Editorial: Piercing the Golden Calf

April 30, 2014 6:25 PM2 comments

Huzzah, the Falls Church City Council has a budget for the next fiscal year and demonstrated a concerted effort not to burden taxpayers with any more than absolutely necessary to achieve it. Given that they were starting with City Manager Wyatt Shields’ recommendation last month for a four-cent real estate tax rate hike, they did a worthy job of scaling it back to no increase in the rate at all.

While the City Schools took a $215,000 hit to achieve this, more important for the future of the City and its sustainability over the long haul was the courageous will of the Council to violate what some, like Shields, insisted was a line they dare not cross.

That is, they pierced the inviolate golden calf of the so-called “unassigned fund balance,” even if ever so slightly, to save taxpayers some funds. So far, no one from Wall Street has sounded an alarm, no shudder on the global markets has been detected.

A four-vote majority on the Council tapped the existing $13.6 million fund balance (that is, taxpayer money that just sits in a virtually zero interest rate account for the proverbial “rainy day”) for a mere $215,000 to balance its budget. Not exactly a revolution, but virtually so to hear some people talk.

Councilman Nader Baroukh was probably right when he complained that this marked the first time ever that a Falls Church City Council “pro-actively” dipped into its fund balance for anything but an emergency. It’s true and it’s a good thing.

It was curious in this budget that no one on the Council or on the City staff undertook a survey, as they do to compare so many other things, what the unassigned fund balances are of comparable jurisdictions, such as the City of Fairfax in this case.

We will repeat, once again, that the first official policy on fund balance adopted by the City in the mid-1990s, and considered solid by New York bond rating agencies then, was anything above eight percent of annual expenses, or the equivalent of one month’s costs of running the government. Keeping that in an unassigned reserve for emergencies or other contingencies was considered perfectly acceptable.

Now, to again repeat, a fund balance of eight percent today would be $6.4 million, instead of $13.6 million (based on 17 percent of annual expenditures) that we now have. The difference is $7.2 million, and with a cent on the real estate tax rate equaling $354,000, taking that excess $7.2 million out of the budget would yield a reduction in the tax rate of about 21 cents.

Additionally, had the Council adopted Vice Mayor Snyder’s suggestion to use a sum from the sale of the City’s water system equivalent to the year’s debt service obligation of $5 million, another 15 cents would have been saved. Taken together, the moves could have lowered the current $1.305 tax rate to under a dollar..

  • FallsChurchCitizen

    And after doing all these wonderful things to reduce the FY15 tax rate to under a dollar, how high, praytell, would the rate skyrocket in 2016 and thereafter when those one-time items are no longer available to address still-rising expenses? Oh, and later on, what would be the additional detrimental effects on the tax rate of having to borrow even more money — at a higher interest rate — for the new high school? (And heaven forbid an actual emergency arise.)

    Our award-winning high school has a personal finance class. I would encourage the teachers to use the editor’s suggestion as a case study in awful financial management.

  • Commentariat

    To clarify, the schools didn’t take any “hit.” They got a 9-percent funding increase, fully six times the rate of inflation.

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