City Adopts Thinner Budget, But Homeowners Tax Bills Will Increase

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The City Council adopted its much anticipated year-long budget Monday after making final decisions on a $530 million financial plan that will eliminate some city jobs and services while raising real estate tax bills for homeowners.

The spending plan for the year starting July 1 is about $12 million less than the current years budget, but includes $610,000 as a social safety net to help city residents in desperate need and boost economic development at a time when Alexandria, like communities around the country, is faced with significant financial difficulties.

Homeowners will be hit with a 5.8-cent residential property tax hike expected to raise the average taxpayers bill by $76 to $4,503 while creating a little more than $5.2 million in new revenue for the government, according to a budget memorandum.

But the citys work force — most of which live outside the city limits — will also be trimmed.
The government cut 117 positions from its workforce (about 4 percent), ebbing service levels for residents and swelling city employees workload. With 74 of the positions currently vacant, 43 city workers could be laid off in the coming months.

City workers salaries will be frozen for the second straight year as well, but the council rejected a proposal to eliminate a life insurance benefit that currently pays employees heirs twice their final city salaries.

We pretty much have, unfortunately, balanced this budget on the backs of our employees, Mayor Bill Euille said.

Still, during a time when many residents are struggling financially, the debate over the budget centered on the real estate tax rate. It represents the most prominent revenue source for the city.
Councilman Tim Lovain moved to amend the tax rate, which he said was an unfair expectation for residents given the uncertain economic environment.

I just think we need to [make] extraordinary efforts to keep our taxes as low as possible, he said, indicating that dipping into the citys rainy day fund (essentially a city savings account of more than $40 million) was appropriate given the circumstances.

But the majority of the seven-member council disagreed. Early projections indicate that the citys financial crisis could be even worse a year from now. As a result, several council members said it was too early to tap the funds that would have provided immediate tax relief to residents.

The real estate property tax is not the fairest tax in the world, Councilman Rob Krupicka said.
Thats why weve been so careful in managing it.

I think the prevailing view is, as we get into the next year when things are potentially going to be much worse, were going to need access to the rainy day fund, Krupicka said.

However, the city government has no current policy on the seemingly intangible threshold it needs to cross before using the reserve money. The citys fiscal policy only states that the unreserved general fund balance should not be made easily available for emergencies, requiring a vote from at least five Council members.

This year, without the tax hike or use of the rainy day fund, council members said they worried that the alternative included cutting public safety spending, which it decided to keep at current levels, or cutting school funding even more than it did, which could exacerbate crime and education issues and bring property values down.

The city government cut its allocation to the Alexandria City Public Schools by $3.4 million (2 percent) at a time when the school system is trying to close the achievement gap between minority and white students and start classes leading to an International Baccalaureate diploma. The $164 million allocation to the schools is the single biggest expenditure in the citys budget.

The schools are also facing an enrollment crisis with a dramatic space problem, said Krupicka, who sits on the State Board of Education. Two new elementary schools may have to be opened by 2015 when 900 new elementary-aged students are expected to have enrolled, according to school officials. The city hopes to capitalize on building the schools with funds from private developers on future development sites.

The affordable housing issue got some attention this budget season as well, receiving a quarter million-dollar surplus for the affordable housing trust fund. Council also took advantage of the buyers market by allocating $455,000 to help lower-income residents purchase their first homes from a pool of relatively low-cost foreclosed properties in the city. It proved to be a bittersweet issue.

Its a unique opportunity, though unfortunate, Councilman Justin Wilson said. It represents an overall theme in the budget we made some pretty devastating cuts but also recognized needs and shifted resources to reflect those needs.

Krupicka said, Putting money into low-income housing purchases is kind of a one-time thing. It allows us to meet some needs this year but it doesnt create an ongoing obligation if next year gets worse.

If the economy worsens, the council could revisit its budget decisions and make further cuts part way through the fiscal year starting July 1.

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