The City of Falls Church’s Chief Financial Officer Richard LaCondre defended his recommendation of a high fund balance in a lengthy appearance before the Falls Church City Council Monday night, urging the Council to adopt the 17 percent rate (17 percent of annual operational budget expenditure, or in the case of Falls Church with an $80 million budget, about $13.6 million of taxpayer dollars that are designated to sit in a bank account earning virtually no interest.)
The 17 percent rate is more than double the rate the City Council adopted in the mid-1990s as the low end of an acceptable range for fund balance (8 to 12 percent). In the last decade, the Council modified that policy to make the acceptable range 12 to 17 percent. But at eight percent today, the fund balance would be $6.4 million or $7.2 million less than LaCondre wants it to be now. That $7.2 million sitting in the bank if kept by taxpayers instead would amount to over 22 cents on the real estate tax rate. If put to that use, the real estate tax rate this year could be lowered from the present level of $1.305 per $100 of assessed valuation to $1.085, instead of being increased by four and a half cents to $1.35, as the City Manager is now recommending.
More than a “rainy day fund” as LaCondre defended his policy, he said in a jurisdiction the size of Falls Church the impact of a “catastrophic event” would be devastating without such a cushion in the bank. Coujncilman Phil Duncan sparred with LaCondre, trying, he said, to find a better term than “an unassigned fund balance” to describe why so much taxpayer money is allowed to sit and do nothing.
“What is all this money protecting us from?” Duncan asked. “That’s what my constituents are asking me.” LaCondre said 17 percent is considered industry “best practice” and is what Moody’s credit rating firm recommends.
“Is this a doomsday fund? How do we answer this?” Duncan continued.
“It’s for the event of an economic downturn,” LaCondre said. “So,” Duncan then said, “It’s more like a stabilization fund. It just sits around doing nothing waiting for doomsday. But I have people who are saying, “It’s raining on me now!”
LaCondre conceded it is for some “catastrophic event,” or “some event that you didn’t plan for.”
In that context, he said, “But individual taxpayer distress does not qualify.” He said he would prefer the City to keep 25 percent in reserve. “Falls Church is small and can be subject to a lot of volatility,” he said.
He noted the fund balance also impacts the ability of the City to borrow money, which according to some observers may be striking closer to the truth. It’s the bond issuers who want Falls Church to fleece its taxpayers for enough of a surplus to make them feel a little more confident that they’ll get their money, with interest, back on time.
So, the bottom line is that it is the New York banks and the bond market who are demanding this pound of flesh, subject to City Council approval, from Falls Church taxpayers, and for no small amount in a year when real estate assessments are up almost 9 percent and a new, still nebulous storm water fee will appear on everyone’s tax bill, as well.