Alexandria’s revenue tax is growing, but too sluggishly to keep pace with the expenditures — leading to a $17 million shortfall as the city heads into budget season.
That estimate, from Mayor Justin Wilson’s monthly newsletter, is slightly lower than the estimate from a City Council meeting in November, but still presents a substantial challenge for city leadership attempting hold off on a tax rate increase.
Wilson said Alexandria’s budget is built around real estate taxes, which are growing but with some worrying signs.
“In Virginia, the structure of municipal finance is heavily reliant on real estate taxes,” Wilson wrote. “Consequentially, in Alexandria the real estate market, both residential and commercial, dictates our budgetary fate. Last year, we saw the healthiest growth in our real estate tax base in over 15 years. Yet, in the past year, mortgage rates have more than doubled. It’s hard to imagine that such an increase will not eventually impact our real estate market.”
Real estate tax revenue is projected to increase by 1.2% — which Wilson called a “return to the anemic growth that characterized much of the last decade and a half.”
Wilson said residential taxpayers are already paying more due to appreciation in the residential tax base, and adding a tax rate increase on top of that would add an even greater burden to local residents.
“I believe we should again work to avoid a rate increase while protecting the core services our residents depend on,” Wilson wrote. “Last year was the 6th budget in a row without a tax rate increase and I am hopeful we can continue that pattern.”
And yet, the city will have to find a way to close the $16.1 million shortfall. That shortfall is mostly attributed to an increase in city operations, the annual transfer to Alexandria City Public Schools and city debt service.
“With these revenue estimates and expenditure estimates, this brings us to a projected revenue shortfall of $16.1 million,” Wilson wrote. “Given that our local budget must be balanced, that shortfall must be resolved with either spending reductions, tax increases or some combination of the two.”
City Manager Jim Parajon, who warned City Council last month that “the budget is going to be tight,” is scheduled to present a budget to Council on Feb. 28.
Alexandria City Public Schools is in the initial stages of organizing a collective bargaining effort for thousands of its employees.
The school system has more than 2,400 employees and pays $11.6 million in salaries, with funds approved by the City Council. That means that any agreement reached between ACPS staffers and the school system will have to be approved by Council.
“In this case, you’re going to be negotiating a collective bargaining agreement for about 80% of your costs,” Mayor Justin Wilson said at a joint City Council/School Board Subcommittee meeting on Monday (Nov. 28).
Wilson continued, “Without some special structure put together, you’re going to be doing so without coordination with the entity that is going to pay those bills. So, I think we need to figure out how we hold hands and put together a process where we can all do this together somehow.”
The news comes shortly after the city and police department came to a collective bargaining agreement. As part of that agreement, which was nearly a year in the making, police officers will get significant salary raises, as well as bonuses for longevity and specialized skills.
Education Association of Alexandria President Dawn Lucas says that her organization is ready to get to work.
“We are ready and willing to work closely during this process,” Lucas told the School Board on Nov. 10. “We believe that having strong collective bargaining will make us more competitive than other school divisions when it comes to retaining and recruiting the very best educators and staff.”
In the meantime, the school system is proposing a 2.64% step increase and 2.5% market rate adjustment for all staff in the upcoming fiscal year 2024 budget. Healthcare costs are also projected to increase 8% and dental care costs will increase 2%.
Interim Superintendent Melanie Kay-Wyatt told Wilson that she will work closely with City Manager Jim Parajon’s office in creating a collective bargaining structure. No timeline has yet been presented.
“We will keep you informed as we are educating our staff on what it’s going to look at , as well as a timeline,” Kay-Wyatt said.
City Council adopted its collective bargaining ordinance last year.
The Alexandria City Council unanimously approved a collective bargaining agreement with the Southern States Police Benevolent Association, ushering in a new era of collaboration with city employees.
If likely approved in the fiscal year 2024 budget this May, the agreement means substantial pay increases for new officers, sergeants and lieutenants. The current base salary of $54,698 for an officer would be increased by 11% to $61,503 at the beginning of the next fiscal year, July 1, 2023. After next year, salaries for officers would increase 2% annually.
Mayor Justin Wilson said that the collective bargaining agreement is historic, since it’s the first of its kind to be approved in Virginia.
“This is a really important step.,” Wilson said. “We came to a place that that was mutually agreeable one that I think moves the needle forward and recognizes our hard working police officers for the work that they do every day for our residents at work that is greatly valued by the community, but does so in a constructive way in partnership with the city, recognizing that we’re all in this together.”
