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The Budget in Fairfax County

The Budget in Fairfax County. Leadership Fairfax November 21, 2013 Susan Datta Chief Financial Officer/ Director of the Dept. of Management and Budget. The Art of Budgeting. Among other things, a budget is:

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The Budget in Fairfax County

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  1. The Budget in Fairfax County Leadership Fairfax November 21, 2013 Susan Datta Chief Financial Officer/ Director of the Dept. of Management and Budget

  2. The Art of Budgeting • Among other things, a budget is: • a statement of priorities that reflects a vision of the County’s collective future • a spending guide which reflects the County’s spending priorities; • the art of juggling priorities and appropriately allocating resources; • a policy document indicating policy decisions and priorities through the allocation of funds to specific services and programs; • a communication device sharing these choices with residents; • an outline of anticipated revenues to support County services, including tax rates; and • a plan of objectives for the upcoming fiscal year.

  3. Board of Supervisors’ Budget Priorities • Quality Educational System • Safe Streets and Neighborhoods • Clean, Sustainable Environment • Living, Caring and Affordable Communities • A Vibrant Economy • Efficient Transportation Network • Recreational and Cultural Opportunities • Taxes That Are Affordable

  4. The Economic and Budget Situation • Four years after the Great Recession, economic growth remains tepid and uneven • A combination of projected modest revenue growth and increasing requirements for services means that the County faces projected budget shortfalls in both FY 2015 and FY 2016 • The demand for County services has also been impacted with more residents requiring assistance while options for helping are becoming more limited. • Our ongoing challenge is to develop a budget with an appropriate level of services that are affordable, sustainable and acceptable to the community. • One primary means of addressing this budget gap is through service reductions and holding down cost increases.

  5. Challenges • Additionally the County faces several challenges ahead, including: • Slow economic recovery and its impact on the County’s budget and our residents • Congressional showdown over the federal budget deficit (sequestration) • Funding implications of State budget issues

  6. The Economic Picture: National and Local Local Economy National Economy • Slow national recovery – federal spending cuts, tax increases, struggling labor market • Unemployment rate of 7.4% as of July 2013 • Stock market has rebounded • Uptick in the national housing market • Inflation remains in check, up 2.0% for the year. • Northern Virginia has more than regained jobs lost during the recession • Fairfax County’s July 2013 unemployment rate is 4.3% , down slightly from 4.4% in July 2012 • Housing market improving • Retail sales rising modestly - Sales Taxes in FY 2013 rose just 2.5%, the slowest in 3 years

  7. Population Growth: Fairfax County Between 1990 and 2012, the population of Fairfax County has increased 291,100

  8. And Remember…Virginia is a Dillon Rule State • Fairfax County operates under the urban county executive form of government, an form of Virginia county government, and like other Virginia local governments, Fairfax County has limited powers. • More specifically, Virginia courts have concluded thatlocal governments in Virginia have only: • Those powers that are specifically conferred on them by the Virginia General Assembly • Those powers that are necessarily or fairly implied from a specific grant of authority • Those powers that are essential to the purposes of government -- not simply convenient but indispensable • This doctrine of limited authority for local governments is commonly called the Dillon Rule, a name that is derived from the writings of John Forest Dillon (1831-1914), who served as a judge, a law professor and an author of legal textbooks in the latter part of the nineteenth century. It is unique to a few states in the United States. • Counties have only those powers expressly granted to them by the General Assembly • Limits locality’s flexibility to raise revenue and diversify tax base; the State limits/controls/caps about 90 percent of the County’s non-real estate tax revenue

  9. General Fund Revenues:“Where It Comes From” – FY 2014 Adopted Budget REVENUE FROM THE COMMONWEALTH* $95,604,727 VA Public Assistance $38.6 Law Enforcement $23.7 Other $33.3 (subcategories in millions) CHARGES FOR SERVICES $72,690,493 SACC Fees $36.0 EMS Transport Fees $15.5 Clerk Fees $5.4 Other $15.8 PERMITS, FEES & REGULATORY LICENSES $36,870,254 Building Permits/ Inspection Fees $26.9 Other $10.0 2.0% 2.7% REAL ESTATE TAXES $2,207,982,016 Current $2,203.3 Delinquent $4.7 REVENUE FROM THE FEDERAL GOVERNMENT $25,676,086 Social Services Aid $25.5 Other $0.2 1.1% 0.7% LOCAL TAXES $526,607,627 Local Sales Tax $171.4 B.P.O.L. (Current) $160.7 Communications Tax $48.5 Other $146.0 62.0% 14.8% 0.4% 0.5% RECOVERED COSTS/ OTHER REVENUE $14,935,437 15.4% REVENUE FROM THE USE OF MONEY AND PROPERTY $16,936,422 • * For presentation purposes, Personal Property Taxes of $211,313,944 that are reimbursed by the Commonwealth as a result of the Personal Property Tax Relief Act of 1998 are included in the Personal Property Taxes category. • ** Total County resources used to support the budget include the revenues shown here, as well as a beginning balance and transfers in from other funds. PERSONAL PROPERTY TAXES * $547,381,366 Current $548.1 Delinquent ($0.7) 0.4% FINES AND FORFEITURES $14,863,219 District Court Fines $8.3 Parking Violations $3.3 Other $3.3 FY 2014 GENERAL FUND RECEIPTS** = $3,559,547,647

