As the benefits and liabilities of large-scale mixed use development projects have become major points of contention in the Falls Church City Council race this fall, top officials at City Hall remain adamant contending that there have been marked positive effects on the fiscal health of the City.
In an exclusive interview with the News-Press, City Manager Wyatt Shields and Economic Development office chief Rick Goff explained that even with updates to the City’s fiscal analysis of the seven major mixed-use projects built since 2002, the net effect has been millions to the good and, as a result, major savings on the individual real estate tax rate for homeowners.
In the current campaign, the five candidates vying for three seats on the Council have been sharply divergent on the issue. Incumbent Councilman Phil Duncan and first-time candidate Letty Hardi have stood staunchly in favor of continued, well-vetted mixed-use developments, while challengers Sam Mabry and Johannah Barry, both of whom have previously served on the Council, have called for a moratorium on such developments, claiming they are costing taxpayers money.
The arguments of Mabry and Barry are that the projects are introducing more new children to the school system and the cost of educating them is a net burden on taxpayers.
But according to City Hall, the majority of new students in the school system come from single family homes, and not from the new mixed-use projects. Comparing the tax yields from single family homes to those from mixed use projects, according to the latest updated fact sheet from the Office of Economic Development, the average annual cost of a pupil in the school system is $15,703.
This includes measuring the marginal impact costs of proposed new development on the City’s general operating budget.
Directly comparing single family homes with mixed use developments, the single family home contributes 0.63 pupils each, and the City’s first six mixed use projects add 0.25 pupils per unit.
The mixed-use projects yield about $7.1 million annually in gross, direct tax revenue to the City from real estate and personal property taxes, as well as taxes generated by business tenants in those buildings. On a per-pupil basis, then, these projects contribute about $38,688 per year, or well above twice the amount of the $15,703 it costs to educate each child.
On top of that, the mixed-use projects have contributed $3.4 million in cash for school capital needs as proffered conditions for receiving the approvals from City Hall to build. Also in addition, but not calculated in the model to date, are the collateral effects in terms of the amount of money the residents of these units in the mixed use projects spend in the City.
On the other hand, for single family homes, the contributors of 73 percent of all the new students to the school system since 2002, their contribution per pupil to the City’s tax base is calculated at $15,885 per year, barely a hundred dollars more than the cost of educating them and less than half, on a per pupil basis, of the revenue generated from mixed use projects.
This data has been updated as of this month and is posted on the City’s website by the Office of Economic Development.
A one-page summary sheet, backed by more extensive information also on the website, demonstrates two main points:
Mixed-use projects have far fewer students per dwelling unit than single family homes and have accounted for 27 percent of new students to the school system, compared to the 73 percent coming from single family homes, older apartments, townhouses and other existing housing.
Revenue generated by commercial activity and residential taxes in mixed use buildings contributed significantly to the City’s overall revenue yield.
“In aggregate,” according to the updated study’s summary, “mixed use development has proven itself a reliable generator of millions of dollars each year in new tax revenue and positive net fiscal impact to the City.”
Shields and Goff told the News-Press that the Tischler Bise firm the City has retained to develop and annually update its fiscal impact model is now being further tasked to add an evaluation of collateral capital projections into the model in time to be applied to decisions the City will be making about the 34-acre Upper West End property recently annexed into the City.
Tischler Bise has a superior national reputation, they said, and their analyses are heavily relied upon by jurisdictions across the country.
Some are arguing, they said, that mixed-use driven population growth is creating the need for new major capital improvements, and that these should be factored into the net cost of mixed use projects.
But Shields and Goff reiterated that most of the student growth is coming from non-mixed use housing, and the need for capital improvements, such as a new City Hall or library, are being driven not by population growth so much as the fact that the buildings are just too old and need to be replaced.
The “tipping points” for replacing old with new City and school buildings are due to a variety of reasons, Goff said, not just population growth.
Shields and Goff also commented on two related issues: why, with all the mixed-use projects that have gone in since 2002, have real estate taxes continued to rise and, factors in comparing Falls Church taxes with neighboring jurisdictions.
“Our taxes rose in the last decade because of the effects of the Great Recession and the loss of the City’s ability to take a return on investment from its water system.” Shields explained. “Our taxes would be much higher but for the mitigating impact of the mixed use projects.”
He also noted that the Fairfax real estate tax rate of $1.09 masks a number of added costs for leaf and garbage collection, Community Center costs and some Metro and transportation tax overlays that Falls Church does not have.
The fiscal model used by City Hall to evaluate the merits of new projects was devised in 2003 by the City’s Economic Development Authority.
Goff noted that the Economic Development Authority will host a public presentation on the fiscal model by consultants from Tischler Bise on Monday, Nov. 2, at 7 p.m. in the Dogwood Room at City Hall.
Ironically or not, that is the night before the Nov. 3 election.