A Budget Balancing Act

A Budget Balancing Act

New tax rate will be $1.03, with one cent going to fund the purchase of open space.

The Alexandria City Council met twice this week, once to finalize this year’s budget add/delete list and, on Tuesday, for the regular legislative session. The main focus, however, is the FY ‘04 budget.

Because the budget is so tight this year, Council members had very little room to propose new initiatives. For every dollar a member proposed adding to the city manager’s proposed budget, offsetting cuts had to be found. The primary addition was a further reduction in the real-estate tax rate. The city manager proposed reducing the rate from $1.08 to $1.05. Each additional cent of reduction results in a $2 million budget shortfall.

Councilman William D. Euille and Councilwoman Redella S. “Del” Pepper originally proposed reducing the tax rate an additional 2 cents to $1.03. Mayor Kerry J. Donley, Vice Mayor Bill Cleveland and Councilman David Speck proposed reducing the rate by 3 cents to $1.02, and Councilwoman Claire Eberwein proposed reducing the rate by 3 1/2 cents to $1.01.5. At Monday night’s work session, there was general agreement to reduce the rate to $1.02.

“One of our primary goals this year was to give the residents of the city some sort of tax relief,” Donley said. “With this in mind, we have to balance all of the other programmatic needs.”

Speck agreed. “The budget is always a balancing act,” he said. “Between the desire to give tax relief and the desire to fund a variety of programs. With cuts in both state and federal funding, this year’s job was particularly difficult.”

Eberwein echoed her colleagues’ sentiments. “The city residents have sustained two years of significant increases in real-estate assessments,” she said. “It was our priority to find a way to give them as much tax relief as possible while still passing a fiscally responsible budget.”

Pepper, too, supports the tax reduction. “Our residents cannot continue to see these increases in their real-estate assessments,” she said. “Some of them are already being forced to sell their homes, and we need to do what we can to reduce the tax rate.”

Cleveland, who proposed capping the tax bill in the aggregate, supported a 3-cent reduction beyond that proposed by the city manager, which, essentially caps next year’s aggregate bill to around a 10-percent increase.

AFTER AGREEING IN principle to decrease the rate by 3 cents, five Council members then agreed to put back 1 cent of the rate and use the funds for the open-space trust fund. Councilman David Speck proposed this initiative last year. “If we are serious about obtaining and preserving open space, we need to find a way to do it,” Speck said. “This will give us a funding stream to begin to do that.” At $2 million per year, the fund will have about $12 million in the next six years.

“Some people say that this isn’t enough and isn’t going to make that much of a difference, but we have to start somewhere,” Speck said.

Eberwein agreed. “Councilman Speck and I went to Richmond last year and asked for some help with this by requesting permission to designate a part of the real-estate recordation tax for this purpose,” she said. “We got no help. We have now done what we can.”

Donley, too, is supportive of this initiative. “Open space is one of those things that our citizens have told us is important,” he said. “By dedicating 1 cent of the real-estate tax to purchasing and preserving open space, we have responded.”

Thus, with the open-space initiative, the tax rate will be $1.03, with 1 cent going to fund the purchase of open space.

TO OFFSET THIS $6 million budget shortfall, Council members found various ways of saving money. The two largest savings come from a 1-percent across-the-board cut in the city’s operating budget for a saving of $1.5 million, and a $1.5 million reduction in the city’s allocation to the Alexandria City public school system.

“Once again, it’s about balancing competing needs,” Donley said. “We have cut money from both the school and the city’s operating budgets so that we can reduce the real-estate tax rate. We have just learned this week that the school system will be receiving an additional $675,000 in state funding that we were not expecting. Thus, the net effect of the reduction is about $800,000. We do not believe that this in any way will affect the delivery of quality education to our students.”

Speck agreed. “The school system has $1 million for reserve teachers,” he said. “This will only be needed if school enrollment increases beyond what is currently projected, and that doesn’t seem likely.”

