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Investing in our Infrastructure

Excerpt from Justin's June Newsletter

Despite large efforts to address deferred capital investment in recent years, the City stands at a crossroads. With a perfect storm of infrastructure needs for school, sewer, city facilities, transportation and recreation, the practices of the past will not sustain us in the future.


Only three school systems in the Commonwealth of Virginia have grown more than ours in the last decade. We're the only one of the top four growing systems to have not constructed a new building (only renovations) during that period.


The City's sanitary sewer, stormwater sewer and combined sewer remediation challenges are not areas that can be deferred any longer.


Our city facilities reflect decades of neglect and require millions in maintenance.


The challenges of the Washington Metropolitan Area Transit Authority (WMATA) have demanded dramatic increases from each member jurisdiction. For Alexandria, those increases have dominated our local transportation funding sources.


The little funding that has remained for basic recreation services to support quality of life in our community has fallen victim to budget reductions.


The City Manager's proposed Capital Improvement Program included $2 billion of investment over the next decade. Yet the constraints of the Council's guidance and paltry revenue growth left over $500 million of recommended, but unfunded, capital investments.

That $500 million of unfunded capital investments serves as a hidden debt on our municipal balance sheet. Yet instead of the 2.12% rate (the true interest cost of our most recent debt issuance) that we are paying for the City's actual debt, this hidden debt is costing us much more.

With construction costs climbing at an annual rate of nearly 5% and the costs of patching, retrofitting, and otherwise "buying time" with existing aged infrastructure growing regularly, this hidden debt is far more onerous than the well-managed municipal debt load the City carries.

This was the seventh City budget that I have worked on during my time on the City Council. While I've never had the opportunity to work on a budget when revenues were skyrocketing, some years have been worse than others.

I've tried to have the same approach in each budget; push for efficiency and savings within the operating budget, but maintain strong levels of investment in capital infrastructure.

At various points, this philosophy has gotten me in trouble with people on either side of the debate about the relative size of government. I have generally opposed extensive growth in the operating budget but strongly supported addressing deferred capital needs.

The operating budget provides the resources to fund employees and their benefits. A competitive regional labor market have pushed employment costs higher. That drives our operating expenses to grow at a rate greater than general inflation.

Capital expenditures are the City's investment in our infrastructure. These investments can reduce operating costs, promote economic development and reduce the need for larger tax increases in the future.

Deferring capital investment further will threaten economic growth and ultimately exacerbate the challenges we face.

The City Manager's proposed 10 year Capital Improvement Program continued the focus on expanding infrastructure investment. The 10 year plan increased by nearly 20%, driven largely by $368 million to address Combined Sewer projects, an additional $161 million for increases for WMATA capital funding, $144 million of increases for Alexandria City Public Schools capital funding, and $47 million to address City facilities deficiencies.

Yet, even with a 10 year, $2 billion Capital Improvement Program, the proposal leaves large gaps in the Alexandria City Public Schools capacity and modernization plans, as well as in City efforts to address deficient municipal facilities.

Knowing that it would be unable to address all our infrastructure needs, Council requested that the City Manager also include a Supplemental Capital Improvement Program..

Alexandria currently has the second lowest real estate tax rate of major Northern Virginia jurisdictions and given the adopted budgets of our neighbors, that will remain the case. Our City is not unique in the region. Other jurisdictions face similar challenges.

In March, the Council was obligated to "advertise" the highest tax rate that we might consider during this budget process. The Council voted 6-1 to embark on a new direction.

You can watch the Council's full discussion on the matter online.

Mindful of the significant capital overhang as well as the opportunity to collaboratively plan truly joint municipal facilities, the Council voted to advertise a total rate increase of 5.7 cents, which would bring our rate to $1.13.

At a real estate tax rate of $1.13 and including the impact of assessment increases, the average single family homeowner will pay an additional $418 during 2017. The average condominium homeowner will pay an additional $216.

The Council also provided direction to the City Manager to develop the composition of a new group that would be empowered to develop a truly joint facilities plan, providing recommendations as to how the community might prioritize nearly $700 million of municipal facility spending for both the City and the Schools over the next decade.

The City is entirely too small and dense to continue building single use municipal facilities. It is imperative that we break down the barriers between the City, the Alexandria City Public Schools and other public agencies and use our scarce capital funds to truly collaborate. I'm hopeful this new process will help facilitate that.

The City Manager returned to Council with a formal proposal as to how such a group might work.

At the beginning of May, the Council approved the budget by a vote of 6-1, and approved the creation of the Ad Hoc Joint City-Schools Facility Investment Task Force. We are now working to constitute that committee.

This budget asks a lot of our taxpayers. I do not minimize the impact this will have on residents who are already struggling to afford to continue living in our City. I do believe that this is the responsible course to avoid even more rapid escalation of taxation in the future.

We have created an entirely new process to achieve new efficiencies and wisely expend the taxpayer dollars. Yet these expenditures themselves are not luxuries. They are the basic infrastructure of our community.

Please let me know your thoughts.

 

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