By Carla Branch and James Cullum
According to City staff’s “best guess” Alexandria is facing a $43 million operating deficit for fiscal year 2011 and things may get worse.
“This doesn’t just mean tightening our belts, it is going to mean real program cuts,” said Alexandria Mayor Bill Euille at Saturday’s City Council budget retreat. “Someone recently asked me if this is the worst budget I have ever worked on; this is the worst of the worst and next year, we can say the same thing.”
Bruce Johnson, the City’s budget director, brought Council three scenarios for next year: worst case; best case and a mid-range estimate. “We believe that we will have $509 million in revenue next year and will need $552 million to pay for City services. This is an increase of $22 million over this year’s approved budget or an increase of four percent,” Johnson said. “Most of that increase comes from the transfer to the school system and from our payment to WMATA (the Washington Metropolitan Area Transit Authority). The City’s increase is $6.7 million, or a 2.3-percent increase over this year.”
In December, Virginia Gov. Tim Kaine will present his proposed FY2011 budget to the General Assembly. “Localities can certainly expect cuts. We just don’t know what they will be,” Johnson said. “The easiest cut is the reimbursement for the car tax, which we certainly hope they won’t cut. Right now, we are projecting a decrease of $1.4 million but that could change.”
Also, State support for the public school system could decrease. “Since we don’t get a significant amount of funding from the State for the schools, a decrease will have minimal effect,” Johnson said.
Just over 56% of the City’s total revenue comes from real property taxes, split nearly evenly between commercial and residential. “We think we are coming out of it on the residential side but we aren’t coming out of it on the commercial side,” said Cindy Smith-Page, City director of real estate assessments.
On the residential side, projected a decline of 4.79%. That includes a decline in condominium assessments of 7.25% and in single family homes of 3.76%. Commercial property is expected to decline by 13.04%.
“This is what we expected,” Smith-Page said. “Commercial property lags about 18 to 24 months behind residential. Remember that this is really just our best guess because we have only had about ten commercial sales this calendar year so we just don’t have any data.”
The commercial office property vacancy rate in Alexandria is 16%. “This is mostly due to the Victory Center,” said Vice Mayor Kerry Donley. “A number of us have been working hard to get this space filled but we need to be careful that when we are looking at federal agencies, we need to look at leases, not purchases because that will take the space off the tax roles and we don’t want that.”
Smith-Page said that she doesn’t expect to see commercial property increase in value for some time, perhaps as long as five years. “The developers are telling us not to expect any real commercial construction for at least that long,” Donley said.
Councilman Rob Krupicka said that, “this will effect City services for five to ten years or more. The things we cut are never going to come back and we are not going to see a magic return of revenues.”
The Alexandria City Public School system’s budget comprises one third of the City’s entire budget. This year, Council approved a transfer of $164.6 million. School staff estimated the need for $178.8 million in FY2011, a total increase of 8.6%. Most of this increase is because of the 423 additional students that are projected to enroll next year.
“We are expecting a 4.1% increase in our required Virginia Retirement System contribution and a 13% increase in the cost of healthcare,” said Chief Financial Officer Jean Sina. “These are costs that are beyond our control.”
On the capital side, “by making some adjustments in our buildings and in our enrollment policy, we believe that we can absorb the additional students for the 2010-11 school year,” said Deputy Superintendent Margaret Byess.
Byess explained that the staff would like to divide John Adams Elementary School into two sub-schools. “We would have a pre-kindergarten through second grade sub-school and a third grade through fifth grade sub-school there,” Byess said. “We can accomplish this by moving our books and records that are stored there and converting that into classroom space.
“Also, we can change our enrollment policy to allow students to be moved to other schools outside their home school if there is no room. We are already moving some Samuel Tucker students to Patrick Henry and James K. Polk where there is more room.”
Superintendent Morton Sherman said that, “siblings will not be separated. This does mean that a student who lives right across the street from a school might be attending a school much further from his home. It isn’t going to make some families very happy but it allows us to use our space more efficiently.”
Donley approved. “I am glad to see that you are thinking of creative ways to be more efficient,” he said.
In 2012, the school system will need modular classrooms at Charles Barrett and Polk. “We are looking at building a new school on the Patrick Henry site and are considering rebuilding Jefferson-Houston. We believe that this could be a real community school site with recreation programs, arts, a pool and office space,” Byess said. “This property is located one block from King Street and from a Metro station so it is ideal for this type of development. The cost of replacing Jefferson-Houston is just over $13 million and the maintenance costs will be almost as high.” The estimate is $11 million.
The school system provided the results of a facilities study, which was conducted last year. Over the next 20 years, ACPS will be required to spend $155.8 million to maintain its current schools or $183 million to replace 12 schools if no maintenance is done. Replacement occurs when deferred maintenance equals 35% of the replacement cost of the building.
There is no money in the 2010 or 2011 capital budget to replace aging school buses. Currently 19 of the 98 buses are 12 years old or older. By 2011, 29 of those buses will have reached their life span.
“We can defer the need for new buses by adjusting bell schedules but that is going to have an impact on families,” Byess said.
Sherman said that, “we want to see what happens with our enrollment numbers over the next year and then we will make recommendations to the School Board.”
One of City Manager Jim Hartmann’s priorities for FY2011 is providing City employees a salary increase. “I think returning the merit step increase is important,” he said. “It’s something that, I think, will mean a lot to our employees. Compared to other jurisdictions in Northern Virginia, Alexandria and Arlington are behind in this respect. Our employees haven’t gotten any significant salary increase for the past two years.” That step increase will cost $2.8 million.
Over all, the City projects a budget increase of $8.2 million. With a savings of $1.5 million, the net increase would be $6.7 million.
“In July, we asked department heads to suggest cuts in services. We didn’t want them to put the Washington Monument on the table but to suggest cuts that they could live with if they are needed,” Hartmann said.
The Community Services Board, which is responsible for mental health, mental retardation and substance abuse services proposed cutting prevention programs. The Office On Women proposed reducing crisis intervention services. Library hours might be cut, with all branches opening at 10:00 a.m. instead of 9:00 a.m., and only the Charles Beatley Library offering evening hours. Discretionary police overtime might be eliminated, along with new uniforms, some vice squad staffing and community policing.
“All of these programs are important but the cuts will not effect our core services nor our ability to respond to calls and protect the public,” said Police Chief Earl Cook.
Last year, 119 City jobs were eliminated. “We also have been very selective about filling vacancies,” Hartmann said. “This means that we have decreased our staff by about 300 over the last two years.”
Krupicka expressed his concern about cuts that don’t improve efficiency. “I’m concerned about cuts that will present a 12-month fix but don’t offer any longterm benefits,” he said.
On Dec. 17, Sherman will present his proposed 2011-16 capital improvement program budget to the Alexandria School Board. On Jan. 7, the School Board will approve their proposed CIP budget and receive Sherman’s proposed FY2011 operating budget. On Jan. 21, the Board will approve their FY2011 operating budget and submit it to Council.
By the end of November, Council must provide budget guidance to Hartmann, including a target for the amount of cuts they want to see in his proposed FY2011 budget. Council will hold a series of work sessions and public hearings and adopt a final FY2011 operating budget and FY2011-16 CIP budget in early May. In February, Hartmann will present his proposed FY2011 operating budget and FY2011-16 CIP budget to Council.