Fairfax City Manager Unveils Proposed FY 23 Budget

Fairfax City Manager Unveils Proposed FY 23 Budget

He’s recommending a 4-cent, residential real-estate tax decrease for City homeowners, but they will still pay more.

The bad news for Fairfax City homeowners is that, because of increased Fairfax County assessments, their tax bills will rise this year. But the good news is that City Manager Rob Stalzer is recommending a 4-cent decrease in the real-estate tax rate for FY 23.

He unveiled his proposed budget last Tuesday, Feb. 22, to the mayor and City Council and suggested cutting the real-estate rate from its current $1.075 per $100 assessed valuation to $1.035. 

Still, the average residential tax bill would increase 4.7 percent based on the 8.75-percent jump in assessed values. So for calendar year 2022, the owner of an average Fairfax City home valued at $588,964 would pay $274 more in real-estate taxes.

However, Stalzer noted that the City’s tax rate would be the third lowest in Northern Virginia. He also said the money yielded is critical to providing the services and quality of life City residents have come to expect, since “real-estate tax revenues are almost half of our income.”

Fairfax City is slated to receive approximately $29.6 million in American Rescue Plan Act (ARPA) funding. 

The budget also recognizes and rewards the contributions Fairfax employees have made to the City during the trying times of the pandemic and beyond. It proposes a 3.5-percent merit increase ($650,000 total cost), as of Jan. 1, 2023, for eligible employees, plus a 2.6-percent market-rate adjustment to employee pay scales, effective this coming July 1, to retain parity within the region. 

Furthermore, all eligible employees will receive a one-time bonus ($830,000 total cost), on July 1, to address hazardous-duty pay and cost-of-living inflation. And as of Oct. 1, public-safety employees will be moved from pay ranges to a step system.

Almost 10 new employee positions totaling $849,900 are funded in the FY 2023 budget, with $487,400 of that total coming from the General Fund. They include a grants administrator in the Finance Department and an environmental sustainability specialist in Public Works. 

The FY 23 expenditures for all funds (General, Capital Projects, Old Town Service District, Transportation Tax, Cable, Wastewater, Stormwater and Transit) total $193,151,232, which is an increase of 4.9 percent from FY 2022.

General Fund revenues and expenditures equal $161,400,810 each – an increase of 4.15 percent from the adopted FY 2022 budget. Real-estate taxes account for 49 percent of the General Fund revenue, followed by other local taxes at 25 percent. 

The largest General Fund expenditures are to education – 37 percent, or nearly $60 million, and public safety (fire and rescue, plus police) – 19 percent, or almost $31 million. The budget fully funds the City School Board’s adopted FY23 contract with FCPS in the amount of $53,480,000. 

Guidelines for the FY 23 budget included focusing on economic development, redevelopment, continuity of government, improving internal and external customer services, and adopting and implementing the fully funded FY23-27 Capital Improvement Program (CIP) totaling $279,982,513. Budgeted for the FY2023 CIP is $78,899,389. Of that amount, 61.3 percent, or more than $48 million, would come from the General Fund. 

“The CIP is our true north, in terms of what we, as a city, are trying to do,” said Stalzer. “We also know our schools have significant capital needs, and we’re in the process of identifying them.”

The Old Town Service District Fund was previously established to fund services and capital projects in the Old Town District. Because of the pandemic’s effects on commercial properties, City Council levied a tax rate of 0 cents per $100 assessed valuation in both FY 21 and FY 22. This year, however, Stalzer recommends it be increased to 4 cents.

“It’s anticipated to generate $181,000 to $188,000 per year,” he said. “And we’d use this money for the conversion of the gas lights to LED lights in the downtown area.” Stalzer said residents have requested more light at night in the City’s historic Old Town, and this project is estimated to cost $1.35 million. 

Pleased that the City is on a positive economic track, despite the effects of COVID-19, Stalzer listed several indications. They include the increase in real-estate assessments and tax revenues, as well as continued interest in Fairfax City by developers and the business community. 

He also stressed the City’s ability to obtain outside sources of funding – State, Federal, ARPA (American Rescue Plan Act), FEMA, NVTA 70-percent Transportation Funds, and Public Safety grants – to achieve City Council goals. In addition, Stalzer praised the ongoing Fairfax City/GMU partnership initiatives and was pleased to announce that the City’s fire and police departments currently have zero vacancies for sworn and uniform positions.

Furthermore, he said, “This is the first time we’ve ever budgeted a 15-percent unassigned General Fund balance – and it speaks to the City’s fiscal stability.” It’s also 3 percent more than Fairfax normally has in reserve and was a City goal. 

Stalzer said private-sector employment in Fairfax City has increased each year and the City’s 2021 unemployment rate of 3.9 percent was well below the state and national averages. And, he added, “Three, key revenue sources are bellwethers for the local economy – general property taxes, local sales and use taxes, and Business Professional and Occupational License [BPOL] taxes.” 

In Fairfax City, said Stalzer, general property assessments increased 7.7 percent (including new construction) from 2021 to 2022. Estimated FY 22 BPOL tax revenues increased by $0.8 million or 9 percent, while local sales and use tax revenue increased $1 million or 7.7 percent.

The City’s Tax Relief Program was also able to raise the income maximums and therefore impact a greater number of senior and disabled residents. As a result, it anticipates an increase of up to 30 applications and a rise in benefits for an estimated 22 percent of the existing applicants.

Fairfax City is slated to receive approximately $29.6 million in American Rescue Plan Act (ARPA) funding. Some $14.8 million was received in July 2021, and $12.8 million in qualified ARPA expenditures – expected to be received this July – are included in the proposed budget.  

“ARPA funds enabled us to do things we wanted to do, in a quicker time frame, said Stalzer. “This also resulted in lower costs and a better quality of life.”

Public hearings on the proposed FY 23 budget are set for March 8, March 22 and April 12, during the Council’s regular meetings, with adoption scheduled for May 3. First, though, will come several budget work sessions. Said Stalzer: “We look forward to starting our budget discussions with City Council next week.”