application, and how it provides real ROI for both our schools and our city.
Following discussions with the Virginia School Boards Association and neighboring school divisions, we have been in discussions since the summer with Milestone Communications to establish a public/private partnership. The plan is simple. Milestone can replace a light pole currently on our school property with a new pole that allow for cellular service. Telecomm companies would then pay an annual fee to host an antenna on our light pole. Each year, our school division could collect approximately $30,000 per pole for such use.
Through this partnership, we will be able to improve Internet access at TJ, a step that wins us points on our QSCB application. As an added benefit, the Falls Church City Public Schools is able to use this partnership to provide an Internet connection to students throughout the City.
Imagine that. At no cost to the City, we can get a new light pole, five figures of annual revenue for that pole that can be reinvested in our schools, and the opportunity to provide Internet access to all students in Falls Church. And it won’t cost City residents a dime come tax or budget time.
That is true return on investment. It is a significant step for our School Board to explore public/private partnerships and identify new ways to bring additional revenue into our schools. And it is equally significant that we find cost-effective (and it doesn’t get more effective than free) ways to offer the 21st century educations that all of our students are promised.
Last year, Falls Church City Public Schools conducted a communications survey finding that a portion of our student body does not have access to the Internet at home. While we may not believe it, it is true. Today, the Internet is just as important to learning as a textbook. The budget realities in our City have forced us to cut back hours at the library (including eliminating Sunday hours) and to ask how to improve access at the schools for both students and staff. Knowing this, it would educational malpractice for us not to pursue a solution that provides new infrastructure (in light poles), free Internet access, and dependable monthly revenue for the schools.
Pursing a public/private partnership with Milestone is a win-win solution for all involved. It helps strengthen our QSCB application, hopefully giving us access to free school construction money and saving the City millions in the process. It improves Internet access at our schools, while providing the School Board the opportunity to provide connectivity for all students in our City. And it brings revenue into our schools, providing some needed resources to support student activities.
This is the very definition of return on investment. The City of Falls Church will reap huge return on this action, and we are investing zero dollars to get there. ROI such as this can be a model for the future.
Pat Riccards is Vice Chairman of the Falls Church City School Board.
October 28, 2010
While this Saturday’s gala (www.homestretchgala.org) may recognize me as one of Homestretch’s founders, the celebration should focus elsewhere. Homestretch was born of a caring community’s love for some of its most vulnerable members. A love put into action by many faith and civic organizations and professionals and politicians in local government. They met the immediate needs of adults who had lost jobs or health, but perhaps more importantly, the needs of the future represented by children who were often hungry, out of school and into troublesome habits.
Through the Falls Church Community Service Council (FCS) and similar organizations in other parts of Fairfax County, needy families for many years received food baskets, clothes and grants for utility payments. These organizations still do this today and they often succeed in restoring families to self-sufficiency. However, a severe recession of the late 1980s had overwhelmed their efforts. Since there were only a few family shelter units, scores of families took long stays at motel s at high local government expense.
Adequate assistance for these families would mean houses and apartments over many months and links to job training, health care, and many other services. Some organization would have to step up — be responsible for this housing and coordinate the community’s efforts.
I helped form a Homes Committee within FCS, and later extended the committee membership to SHARE (McLean) , CHO (Vienna) and ACCA (Annandale). We secured a county grant of $67,000 in July 1990, and by the end of August hired Nancy Taxson as the part-time administrator for our roughly $80,000 total effort that would aid a half dozen or so families in our first year.
These early efforts involved many volunteers, even children who would carry boxes on moving days and ride along to deliver leases and grant papers. By the way, “homestretch” was in part the obvious play about stretching ordinary rules to get homeless families into housing, but was also a quiet homage to my parents who were avid horse racing fans.
The Homes Committee morphed into the Homestretch Board, and after a few years, Homestretch, Inc., became an entirely separate entity from FCS. Nancy instantly embraced the task, and in just a few years extended her job to full time and began taking on part-time, and later full-time, social workers.
The addition of Ricky Weiss as a part-time grant-writer was a key to a rising flow of funds that fueled Homestretch’s growth.
County grants have continued and grown over the years, and grants from many others have followed, including CapitalOne, Dulin Methodist Church, Freddie Mac, federal and state housing agencies, Project Performance, and Excella Corporations, the City of Falls Church, and Bowman Construction, plus Fannie Mae through its annual Walk for the Homeless — and oh yes, a federal earmark or two.
Board members generally loved their work and tended to stay a long time. Many like Morgan Crafts, David Legge, Rip Sullivan, Susan Gates, Tim McGough, Roger Charin, Carmine Zarlenga, John Dapogny, Karin Arnette, and David Goldberg brought great management skill and fundraising expertise from their business, law and accounting firms. Others like Jane Dickerson, Ron Brousseau, and Phil Loar focused on building a strong community network and strategic planning. Like me, all board members have enjoyed great support from spouses and other close family.
