It will cost the City of Alexandria next year an estimated $43.4 million it likely will not possess to continue providing the level of services it currently offers its 140,000 citizens, elected officials and city staff announced Saturday at an all-day budget retreat. 

The preliminary estimates, should they hold true, place the city $22.8 million over its current approved budget at the midway point an increase of about 4 percent. 

Because the city is only halfway through its current budget year, all of its projections are based on figures middling between the most optimistic and pessimistic outcomes, meaning the deficit could get better or worse as the year plays out.

The revenue estimate is a midrange estimate and there is a degree of uncertainty, said Budget Director Bruce Johnson.

Representing the formal public introduction to the fiscal year 2011 (July 1, 2010 June 30, 2011) budget planning season, the gathering ended with an austere though expected projection of whats to come: Diminished services that could include but are not limited to the public safety realm, public education and the citys social safety net all under the umbrella of a strained city workforce that eliminated about 4 percent of its manpower last April.

In attempts to close the gap, the city government will not only cut and attempt to streamline many of its 40-plus departments but will also consider an array of tax and fee increases before the final budget is approved in the spring of 2010.

The stark projections, though preliminary, produced no blur in the eyes of officials, who did not deny the expected effects on Alexandrians quality of life.

The things we cut now, people have to assume in the community that theyre not going to get replaced for many, many years, City Councilman Rob Krupicka said, because the revenues are not going to suddenly bounce back.

The gaping lack in funds stems from the nation- and state-wide recession, inducing reduced federal and state aid to the city. 

Locally, though, weaker-than-expected real estate assessments the largest source of the citys revenue are primarily responsible for the deficit, as is a needy Alexandria City Public School System being stretched by ballooning enrollment and increasingly necessary maintenance to its buildings. 

The real takeaway is that revenues in this city, general fund revenues, are very dependent on the real estate market and no matter how the economy recovers, its really all about real estate, said Eric Eisinger, one of the citys budget analysts.

Real estate assessments, which will come out in January, are projected to cause tax revenues to decrease by $6.7 million in the most pessimistic scenario and by $1.1 million in the most optimistic scenario, according to budget documents. But the citys best guess is a decrease of about $4.7 million.

Preliminary estimates for fiscal year 2011 range from decreases of $12.8 million to $32.1 million.
The city has long been dependent on residential and commercial real estate taxes to fill its coffers. In 1986 they made up about 54 percent of the citys general fund and today cover about 56 percent of government revenues. The largest disparity occurred in 2002 when it dipped to 45 percent before rising again, according to budget documents.

It essentially has not changed at all, and its hard to foresee that it will change going forward, Eisinger said.

Thats the vast majority of our revenue, i.e. real property taxes, Vice Mayor Kerry Donley said. And that is a structural problem that I dont see going away because I dont see a sea change in Richmond thats going to open up different taxing revenue opportunities for local government.

The school systems entire funding, of which 83 percent comes from the city, is another damper to the overall deficit. The city estimates an allocation to ACPS of $14.2 million more than last year, according to estimates, and the school system has said its own deficit could be as high as $17 million. 

[The range] is intended to be illustrative of possibilities and of the impact, from miserable news to just plain awful news, Superintendent Morton Sherman told the School Board late last month. And the reason I say miserable news is that even if the budget were approved by the City Council and even if the city were able to, in some miraculous way, come up with additional funding the loss would be in the millions of dollars.

The school system faces significant capacity issues that may require, ideally from the ACPS perspective, two new elementary schools in the not-so-distant future. Its existing buildings are in need of basic repair and maintenance as well.

Wondering Whats  Happening Next

Heads of the citys several departments have suggested cuts in their own realms at the citys request, albeit potentially tender ones, to help minimize their budget impact while attempting to maintain quality services.

Chief of Police Earl Cook presented a list proposing reductions in community policing, vice squad staffing, equipment purchases and patrol overtime much of which includes ceremonial or other demonstrations. 

Its going to be problematic in the future, Cook said of the decrease in vice squad staffing. Its a near-term thing that were doing. Unfortunately, the drug problem in the country is actually escalating and not deescalating.

Add the possible public safety cuts to other proposed service reductions, like those being considered by the Department of Mental Health, Mental Retardation and Substance Abuse, and an interconnected dynamic between the various service reductions and quality of life becomes evident.
Im very concerned about the linkage between people needing mental help and the increases in death and suicide rates and crime, City Councilwoman Alicia Hughes said. Those types of things are particularly alarming to me.

Deputy City Manager Mark Jinks described the hopeful exodus from the recession as sitting on the edge of our seats, kind of wondering whats happening next. The city government put on the table an array of revenue-raising options for discussion amongst city residents and City Hall throughout the budget process that they hope will answer that question.

Raising the base real estate tax and implementing a commercial real estate tax add-on tax comprised two options at the forefront of the discussion. Increasing the base tax by one cent would raise about $1.5 million in the current year and about $3 million in the next fiscal year.

The City Council also has the authority to add an extra tax to commercial property owners that would raise about $1 million next year for each cent it was raised and go toward transportation funding, which the city lacks from the state.

Increases in other taxes, fees and selling some of its assets are also on the table. 
Were going to need a lot of creative solutions on what we can do in terms of funding and financing for programs we have because yes, we do a lot of great things in this city, but is there a possibility that we could be doing them all a lot more efficiently than we are doing them? Hughes said.

The theme of long-term, structural changes in the upcoming budget years has been stressed throughout the debate over how best and where best to close the budget shortfall. 

I think its really important for the community to understand that revenues arent just going to pop back to where they were and allow us to fill in all the holes, Krupicka said. The cuts we are making now are in many ways structural changes created around a new normal. And it may not be a new normal that you like, but it is a new normal.