Damon Minnix, president of Alexandria chapter of the Southern States Police Benevolent Association, said that the agreement creates a new pay scale based on years of service.
“We’ve spent countless hours working towards this agreement,” Minnix said. “Most importantly, this process and agreement opens the lines of communication between the interests of our officers and city management.”
Compensation issues have plagued the Alexandria Police Department for years.
The collective bargaining agreement includes:
- A one-time payment to employees who will not get at least a 10% pay increase in the agreement
- A $1,000 longevity bonus for well-seasoned officers in July 2024 and July 2025
- A 5% pay boost for officers in specialized units, including academy instructors, motorcycle officers, field training officers and K9 handlers
- Formation of union committee
The agreement also asks the city to conduct a “cost-neutral, 20-year retirement option with an immediate payout and no minimum age requirement” for officers.
City Manager Jim Parajon said that coming to an agreement was an exhausting process.
“This agreement is not without disagreements, and is a I think an excellent start,” he said. “It really does value our police officers at a very significant level.”
Facing inflation, a $17 million budget shortfall and fewer federal economic recovery funds, the Alexandria City Council will consider a tax increase in its upcoming fiscal year 2024 budget.
City Manager Jim Parajon has been tasked with presenting Council with two budget alternatives — one with a tax increase and another without.
“This year’s budget is going to be tight,” Parajon said at a recent Del Ray Business Association meeting. “We’re also predicting a much slower growth rate than we’ve done in the past. As you can imagine, property tax and the growth in our real estate is what drives a lot of our revenue. And we projected that’s going to be a little slower this year.”
Parajon said that city staff is expecting a shallow recession to impact the city this spring, and is eyeing expenditure reductions. So far, the $17 million shortfall is mostly attributed to an increase in city operations, the annual transfer to Alexandria City Public Schools and city debt service.
Mayor Justin Wilson hopes to not increase taxes, and said that inflation pressures impact city government, just like everyone else.
“We have not increased the tax rate in six years and I am hopeful we can avoid any increase this year,” Wilson told ALXnow.
The city is also contending with collective bargaining agreements with the police and fire department unions. Additionally, ACPS faces a $12 million budget shortfall, and wants to give employees raises.
The current FY 2023 budget saw a $445 (6.5%) increase to residential real estate taxes, although the tax rate of $1.11 per $100 of assessed value did not change.
City staff are also working on re-timing projects in the city’s 10-year $2.7 billion Capital Improvement Program to “better align with ability of operating budget to absorb costs increases and City’s ability to execute projects,” according to a presentation to Council on Tuesday night (Nov. 22).
Parajon will present his proposed budget on Tuesday, Feb. 28 — a week-and-a-half after the School Board approves its budget request. The budget will be approved in May and go into effect on July 1.
The King Street Pedestrian Zone was officially expanded to reach Waterfront Park on Saturday (Nov. 12).
Council voted unanimously and without discussion on the permanent conversion of the unit block of King Street and the northern portion of Strand Street.
The City shut down the 100 block of King Street in 2020 to help small businesses with outdoor seating during the pandemic. The unit block of King Street and Strand Street were later added to the pilot.
A survey of community feedback on the closure found that 91% (of 1,853 survey respondents) rated the pedestrian zone as very positive, and that 89% of wanted it to be permanent.
The Waterfront Commission also approved the plan, and suggested to City Council the following “enhancements”:
- Strengthening temporary barricades to provide for the safety and security of pedestrians in these blocks until full implementation of street improvements
- Installing a sign on Strand Street at the intersection of Prince Street identifying “no outlet” or “dead end” and noting limited parking available on Strand Street
- Closing Strand Street at Prince Street and designating the metered parking spaces adjacent to Waterfront Park as Handicapped Parking and City Service Vehicles Only. Continue to allow vehicle access to the private garage at 110 S. Union Street. This would provide additional parking near the waterfront for disabled individuals, and would discourage traffic from drivers looking for limited parking in the 100 block of Strand Street
- Designating specific resources to provide appropriate City maintenance and security of the pedestrian zone
- Installing pavement markings on Strand Street clearly identifying the turnaround and no parking areas on Strand Street
Conversion costs will be minimal, said City Manager Jim Parajon in a note to Council.
“If the closure is approved, there will be minimal costs associated with updating parking signage and refreshing striping,” Parajon wrote. “All of these costs can be handled with existing budgets. Also, since there will be four metered spaces eliminated along the Waterfront Park to provide turnaround space and parking for police, this will total approximately $8,000 per year, or $666/month.”
