Update 11/25/2013: County Board's guidance for the FY2015 budget is now online.
- $20-$25 million projected gap to be closed with no tax rate increase
- Continued investment in affordable housing, environmental sustainability, public schools, safety net
- Average 5.5% increase in residential real estate assessments expected
- Overall real estate tax base projected to rise 2.6%
- Commercial assessments expected to be flat or declining
ARLINGTON, Va. — The Arlington County Board today directed the County Manager to develop a proposed budget for Fiscal Year (FY) 2015 that will maintain existing tax rates while closing a projected gap for the County and Arlington Public Schools (APS) of $20 – $25 million.
The Board directed the Manager to fund services that protect the health and safety of Arlington residents; continue investments in affordable housing and environmental sustainability; adequately support the public schools, including funding an expected increase in enrollment, and preserve the safety net for those in need.
“Our guidance to the Manager begins a months-long conversation with our community that will involve tough decisions,” said Arlington County Board Chairman J. Walter Tejada. “With the increase in residential property assessments costing many homeowners close to $300 more per year, we have directed the County Manager to assume no tax rate increase; however, we recognize that this is a time of continued financial uncertainty. If the economic environment changes, we expect the Manager to give us options that may include further budget cuts and/or revenue increases.”
The Board emphasized the importance of maintaining the County's long-term financial sustainability and preserving Arlington's triple-Aaa bond ratings.
Funding gap smaller than FY 2014
For the sixth consecutive year, the County is starting its budget cycle with an anticipated gap between revenues and expenditures. The projected gap for FY 2015, however, is smaller than the gap in prior years due, in part, to higher tax revenue projections.
County Manager Barbara Donnellan has already taken steps to cut costs by extending a hiring slowdown that began in 2012. The slowdown restricts the pace at which departments may fill openings. Donnellan also has instructed department heads to provide options for expenditure reductions.
Overall real estate tax base projected to rise 2.6%
The County is projecting the overall real estate tax base to rise 2.6% with residential real estate assessments rising, on average, 5.5%, and commercial assessments staying flat or declining slightly. Residential values, which rose slightly last year, continue to strengthen. Rising office vacancy rates, caused by BRAC, sequestration, and the uncertainty of the federal government's fiscal situation, continue to place downward pressure on commercial real estate values. Real estate taxes, which are based on assessments, are the single largest source of revenue for the County.
Ongoing cost pressures
Among the costs expected to increase are employee compensation, healthcare, funding for Metro, and debt financing for major capital projects. In addition, there will be new costs for the County's homeless services center/County office space and technology investments in the County's ConnectArlington fiber network.
The Board voted 4-1 approve the guidance. Read details of the guidance on the County website; click on the County Board Nov. 19 Recessed Meeting and scroll down to item #30.
The County Manager and the Superintendent invite the public to a joint County/Schools community forum on the FY 2015 budget, Wednesday, Dec. 11, 6:00-7:30pm at Washington-Lee High School Cafeteria. The County Manager will meet with Commission chairs on November 21 and will hold an online community chat in December.
Stronger than expected tax revenues, operational savings help County end FY 2013 with surplus
The County Board also closed out the FY 2013 budget. Savings were realized by both the County and Schools, and there were stronger than expected local tax revenues. Available funds were allocated to reserves, previous commitments, and priority projects. Read details on the County website; click on the County Board Nov. 19 Recessed Meeting and scroll down to item #29.
Arlington County's General Fund balance for FY 2013 was $199.6 million; most of which, $174 million, or 87%, is allocated in accordance with current County Board policy or legal restrictions, including:
- Maintaining the operating & self-insurance reserves which are critical to keeping the County's triple-Aaa bond ratings – $60 million.
- Affordable Housing Investment Fund (AHIF) – $43 million.
- Continued support of Arlington Public Schools – $28 million.
- Funding decisions made by the County Board as part of adoption of the FY 2014 budget – $26 million, including funds for capital funding for joint County/School projects, affordable housing, housing grants, an economic stabilization contingent, and a number of other priority programs.
- Continued investment in infrastructure and capital projects – $10 million – funded with bond premium that is restricted in use.
- Grant funding and other legal commitments – $5 million.
The remaining $25 million in discretionary funds have been allocated for one-time items and to provide flexibility for the FY 2015 budget:
- Additional $5 million to the economic stabilization fund in light of federal sequestration and BRAC impacts.
- One-time $3.3 million employee compensation contingent, in case employee step/market pay adjustment is not included in the FY2015 Budget. Another $1.5 million to fund ongoing comparative pay studies.
- Affordable housing initiatives for FY 2015, including $2.9 million to AHIF and $1.5 million to housing grants;
- Additional funding of $1.7 million for Artisphere, for both FY2014 and FY2015.
- Other FY 2015 set-asides, including a $3.0 million contingent to provide flexibility for the Board and funding various one-time projects primarily in the technology, planning and safety areas.
As noted above, the close-out decisions included additional funding ($4 million) for the joint County/Schools collaboration contingent that will fund investments associated with Schools' capacity-related projects as they address enrollment growth.
“Our budget guidance to the manager will ensure that Arlington Public Schools will have the funds it needs to address anticipated increased enrollment of 703 new students this September,” Chairman Tejada said. “APS, through our action, has more than $23 million in unallocated new resources to meet its needs.”
The Board voted 5-0 to approve the closeout appropriations.