November 28, 2017 Published in Editorials

Guidance Anyone

alexandrianews.org Editorial

At its last meeting, Alexandria’s City Council considered the fiscal year 2019 Budget Guidance and Budget Process Resolutions. Council made only a few changes to last year’s resolutions.

Council will adopt the FY2019 budget in May, 2018, with City Council and School Board elections to follow six months later. Given that Council enacted a major real estate tax increase above what the City Manager proposed in his own operating budget submission this year, it is important that we understand what may be happening.

The budget projections are indeed grim.  Revenue is projected to increase by about $9 million next year. Expenditures are projected to increase by nearly $41 million leaving a gap of over $30 million. If that is true then the real estate tax rate would have to increase by 8 to 9 cents to cover it.

One revision of the guidance dealt with the way the contribution to the schools should be handled. It was not a substantive difference from what the staff proposed.

The other revisions dealt with tax rates. Last year the Council left them to the discretion of the City Manager. This year Council changed the guidance to require the Manager to submit a budget with no increase in taxes. Members warned that will likely require major cuts in services.

Is it possible that a tax rate increase could be avoided? The answer is clearly yes if Council is willing to make some tough decisions and the Manager is willing to look into the operations of some of the City departments to make them more efficient instead of imposing across-the-board cuts.

Looking at the projected increases, only 1.3% or about $5.0 million is in City government. That is a very small increase. Transit services receive a 17% increase of about $5.0 million most of which may be attributable to increased costs of the Metro system. Alexandria City Public Schools is estimated to receive $23.5 million more which is an 11% increase. Finally, capital projects, which includes cash capital, city project debt service and school project debt service, will increase by nearly $8 million in total which is about a 7% increase.

Will these costs actually increase? Every budget season, November projections seem to reveal a major deficit yet when May rolls around and the budget is adopted a number of them simply vanish. Metro contribution is often not as large as projected, the State retirement contribution is less than anticipated or some other wonderful combination of events makes part of the deficit less of an issue. At this point we don’t know if this will happen again but it is likely that the projected deficit will be larger than the actual.

Next, how much control do we have over these costs? In some cases we have none and in others we have quite a bit. For example, debt service on bonds is what it is. If you issue the bonds you have to pay the principal and the interest. Cash capital, on the other hand, is discretionary. The City and the Schools could simply postpone or eliminate projects and reduce cash capital which could then be redirected to pay for other expenditures.

We also have control over the amount we pay for services. The Schools are projected to receive a large increase in their operating budget which is due to the opening of a new elementary school in a converted office building in the West End and projected student enrollment growth. It is certainly possible to examine the requests and to see if cheaper alternatives could be found. Perhaps the new school will not be open for a full year or will not be opening in FY 19 at all because of the need for regulatory approval and construction time. School costs are extremely important because they account for 57% of the projected increase in operating budget expenditures.

Will any of this be achieved? Unfortunately, control of complex budgets requires a degree of understanding and time that part time or even full time elected officials do not possess. The City has known of the revenue shortfall issue for a decade and has made absolutely no progress in dealing with it other than to raise taxes. The part of the City that should be dealing with the issue, the Manager’s staff, has over the years been reduced to furnishers of budget memos to members of Council who then want to make the decisions. It is a far cry from the City in the 1990’s when the late Vola Lawson was our Manager.

The simple fact is that if we have a chronic revenue shortage then we should have a system in place that limits expenditures. The alternative is raising taxes. The real estate tax rate has been raised for the past two years at a pace that is normally reserved for serous recessions with tumbling house and building prices. House and building prices are rising in Alexandria and we are still short of revenue. What will happen when the economy does turn?

Rather than the chaotic and politically driven budget cycle that is now in place, Alexandria needs a more professional and forward-looking approach. It is time for candidates for Council to propose improvements in the system which they can achieve instead of unrealistic and unachievable revenue increases that they cannot.

 

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