'Challenging' Budget Year Looms

'Challenging' Budget Year Looms

County Manager tells board it needs to curtail some services and programs in order to produce balanced budget.

Unless the County Board wants to raise the tax rate, it will have to roll back some services and programs to fill a $20- to $30-million gap in next year's budget, officials announced last week.

The county will have fewer discretionary funds next year as the housing market cools, and will have to either curtail programs or increase taxes in order to deliver a balanced budget, which is required by state law, County Manager Ron Carlee said during the Nov. 15 board meeting.

Carlee predicts that if the county maintains its current level of services, it will have to make up a shortfall between revenues and expenditures of at least $19.6 million. This does not take into account possible growth in compensation for employees, additions to a retiree health care reserve and a spike in maintenance capital.

Carlee said he is committed to coming back to the board in February with recommendations for a balanced budget within the existing tax rate. "That will require us to make some tough choices," he added.

The county has already implemented an across-the-board hiring freeze to save money.

Board members directed the County Manager to sift through department budgets to identify cost savings, but admitted that it will be a struggle to balance competing community interests.

"It is very clear that we will face a challenging budget year," County Board Vice Chair Paul Ferguson said.

IN FISCAL YEAR 2008, tax revenues are expected to increase by only 3.2 percent, compared to approximately 10 percent in the prior fiscal year. The drop is due to the leveling off of the red-hot real estate market in the region. Real estate taxes make up the majority of the county’s overall revenue each year.

After six straight years of double digit growth— a total value of upwards of 140 percent— residential real estate assessments in Arlington are expected to increase by a modest 2 percent. Assessments for condominiums, which have increased in value by more than 200 percent over the past five years, will actually dip by 3 percent over the prior year.

"There will be fewer funds available next fiscal year because of the slower rate of growth in the real estate market," said Barbara Donellan, an assistant county manager.

Due to Arlington’s large number of commercial properties, a slow-down in the residential market will not affect the county as much as it will other localities in Northern Virginia. Last year 40 percent of the real estate base in Arlington was commercial, while 60 percent was residential.

County officials predict assessments for commercial properties will grow by 9 percent, helping to restore the balance between commercial and residential in Arlington.

Several other factors are contributing to the expected gap in revenue that the County Board must find a way to close.

The county expects to see some savings by switching health care administrators, but officials predict that costs may escalate by as much as 15 percent. The county is also likely to set aside millions of dollars into a reserve fund for retiree health care, officials said.

Other increased costs this year include a higher contribution to the Metro budget, a larger debt service and the need for additional funds to maintain aging infrastructure.

County Board members may also try to restore funding for critical mental health and prevention services that lost federal and state funding this year.

The county will soon undergo a complete evaluation of all services to find areas to save money.

"We are going to take a look at all programs and see if we can do some at a lower cost with the same quality of service," said Mark Schwartz, the director of the department of management and finance.

"It certainly isn't going to be easy," Schwartz added.

SEVERAL FISCAL HAWKS attending the Nov. 15 board meeting said it was time for the county to learn to live within its means.

Robert Atkins, a civic activist, said the current budget "suffers from morbid obesity," and called for all governmental agencies to publicly identify their least efficient programs.

Wayne Kubicki, a former member of the Fiscal Affairs Advisory Committee, said a serious review of the of the county's budget that eliminates the fat is long overdue.

"Any way you look at this, the upcoming budget cycle needs to be one of prioritization and re-examination of everything Arlington does — because, simply put, business as usual isn't going to work this time around," Kubicki said.

Others believe that the County Board may be forced to raise the tax rate in order to keep all programs running at current levels. Tim Wise, head of the Arlington Taxpayers Association, said the board was likely to "plunder the income" of Arlington residents.

One thing all parties agree upon is that there will be a vicious battle this spring among departments and outside organizations for a smaller pot of money.