Euille agreed. “I don’t think there is any member of Council who would do anything to hurt the delivery of excellent educational services to the city’s children,” he said. “It is our responsibility to make hard decisions, and I believe that the city and the School Board will make a joint statement to that effect before the budget is passed. All of us want to see our schools continue to progress as they have been doing, and we have been in close consultation with members of the School Board as we have proceeded.”

Council members cautioned the School Board in a work session on April 1 that there might be cuts in the operating budget in order to fund tax relief and the large number of capital projects that are on the horizon, including the building of a new T.C. Williams High School and a new police department headquarters building.

Pepper hopes that the school budget will not be cut. “I would like to see us just cut the cost-of-living raises,” she said.

That, too, looks likely. In general, Council has agreed to cut the manager’s proposed cost-of-living allowance (COLA) from the proposed 2.25 percent to 2 percent. This would result in a saving of $430,000 on the city side and $270,000 on the school side. This would not mean a further reduction in the school system’s operating budget, as the COLA is a city add-on, above what the Board proposes. Even with the proposed $1.5 million reduction, the school operating budget will still increase by over 5 percent from this year’s budget.

ALTHOUGH THOSE WHO provide in-home child-care services under contract to the city will not receive the desired health insurance, they are likely to get an increase in the rates that are paid to them. Councilwoman Joyce Woodson once again proposed increasing their rates at the cost of $378,000 to the city. “If we aren’t going to pay for health insurance, we need to do something to increase the rates per child,” she said.

Donley and Speck have proposed less money for such an increase, asking for $150,000. The city already subsidizes the rate above that which is provided by the state. “The state pays about 75 percent of market rate, and we don’t even agree that their survey is reflective of a true market rate,” said Mark Jinks, the assistant city manager for finance. “Right now, the city subsidizes the rate to make us equal to the rate that the state is paying in Arlington. We see no reason that our child-care providers should not be paid the same as those in Arlington, because our populations are similar. Councilwoman Woodson’s proposal would increase the rates by about 13 percent.”

For example, child-care providers currently receive $140 per week for a preschool child for a full day of care. Woodson’s proposal would increase that rate to roughly $158 per week.

“We will do something, and we will have to look at just how much we can do,” Donley said. “For a variety of reasons, we are not going to pay for health insurance, but we are looking at doing something to increase their rates.”

Woodson also proposed increasing the number of persons who are eligible for the tax-deferral program. This would mean that more elderly, disabled and moderate-income residents would now be eligible to defer a certain portion of their real-estate taxes each year. “This will have no budget impact because it will come out of the Housing Trust fund,” Woodson said. “I know we all say we want to do something about affordable housing, and I know that I want to do something about affordable housing, but I am very frustrated that we don’t seem to be willing to actually do something.”

Woodson argued her point at Tuesday’s Council meeting in the context of an ordinance that would have expanded the tax-deferral program only for the elderly and for persons with disabilities. She urged Council to do more. Council agreed and has left the question open to discussion until final passage of the budget next week.

Euille is proposing that the city begin a youth rider subsidy for DASH and WMATA. The cost will be around $150,000. “Both Montgomery County and D.C. have such programs,” Euille said. “I would like to see us do the same thing here. If we want to get people out of their cars and encourage them to use mass transit, we need to establish the mind-set when our residents are young. Not only would we get more of our young people out of cars but we would get their parents out of cars, because the kids could take public transportation to sports practices and to the mall. I want us to start a program and see how it works. If it works well, we could consider expanding it later.”

THE PROGRAM would provide subsidies for students under 19 who have student or transit ID cards.

Eberwein proposed an additional $100,000 for the planning budget. “This is to get us started on planning Eisenhower West as soon as possible,” she said.

She also is proposing to put $50,000 in the transportation budget for additional traffic calming. “There are significant traffic problems in the Seminary Road area of the city,” she said. “This money will allow us to work with the civic associations in that area to do something about them.”

A final budget will be prepared, and Council will vote on that budget on April 29.