Editorial: Fund Balance In the Balance

March 26, 2014 7:32 PM2 comments

The squeeze is really on in this spring’s City of Falls Church annual operating budget deliberations, driven by robust increases in residential real estate values, record rates of enrollment growth in the city’s schools, and a new stormwater management fee that every property owner will have to pay for the first time this June.

The pressure on taxpayers has become so acute, one City Council member commented this Monday, that residents who could be counted on in the past to be staunch in their support of the schools are now complaining that the schools are asking for too much. This is despite the air-tight proposed school budget whose increases are being driven by explosive enrollment growth while more and more school needs are put onto a wish list, but kept out of their budget ask.

There’s nothing the schools can do about their enrollment growth rate, which is forecast to continue, nor should they. Nor should anyone else, either. Nothing is more indicative of a vibrant community than a high rate of school aged children, and the cost of educating them should be a joy and not a burden. This is the case even from a Scrooge-like point of view, because the popularity of the school system is the City’s biggest “value added” in terms of higher taxable real estate values and the desirability of right-sized tax revenue-generating businesses and developments here.

But there are a wealth of options for the City other than to simply plant the burden for paying for the school growth on taxpaying homeowners. The City Council is only just beginning to consider these, such as with the debate on the City’s fund balance this week. Though most kowtowed to the City staff thinking on the need to keep up to 25 percent of its revenues in the bank in case of emergencies, the issue continues to be debated, and will be until the budget is finally voted on April 21.

The fact is that lowering the City Manager’s recommendation for a fund balance at the level of 17 percent of annual operating budget expenditures to 12 percent would free up $4 million dollars.

At 17 percent, the City keeps $13.6 million sitting in the bank earning almost no interest. Lowering that to 12 percent, a mid-range between 17 percent at the top and eight percent at the bottom of the version of the Council approved policy on fund balance adopted in the mid-1990s, would free up $4 million for application to the general fund.

That is equal to about 13 cents on the real estate tax rate, and would knock down the residential real estate tax rate from the $1.35 level recommended in this budget to $1.22. To emphasize, that would be achieved without touching any program, just using taxpayer money that’s sitting in the bank.

Unlike an individual, the City can raise money in an emergency by using its powers to tax and borrow.

  • FallsChurchCitizen

    Popularity of the school system is tied to its smallness, not its quality. Yorktown is a great school, Langley is a great school — both probably send more of their kids to top colleges than we do. If Falls Church loses the “small” attribute, it loses its primary competitive advantage and draw. As more students come and the City builds 1,000 new apartments to bring in even more, the schools get less small. Period.

    And is the editor suggesting that the stormwater fee won’t come back next year? What happens when there’s no more emergency fund balance to use for these recurring expenses in 2016, 2017, 2018…and if there’s, you know, an actual emergency?

  • Mike Smith

    The proposal, as I see it, is to spend down our reserves and if anything goes wrong we can tax and borrow our way out of the problem. The lead time on raising taxes is many months (hardly a good plan for dealing with an emergency) and we would have to borrow from the same folks who recommend we keep a larger fund balance (thus jacking up the interest rate we pay.)

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