Nancy’s importance can’t be overstated. She dived deeply into all facets of the organization – visiting families, squeezing the bureaucracy, schmoozing the politicos, running fundraising events, renting and buying properties, commanding staff, and cajoling the board.
Chris Fay, Brenda Wilks, and other staff have consolidated Homestretch’s success over the last few years and, as this event may attest, have taken the leap toward a new era of innovation and growth. It amazes me that Homestretch now budgets more than $2 million each year, has 20+ full-time staff, owns its headquarters building, owns or leases dozens of housing units, and most importantly, achieves outstanding success with more than 100 families each year.
What Nancy seemed to know instinctively, and the board applied with intellectual skill, is that certain incentives are the root of Homestretch’s success. The affluent have incentive to give if they see that the homeless can obtain jobs, educate their kids, and pay their bills and taxes. The homeless have an incentive to work hard, follow rules, and properly parent their kids, if they see that they can live in decent housing, sustain a productive lifestyle, and become self-sufficient.
Some have called it a “tough love.” I believe it’s the path to genuine rehabilitation and reflects the glory of God with us.
October 26, 2010
“The City of Falls Church Budget for Fiscal Year 2011 . . . puts the City back on a sound financial footing at a time of dramatically reduced revenues,” said the City Manager in his cover letter to the budget. Yet, exactly four months later (and three months into the current fiscal year) at the annual Council retreat, the City Manager’s financial overview shined the spotlight on a $1.4 million budget gap.
At the Council’s work session on October 18, the Acting Finance Director addressed the shortfall by saying that the City will have to raise real estate taxes in the second billing this year by 5 cents to close the gap.
If the Council approves a second tax hike this year, our previously approved 16 percent tax increase (then a record) would become a 19 percent adjusted tax increase. This will mean that the typical tax bill per household will be about $7,459. How did we get here so quickly when we were supposedly on “a sound financial footing?”
The Long-Range Financial Planning Working Group (LRFPWG) was asked to develop a multi-year budget forecasting model for the City in February, where none previously existed. When asked to comment on the various draft budgets, we developed budget scenarios that all forecast decreases in real estate tax receipts of between 4 percent and 6.5 percent for the current fiscal year and leveling off in FY2013 before beginning to increase again. We expected a 2.6 percent annual increase in expenses tied to the then rate of inflation.
On page 3 of the budget, the City Manager said, “With an increase in the real estate tax rate from $1.07 to $1.24, total operating revenues will decline by $2.7 million, or 4.06 percent.” Buried in the budget notes, however, on page 57 of the City Manager’s budget is an assumption that says, “for planning purposes, both revenues and expenditures are assumed to increase at 3 percent per year . . . .” The source of the revenue increase was not mentioned.
If one’s revenues are declining by 4 percent, how can one logically assume that revenues will increase by 3 percent for “planning purposes” other than if taxes are raised in the second billing?
At the Council work session on October 18, Council member Lawrence Webb candidly said, “We were doing a push off. We told the public that there would be an increase [in real estate taxes]. We didn’t want such a high increase in June, to give folks time to prepare for an additional increase.”
Does this mean that the previous Council knowingly passed an unbalanced budget contrary to the City’s charter? If the previous Council knew the City would have to increase taxes in the second billing, why did it not inform taxpayers of the amount of the increase at the time the budget was passed?
If we thought last year’s budget planning and negotiations were arduous, this year promises to be no cake walk for the Little City, whose own sustainability is more of a challenge than ever before. Some of the challenges confronting our politicians on both the City Council and the School Board include:
1. The City has been without a Finance Director for five crucial months, and his department was understaffed before the City Manager removed him. We are going through our annual audit without a Finance Director, and the audit should have been finished well before now. In fact, the recent quarterly financial report was a first for the City but lacking in comparative data to previous years and variance to budget.
Falls Church, with a $64 million budget, has never prepared monthly budgets or monthly financial reports to manage its finances. Had the City been analyzing its financial data or preparing graphs, it would have seen six leading indicators for the Great Recession so that it could make operating adjustments. There is no financial analyst on staff.
2. The FY2010 adjusted ending fund balance was probably closer to 2.3 percent if the June real estate tax receipts for FY2011 were stripped out of the fund balance for FY2010. Our June tax receipts are meant to begin funding the following fiscal year which starts on July 1. Nevertheless, the City reported an unadjusted 8.4 percent fund balance. Was the City also deferring expenses from FY2010 into FY2011 as well?
3. On October 18, the City Manager indicated that the fund balance was tracking to just 6.4 percent, which is about half of the 12 percent policy set by the Council to help manage City finances and preserve our AAA bond rating. The Council has five years from the time the fund balance falls below 8 percent to restore it to 12 percent. Two years is already gone and there is talk about returning to the bond market to fund various capital projects, including schools.
Just to achieve a 12 percent fund balance by FY2014, we will need to increase real estate taxes to $1.585, which is 28 percent more than they are today.
Because the City has a policy to cut expenses or raise revenues to restore the 8 percent minimum fund balance, the City Manager and the School Board are required to act now to restore the fund balance, not wait until January or February, when it’s too late.
