Rousing F.C. Council Debate on How To Best Deploy Water Sale Proceeds

December 2, 2013 11:58 PM5 comments

At its work session tonight, the Falls Church City Council undertook a passionate, often noisy discussion on how to best deploy the some $14 million in net cash expected to come to the City as a result of the sale of its water system approved in a public referendum last month.

Despite the wishes of some on the Council, once it was realized that the funds will not come into the hands of the City until after the new Council (including three new members elected last month and excluding three members leaving at year’s end) is seated, a push to vote on locking in how to deploy the money next Monday was dropped.

Instead, Mayor Nader Baroukh, realizing the legal limits to such an approach, suggested the Council adopt a set of policy guidelines for the use of the money at its next meeting on Dec. 9. Those guidelines, he suggested, including 1. the preservation of the principal through use of some form of investment, 2. the achievement of an optimal rate of return on it, and 3. being mindful of the Council’s obligation to the public trust in its use of the funds.

The policy guidelines, which are expected to be voted on by the Council next Monday, were reflective of the concern of all on the Council and the City staff that the $14 million cash windfall not be used for on-going operational fund purposes, or returned to the taxpayers in the form of a tax refund.

It was suggested by City Manager Wyatt Shields that investing the money in the City’s pension fund or in an endowment trust would enable the City’s derive income from the principal that could range upwards to $1 million a year, mitigating against the impact of anticipated major capital improvement projects (like the construction of a new high school) on the residential real estate tax rate.

While it was noted that the return on such an investment would be higher if the money were placed into the City’s pension fund, that principal would no longer be accessible to the City for any other use, should any needs arise. An endowment would yield less annually (depending on interest rates), but would remain accessible.

It is expected that number of discussions and public meetings will be held early in the New Year to elicit preferences of the Falls Church public before amendments to the City budget are made incorporating the new Council’s judgment on how best to use the money.

  • David

    Whatever is decided, the money will be blown quickly and property taxes will continue to climb. Thank you, local government liberals!

  • Mike Smith

    Who really thinks we can earn $1 million on $14 million? That’s better than 7%. Maybe if it is put in the pension plan that can be done, otherwise we are in fantasy land.
    So instead, just reconcile yourselves to the money being squandered over the next few years.

  • FourQ

    You could give us our court-ordered refunds.

  • Ira Kaylin

    I was looking at the survey. The tax offset and placing the funds in the Pension Plan are the same. By placing funds in the Pension Plan the City can reduce its yearly transfer amount to the Pension Plan (Basic and Police) by almost $1 million which is the equivalent of a tax offset of about 3 cents every year in perpetuity. These numbers have been generated by the City’s Financial Advisor. Placing the sale proceeds in the Pension Plan has been reviewed by outside Legal Counsel and Pension Actuaries. The allocation of proceeds is legal and actuarially sound and produces the highest yearly return possible.

    The Pension Plan returns have achieved, on average, returns above 7%. Once the funds are in the Pension Plan it is illegal to remove them.

    The math works.

  • Schell

    Those of us who are retired are NOT getting increases in income that pace the increase in taxes – no raises, no promotions, no better jobs – we are no longer “promising.” Thus, the continual need for yet more money – new high school, new elementary school, new library, new city hall, etc. – now happily may be matched by some increased income for the City. While most of us recognize – embrace – our civic obligations – including especially the education of our young people (please don’t scream “Support our Schools” at us: we’ve been paying at a high rate for years, mostly for kids unrelated to us) – the turnip is squeezed just about dry. Unless there is a conscious policy decision that retired people should be forced out of the City, the newly available funds should be used to relieve the burden. If Ira’s suggestion of a three penny tax offset actually means reducing the rate by that amount, I’m all for it.

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