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Budget Taking Shape

Excerpt from Justin's April Newsletter

It has been a little over a month since the City Manager presented his proposed FY 2015 Operating Budget and his proposed FY 2015 - FY 2024 Capital Improvement Program.

The Council has engaged in a series of work sessions and public hearings as the community made their views known on a variety of aspects of the proposed budget.

As I discussed last month, while the real estate market shows modest growth, our consumption-based taxes are creating very anemic revenue growth overall. To produce an operating budget in line with the Council's guidance requiring no increase in the real estate tax rate, the City Manager proposed significant and in many cases unpopular, reductions to spending.

The very first decision that the Council must make in any budget process is the "advertisement" of a real estate tax rate. Under the Code of Virginia, the Council must advertise the highest possible rate that it will consider. When it eventually adopts the budget on May 1st, the Council may choose a lower rate, but it cannot go higher.

On March 11th, the Council voted 5-2 to advertise a half-cent increase in the real estate tax rate. I voted no. While I believe that there are important needs in our community (particularly in our schools) that this budget does not provide for, my view is that those needs can be addressed using the revenue available to us. You can watch the City Council's discussion and vote online.

Last year, on average, single-family homeowners saw 3.6% assessment increases coupled with a 4% tax rate increase, resulting in a 7.5% tax increase. Our condo taxpayers had a 4% assessment increase with the 4% tax rate increase, creating an 8% tax increase.

This year, even without a tax rate increase, our single-family homeowners will pay 3.6% more and our condo homeowners 4.5% more due to assessment increases.

Late last year, we learned that as a region personal income in the DC area grew at the LOWEST rate of any large metropolitan area in the country. Most dramatically, the wages paid to Federal civilian workers in the DC region decreased by a half percent. This is even more dramatic when you consider that for the previous decade, these wages increased by an AVERAGE rate of 6.8% per year.

Our residents are not seeing income growth, and I believe that the City's government should be cognizant of our residents' capacity to pay additional taxation. We need to make some difficult choices.

While last year we used the budget process to address long-deferred capital needs, I believe this budget is where we right-size our operating spending to the new trajectory of modest revenue growth.

If we miss this opportunity, we are signing the City up for more service cuts, and more tax increases in the near future.

Last year I wrote about my view that the City should evolve towards multi-year operating budgets. In a nod to that push, our City Manager has proposed that we instead construct a five-year financial plan. The five-year financial plan would not contain the rigor and detail of an actual multi-year budget, but it will give the City the long-term view that I believe is required.

The first step in this direction is the updated version of the City's Forecast Scenarios. The bottom line of this forecasting effort is to suggest that even under a "medium growth" scenario, the City is heading for another $13.2 million of cuts or revenue increases next year, and $16.4 million the year after. This scenario assumes relatively healthy growth in tax revenues with modest increases in costs.

The next few weeks are critical in the development of the City's budget, as we continue to receive public input and begin to craft our amendments to the City Manager's proposed budget.

As individual members of the City Council explore areas of the budget, the City's Office of Management & Budget (OMB) prepare written Budget Memos that detail specific areas. These documents are available for review on the City website and are a useful insight into the Council's budget process and deliberations.

If you wish to learn more, the City Manager will be presenting the budget to the community on Wednesday evening at 6:30 PM at Beatley Library.

Please continue to let me know your thoughts.

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