Letter to the Editor--Leasing City Property

I submitted the following letter to the editor regarding a proposal by Councilman Fannon regarding un-needed City property:

To The Editor:

As someone who spent most of my two years on the City Council grappling with two of the most challenging budgets in our history, I was extremely interested to see Councilman Fannon’s proposal to handle some of our financial challenges by leasing City properties that are currently underutilized. Our challenges are so great that we have to welcome any and all suggestions to the discussion.

Councilman Fannon’s proposal appears to build on the work of the Economic Sustainability Workgroup-—which urged the City to inventory and dispose of surplus properties; as well as the work of the previous City Council, which commissioned real estate consultant Jones Lang LaSalle to perform that inventory and make recommendations for the disposition of those properties.

While it is important to bring new perspectives to this discussion, Councilman Fannon’s proposal departs from the recommendations of Jones Lang LaSalle, the Economic Sustainability Implementation Monitoring Committee, and I believe the long-term best interests of our taxpayers, in that it opposes disposition of the properties. Councilman Fannon’s proposal insists that maintaining ownership of these properties is more lucrative. I respectfully disagree.

While the leasing of City property may be a beneficial, interim policy as we await a more favorable market for sale, I don’t believe it is the appropriate role of government to hold onto unneeded properties and operate as a landlord for generations as the proposal suggests.

Furthermore, such a proposal is fiscally short-sighted. While leasing does bring in recurring revenue, it does so at the expense of keeping very valuable properties in the hands of government, rather than allowing the private sector to realize their highest and best use. Given our current vacancy rate, and the substantial investment required in these properties to make them available for lease, getting these properties into the hand of private landowners presents the greatest long-term benefit for our taxpayers.

A lot of hard work has been done by the citizens and consultants who have been involved with looking at Alexandria surplus properties. The goal of that work has much in common with Mr. Fannon’s proposal: to eliminate properties that are unproductive, a drag on our resources and in some cases detrimental to our quality of life. But these properties are valuable cards that the City has the opportunity to play to leverage redevelopment, open space preservation, and long-term economic sustainability.

I urge the City Council to consider those options carefully.

Sincerely,


Justin M. Wilson

"CIPing" the CIP

During my Council service, the majority of my time was spent dealing with the City’s budget. In “normal” years, it is the most important thing the City Council does. With the extreme financial situation we are facing, that importance is magnified.

I spent much of that time working with residents to explain the City’s budget process, the challenges we are facing, and how they could play a role. Oftentimes, I found it challenging to adequately explain our budget to many of our residents—not because of their ignorance, but due to their experiences.

Many of our residents head across the Potomac River each day and work for (or with) the Federal Government. The Federal Budget that they are familiar with isn’t balanced. It finances on-going operating expenses with long-term borrowing. The Federal Budget doesn’t set aside reserves for difficult times, and frequently borrows from funds in employee retirement accounts to make ends meet (a major no-no for the private or public sectors).

The process by which the Federal Budget is adopted is byzantine, opaque and inscrutable to all but a few. Over the years, the self-imposed rules of the process, Gramm-Rudman, Pay-Go rules, and others have been rarely successful, and are often subverted in “emergencies” and with “off-budget” spending.

Aside from the lack of balance, perhaps the most significant difference between the budgets that emerge from Washington and those that we adopt in Alexandria is the basic concept of a capital budget versus an operating budget.

In Alexandria our Capital Budget (our Capital Improvement Program or CIP) includes items that are in excess of $10,000, and have a useful life of 3 or more years. This could range from an elevator at a school, to a repaved road, reconstructed bridge or an expanded library. The Feds recognize hardly a difference between spending for a few thousand employees and the dollars necessary for a new veterans hospital.

Each year, Alexandria adopts a 6-year CIP—with one “active” year and 5 “planning” years. Within each adopted CIP, we lay out a plan for how we will fund the components of this plan. The lion-share of the funding is drawn from General Obligation Bonds—dollars borrowed from investors who purchase our bonds. In typical years, the City also makes a significant contribution of current tax dollars to fund the capital improvements being made in that budget (the municipal equivalent of a “down-payment” on our borrowing). The balance of the funds necessary is typically derived from a combination of dedicated fees and Federal/State dollars.

With the exception of the current year, the CIP is a plan. As with any plan, there is uncertainty and an evolution as the plan nears fruition. Traditionally, as you look into the “out” years within the City’s CIP, the numbers get more “fuzzy” and the sources of funding become more difficult to predict. In there lies the rub. While the CIP the Council adopted last year provides for funding for the current budget year; as well as a balanced picture of next year (FY 2011), the remainder of the CIP makes a swift departure from reality.

While the level of planned capital spending reflects the austerity we see today, we have no clue how we might pay for that lower level of spending. In FY 2012, we have a gap of $32.5 million (about 37% of the planned spending), $26 million for FY 2013 (29% of the planned spending in that year), and $13.7 million in FY 2014 (19% of the planned spending).

The options are as time-honored as they are unpalatable—raise more money “today” to pay the bills, cut planned spending, or borrow more.

In this environment, the tendency for a government such as ours is much the same as many of our residents do with their personal checkbooks—load up on debt and worry about it later. In 2007/2008, the City borrowed about 50% of its capital needs. In this current budget, we are borrowing about 68% (the City Council lowered the proposed level from about 70%). Next year that is planned to rise to nearly 85%.

While there is no question that policies such as this limit the taxes we pay today, let there be no illusion—in the process we are raising taxes on tomorrow. This brings us to the conflict that as a community we must answer: What is our obligation? How much of that new police facility should the taxpayers of today pay, and how much should we allow our children to cover? Since we’ve been putting off critical sewer improvements for a few decades, do we feel some greater obligation to cover more of those costs today, or should we pass those along in their entirety for the next generation?

The answer is found in a responsible balance; and there is ample evidence that as the City has grappled with this economic downturn, we have shifted the burden far too squarely on the shoulders of a future generation who can’t yet speak for itself.

In June, the City sold newly issued bonds to the market—receiving some of the lowest borrowing rates in our history, in recognition of our perfect AAA/aaa credit rating. Yet even with extraordinarily low borrowing rates, our debt burden continues to rise as a percentage of our expenditures. The interest or debt service on that borrowing now begins to crowd out the essential spending that we know lies ahead.

In both Washington and Richmond, we see poor examples of managing through downturns such as this.

Responsibility in budgeting doesn’t often win a politician votes or press adulation and it does not have a vocal constituency, but it does continue our City’s tradition of sterling fiscal management—and that should give it the urgency it deserves.

Here I Am

Welcome to my new blog! After the election, as I began to transition my life to one that did not include service on the City Council, I thought about ways to stay in touch with the 2,500 or so people who regularly received my newsletter during my tenure on the City Council.

Of the things that I did during my two years serving the people of Alexandria, I greatly enjoyed writing my monthly newsletter--and the ensuing onslaught of e-mails that I would receive in the days following when it was sent out.

Alexandrians are not a shy bunch, and they have a set of experiences and education that make discourse an exciting prospect. While I'm sure there is no way to duplicate the monthly "give and take" that I enjoyed so much, my hope is to create a forum where I can share my thoughts on issues and you can feedback.

This is not going to be a blog where I post pictures of my adorable kids (if you're interested, drop me an e-mail and I can get those to you), or tell you about my latest vacation--or even a place where I offer restaurant tips. I intend to focus on issues, events in our community, and how residents can influence the decisions being made. Together we can continue to make Alexandria a better place to live, work and raise a family.

Let me know what's on your mind!