The Alexandria City Council unanimously approved a plan to install lights on a handful of athletic fields, but city leaders also acknowledged neighbor concerns about the project.
The plan is to eventually install new outdoor lighting at five fields around the city, with those lights phased in as the budget and construction timetables allow. Three of the fields could be illuminated as early as FY2023:
- Francis C Hammond Middle School, 4646 Seminary Road
- George Washington Middle School, 1005 Mt. Vernon Avenue
- Jefferson Houston K-8 School, 1501 Cameron Street
The other two, Patrick Henry K-8 School and Recreation Center (4643 and 4653 Taney Avenue) and Eugene Simpson Stadium Park (426 East Monroe Avenue), can’t be illuminated until 2024 and 2025 respectively. The aim of the lights is to extend the usable hours of some of the city’s more overcrowded fields.
The tone of the City Council meeting on Saturday was more cooperative than other debated city topics. While some civic discussions in Alexandria have been combative in the past, local resident organizations were quick to point out areas of agreement with local sports organizations and outline areas for compromise. The meeting featured a range of supporters of the lights and some nearby residents against the lights, but a sizable group of residents who supported the lights but had specific concerns about the lights exacerbating ongoing issues at the fields.
“Varsity Park members are not opposed to lights on the fields, including at Hammond Middle School,” said Bill Rossello, President of the Seminary Hill Association, “but we have significant concerns we feel have not been heard heretofore. All we’ve gotten back is indirectly communicated staff-splaining.”
Rossello said the Hammond field is frequently used by non-permitted adult groups throughout the year. Rossello echoed concerns shared from other neighbors who said their issues lie more in the handling of activities on the field than the lights themselves.
“In warm-weather months, these groups often use the field until dark,” Rossello said. “These groups are known to make a party out of a soccer match, consuming copious amounts of beer, playing music from very loud speakers, setting up food trucks at the site, and relieving themselves on resident properties across the street.”
Rossello said the Seminary Hill Association is asking for:
- Use limited to permitted youth sports groups
- If activity is not permitted, the lights are left off
- Bathrooms installed on-site
- Recreation, Parks & Cultural Activities staff monitoring field use
- Trash picked up early each day
- Rental to adult groups prohibited
Ultimately, the City Council unanimously approved the lights, but several members of the Council said the discussion on Saturday was only the beginning of addressing issues related to use of the fields.
At a previous meeting, Planning Commissioners raised concerns that it can be difficult for someone facing an issue with one of the fields to get a clear answer on who to address those concerns to. One of the recurring items discussed was the need to have a phone number at each site so either local residents or those using the fields have a clear point of contact for issues related to field use.
“I appreciate these questions concerning management and monitoring of fields,” said Vice Mayor Amy Jackson. “As these issues arise what I want to get back to is… making sure the lights don’t continue to be on when they don’t need to be on.”
Jackson also said there have been games on lighted fields where the lights shut off and it wasn’t clear who to contact to get those turned back on.
However, I also want to bring up the flip side of the lights: sometimes those lights will go off in the middle of a game and I’ve been there when it happens,” Jackson said. “It’s disconcerting to players and parents, and there’s no one who can get ahold of anyone to turn on the lights. Again, that phone number comes in really handy. Broken hearts are left on the field if the lights are off and the game’s not over.”
Mayor Justin Wilson said discussion about field use will continue post-approval as the project is implemented.
“I appreciate everyone who added insights into this conversation,” Wilson said. “We’re working to address the concerns we heard and I think as we go forward we’ll work to address any concerns that arise.”
Over the last two years, Alexandria’s DASH bus system has gone through a series of dramatic changes, from a complete overhaul of the route system to changes to strollers and how the buses are boarded. But at a City Council retreat last week, city staff made it very clear the current balance of costs and revenue spells trouble in the near term.
“On the capital side, with what we have set aside for bus replacement, the cost of maintaining a state of good repair and electrifying [the bus fleet], we’re struggling to find the funds to do all that work,” said Yon Lambert, director of the Department of Transportation and Environmental Services (T&ES).
Lambert said it’s important to keep that swelling cost in mind as the city heads into budget season this spring.
“On the DASH side, we’re doing some fantastic things in transit, but the challenge for us is that operating what I would consider a best-in-class transit system is challenging and expensive,” Lambert said. “Operating costs are expensive and we need to make sure we head into this with eyes wide open.”
Lambert said that, at the current rate, in just a few years the DASH subsidy will increase from the current $23.6 million to $45 million annually.