4. Further reductions in the operating costs of the City and Schools are necessary. There needs to be a renewed focus on streamlining organizational structures and processes. Savings realized in one area could free up capital for other programs. Both entities can re-evaluate the demand for services, terminate underutilized programs, increase user fees, and undertake cost-benefit analysis for partnering and privatization of public-sector services.
Not all functions should be competitively contracted. For instance, it is more cost-efficient to buy a street sweeper than to contract the service to the private sector.
5. City policy has set a borrowing limit of 5 percent of the real estate value inside our 2.2 square miles. If the assessed value is $3 billion, then policy would permit the Little City to borrow $150 million, which is illogical for 4,600 households to service.
If the City went to the bond market to raise $70 million in general obligation bonds, aside from underwriting and placement fees, total annual debt service cost would be $6.5 million (principal and interest), or $1,421 for each of our 4,600 households. In terms of the tax rate, it would be the equivalent of 23 cents.
6. Falls Church has not yet begun to address the $15.2 million gap in our pension funding and what it will take to close it. It could add anywhere from 3.6 cents to 11 cents to the current real estate tax bill depending upon the amount of time we are given to fully fund our two pension funds.
To mitigate some of the funding increase, policymakers could allow existing employees’ defined benefits plan to be frozen and replaced with a defined contribution plan.
The City could eliminate opportunities for pension spiking, which is the practice of adding accrued sick, vacation, and other pay categories to an employee’s final year salary to determine pension payments.
The City could adopt the private sector’s market value approach rather than actuarial smoothing over 5 years.
Our pension fund liabilities are currently discounted at unrealistic rates of return, thereby leading to an understatement of liabilities and the subsequent overstating of pension funding ratios. We could pool or combine our pension plans with other jurisdictions to achieve economies of scale.
In terms of kitchen table economics, what does this mean for the 4,600 households in our Little City?
1. Unless the City Council and the School Board can collectively cut $1.4 million from the current FY2011 budget, households will be handed another 5 cent real estate tax increase, bringing the tax increase to $1.29, up 19 percent in one year—far more than any other jurisdiction.
Less than 15 percent of Falls Church households have incomes of $150,000 or more. It will hit fixed income residents, and the 60 City employees residing in the City. They comprise about 30 percent of the City’s workforce. Our residents are nowhere near as affluent as McLean’s.
2. Unlike households which save for a down payment on a new washer, car, or deck, the City has no plan to save for any down payments for infrastructure maintenance for schools, street paving, city buildings, or even public vehicles like public works trucks or fire engines. The City needs a capital items replacement fund.
3. Whereas many households have saving accounts they can tap for emergencies, our City has no stabilization (i.e., rainy day) fund, because the City spent $15 million of fund balances over three years.
In order to balance the budget, the City Manager has stripped the capital improvement plan (CIP) of almost any funding, thereby leaving citywide infrastructure needs largely unfunded. The cost of not maintaining our expensive and aging infrastructure now will cost us far more in subsequent years.
4. If the real estate tax rate rises to $1.585 by FY2014, there’s a distinct possibility that property values, a store of retirement wealth and collateral for home equity lines of credit for many in Falls Church, would flatten or even decline.
In 2004, real estate taxes were 50 percent of revenues, and if the trend continues, real estate taxes will account for 70 percent or more of City revenues. This will cause the City to rapidly increase taxes to fund its operating deficits, because it has been concentrating, not diversifying, its revenues. The tax spiral would continue, increasingly eroding household discretionary income.
5. At the current rate of growth, the average household will be paying $9,120 of real estate taxes by FY2013, or 28 percent more than today. The impact on each household will be about $1,771, thereby lowering annual discretionary income by about 18 percent to $7,918.
Bleak job prospects have caused our households to focus on reducing debt and scaling back consumption, a trend that has caused a drop in sales tax receipts.
Achieving long-term sustainability for Falls Church will require a painful paradigm shift, and the sooner government addresses our Little City’s structural challenges, the better off our residents will be. Adopting short-term expediency and pushing out decisions is not sustainable in the long-run and will deprive our residents of services they want and deserve.
We will have to reassess our economies of scale, from shared services to possible consolidation.
The Council must adopt a multi-year budget that accounts for funding of schools and providing for infrastructure and the operating budgets to sustain them. Multi-year budgets would force policymakers to assess revenue/expenditure stability or lack thereof over the long run, deterring one-off, unsustainable expenditure increases.
All stakeholders — the politicians on the City Council and the School Board, employees of the City and our schools, and taxpayers — will have to compromise.
With current debt levels and ongoing economic uncertainty, the political reality is that constantly raising taxes is generally imprudent and detrimental to a sustainable Falls Church.
Richard Sommerfeld is a Partner with Tatum LLC, a management consulting firm, where he works in the Private Equity Practice. He is also chairman of the Long-Range Financial Planning Working Group for the City of Falls Church.
By RICHARD SOMMERFELD
July 29, 2010
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 email@example.com.