City Council member John Chapman said the discussion raised red flags about the bus system’s future and broached the question of whether or not fare-free will remain a permanent state for the bus system.
“To me: saying transit investments need to be placed on a sustainable path and not presenting what that pathway is is a big red flag to me,” Chapman said. “To say ‘hey, we don’t have this money and we don’t think it’s going to happen,’ so how do we look at cutting back or finding other opportunities to put us on a sustainable path?”
Chapman said those discussions about putting DASH onto a more sustainable path are going to have to happen sooner rather than later.
“I want to be helpful, but I want to hear solutions for right now rather than further in the future because we are going to have budgetary decisions to make in the spring,” Chapman said. “If we’re going to do fare-free: how do we make that sustainable or is that a program we do for a few years and then find a way to not do that?”
Staff said DASH was collecting around $4 million in fares before the fare-free program was put into effect — not an insignificant amount, but still not enough to accommodate for the DASH expenditures.
“When we get to budget season, I want to have those hard conversations instead of saying ‘we’re going to have a 14% increase on transit [costs]’ and then keep moving,” Chapman said. “We need to be able to go back to taxpaying residents and businesses and say ‘we understand this is going to affect your standard of living coming out of a pandemic and into a possible recession, and we are still doing the best with our funding that we can.'”
Lambert said figures from DASH and Metro recovery showed buses recovered ridership more quickly from the pandemic than Metro did, saying the numbers emphasized that buses are the real “people movers” in Alexandria and did much of the heavy lifting for public transit during the pandemic.
Mayor Justin Wilson said there may be room to expand DASH operations while still making more efficient use of city funding by folding some aspects of the city school bus network into DASH. Wilson said the city could reach a place where DASH buses replace middle and high school bus services for Alexandria City Public Schools (ACPS).
“This is an opportunity,” Wilson said. “Anything we can do to use capacity we’ve already invested in more efficiently is a good thing. The opportunity for partnership with ACPS is one of those opportunities, particularly at the middle school and high school levels.”
Wilson said the future of public transportation could involve replacing school buses for high school and middle school students with DASH bus lines.
“I want to be explicit: it’s not just ‘hey we can supplement what they’re doing,’ it’s potentially figuring out a way we get rid of ACPS transportation for middle and high and come up with a scenario where DASH route network can do that,” Wilson said.
DASH’s financial forecast is one part of a looming challenge for the city — a swelling budget faced with stagnating growth in a potential “pasta bowl recession.” According to Arthur Wicks, budget manager of the Capital Improvement Program:
We’ve embarked on a very ambitious capital program over the last couple of years… the big takeaway is: the expense of having a CIP the size we have is going to exceed what revenue growth can absorb. Our capital programs have become larger and more complex than what we can execute. We’ve come to you during the last few years of retreats and said a big CIP expense increase is coming and we find ways to shave it down and make it bearable. We’ve kind of used up our bag of tricks on that.
The City of Alexandria is making it easier for locals who pitch in on flood prevention to skip out on their utility fees.
At a meeting last night, the City Council voted to adopt a series of changes to a utility fee credit program, including reducing the fee for residents who install flood mitigation on their property.
All property owners in Alexandria pay a stormwater utility fee based on the amount of impervious area — or hard surface — on their property. The Stormwater Utility Fee Credit Program allows local property owners to claim reductions on that fee.
Some of the changes should make is easier for locals to earn get that fee reduction.
“Property owners can earn credits to reduce the fee by installing and maintaining eligible stormwater management practices and filing an application to the City,” the city said in a release. “Applications can be submitted by searching for the property on the City’s Real Estate webpage or submitting a hardcopy form. Applications will be accepted from December 1 to February 15.”
According to the release, some of the changes from the meeting include:
- Simplified application process that removes duplicate items and streamlines documentation requirements
- Two-year credit applied to two consecutive calendar years – or four billing cycles – for approved applications for eligible practices
- Increased credits for individual eligible practices and increased overall potential maximum credit per application from 30% to 50%
- Previous applicants will be notified via email to reapply for the next two-year credit cycle starting in 2024
- Added credit option for preserving and maintaining existing mature trees and dry floodproofing practices
The city’s top finance experts said the city should be cautious as it potentially heads into a period of stagnant economic growth — if not outright decline.
“We don’t want to take a doom and gloom approach,” said Director of Finance Kendel Taylor. “We’re not saying the sky is going to fall, but we actually don’t know. The uncertainty where everyone is sitting right now is fairly significant.”
Taylor said that, as the city begins to plan for Fiscal Year (FY) 2024, the Department of Finance is being cautious.
“When we look at FY 2024: it’s very early,” Taylor said. “We only have a couple months of sales tax… interest rates keep going up, fuel prices, there’s a lot of uncertainty. We’re in a very cautionary stage.”
While the city’s economy is continuing to grow, Taylor said that’s going more slowly than she’d like. While the city averages 4% economic growth, Taylor said her office is estimating only a 2% change.
“We’re still an attractive place to live, we’re still economically sound, but it’s not what it’s been for the last few years,” Taylor said. “We’ve seen a lot of growth in the past year… but really we’ve just gotten back to pre-pandemic levels. That means we missed two years of anticipated growth. It’s a weird environment… It’s something where we have to just be cautious.”
Along with that slow growth, Taylor said interest rates have gone from 3% to 7%, meaning it’s more expensive to buy a house in Alexandria today than it was a year ago.
Vehicle assessments, meanwhile, remain high. The city approved a one-time tax relief for car owners to keep their tax from skyrocketing after vehicle values shot up during the pandemic. Taylor said the city is still monitoring those values this year to see if a repeat of that one-time relief might be needed.
“It’s too early to really know what’s going to happen with vehicles, but values remain high,” Taylor said. “We made an assessment adjustment in 2022 to mitigate those increases. We’re going to keep watching that over the next few months to see what’s the right approach to vehicle values in 2023.”
In brighter news, Taylor said sales tax and meals tax figures have remained strong, exhibiting a commitment from the community to supporting local restaurants and businesses. Those tax levels were restored to pre-pandemic levels in the summer of 2021.
The hotel tax has slowly been crawling back. Taylor said in July the city was within 10% of where the hotel tax was pre-pandemic. In August, it was within less than 1% of pre-pandemic levels.
At the same time, Taylor warned that optimism over tax levels returning to pre-pandemic levels ignores the bigger concern that the city has still lost two years of economic growth.
“It’s great to see that hotels are getting back to pre-pandemic levels,” Taylor said, “but we would have typically seen a few percentage points of growth.”
Kevin Greenlief, assistant director of finance, said the revenue from FY22 was good and FY23 has revenue increases baked into it, but the keyword for FY24 is caution.
“In the second quarter of 2022, [chief financial officers] are beginning to be pessimistic about GDP growth and potential impacts of a recession,” Greenlief said. “The popular term right now is a pasta bowl recession’: a long recession but not a deep one. I’ve seen ranges from a -.4% GDP growth to a .1% positive growth. There’s a lot of debate right now about whether there will be a recession. The smart money seems to think so, but they’re not looking like the sky is falling, it’s that [growth] is going to be flat.”
As the city plans for the future, City Manager Jim Parajon said some of that will involve looking at how much office conversion the city allows. While the city has had numerous positive office conversions — from restaurants to schools — Parajon also warned against throwing the baby out with the bath water. Maintaining some level of office space could be the better long-term play, even if it means losing some revenue short-term.
“The conversion approach for outdated office makes a lot of sense, but I want to be careful that we don’t lose good office space to conversion,” Parajon said. “That’s really important, and that may mean we play out a cycle or two in the economy so we’re looking at a balance of commercial to residential.”
Even when offices do come back, Parajon said they may not resemble the sea of cubicles from the pre-pandemic days.
“We’re likely to see smaller footprint office components with lifestyle office elements,” Parajon said. “They all feed really well into Alexandria because we have an amazing lifestyle here and that’s enticing to a company that needs to recruit and retain talent.”
Alexandria has its fair share of grooming salons and overnight hotels, but the Carlyle neighborhood could be getting a new one for the city’s canine companions.
Dog care facility District Dogs is headed to the City Council at a meeting on Saturday, Nov. 12. The item is docketed for the consent calendar, meaning it’s likely to be approved with little or no discussion.
The new location at 2424 Mill Road would include grooming, training and daycare services for dogs.
An animal care facility is already authorized in the building’s zoning, but a staff report said because District Dogs includes overnight accommodations it requires a special use permit.
The staff report recommended approval of the special use permit, saying the new business could be a boon to the growing neighborhood:
The proposed location for District Dogs is well-suited for this use. Dog-related businesses have grown in popularity and, with the number of new residential units in this area, the demand for dog boarding will likely increase. The addition of overnight accommodations to the permitted animal care facility use will increase the options dog-owners have in this neighborhood.
Photo via District Dogs/Facebook