  10. More on “Where It Comes From” • County’s Tax Structure is: • Over-reliant on Real Estate Taxes, which make up 62% of total General Fund revenue • Nearly 75% of Real Estate Tax revenue comes from Residential property • State limits/controls/caps nearly 90% of the County’s non-real estate tax revenue • State levies and collects all income taxes • Local city and county governments cannot levy personal income tax in the Commonwealth of Virginia

  11. General Fund Revenue 2000- 2008 2009 2010 2011 2012 2013 2014 2015 2016 2007 (prelim.) Average Projections Fiscal Year

  12. Annual Changes in Residential Equalization: FY 2000 – FY 2016 Residential Equalization Fiscal Year • FY 2000 -- FY 2009, changes ranged from -3.38% to +23.09% • FY 2010 -- FY 2014, changes ranged from -12.55% to +3.50% • Projected increases of 2.00% in FY 2015 and FY 2016

  13. Fairfax County’s Housing Market Residential Values are Projected to increase 2.0% in FY 2015 – FY 2016 • Some improvement to projections is expected as home prices are up 9.6% through July • Note: assessments are based on sales by neighborhood so the current mix of homes sold may not be reflective of the County’s entire residential base • The number of homes sold has increased 13.4% in 2013 from 7,987 to 9,054 through July 2013 • The most homes sold in this 7 month period since 2006 • Average number of days to sell a home was just 25 days in July reflecting the lack of homes for sale • Active listings are down nearly 25% in 2013

  14. Annual Changes in Nonresidential Equalization: FY 2000 – FY 2016 Nonresidential Equalization Fiscal Year • FY 2000 -- FY 2009, changes ranged from -2.94% to +16.64% • FY 2010 -- FY 2014, changes ranged from -18.29% to + 8.21% • Projected increases of 1.00% in FY 2015 and FY 2016

  15. Nonresidential Real Estate Nonresidential Values were Flat in FY 2014, Very Modest Growth Projected for FY 2015 and FY 2016 • Vacancy rates at year-end 2012 14.4%, 16.7% with sublets • Leasing Activity was at a five-year low • 114.1 million square feet of office space in the County • 2.2 million square feet under construction as of year-end 2012 • Economic uncertainty over government reductions impacts demand for office space • Businesses are reducing the amount of space they rent by consolidating space, releasing empty space previously held for future expansion • Government agencies have zero growth mandates regarding leases

  16. Impact on the Typical Fairfax County Household

  17. Impact on the Typical Fairfax County Household

  18. General Fund Expenditures: “Where It Goes” – FY 2014 Adopted Budget (subcategories in millions) TRANSFERS $142,529,096 County Transit$34.5 Capital $12.0 Metro $11.3 Information Technology $2.9 Other $81.8 PUBLIC SAFETY $442,869,704 Police $175.5 Fire $170.9 Sheriff $44.5 E-911 $17.1 Other $34.9 PUBLIC WORKS $67,958,940 Facilities Mgt. $51.1 Other $16.9 PARKS AND LIBRARIES $50,001,226 Library $27.1 Parks $22.9 COMMUNITY DEVELOPMENT $46,375,447 Land Development Services $13.3 Planning & Zoning $9.9 Transportation $7.5 Other $15.7 JUDICIAL ADMINISTRATION $33,242,578 Sheriff $17.9 Circuit Court $10.5 Other $4.8 1.9% 12.3% 4.0% 1.4% 0.9% 1.3% NONDEPARTMENTAL $298,134,321 Employee Benefits $298.7 Other ($0.6) HEALTH AND WELFARE $395,234,394 Family Services $185.0 Community Services Board $109.2 Health $51.7 Neighborhood & $26.1Community Services Other $23.2 11.0% 8.3% 2.1% CENTRAL SERVICES $74,153,643 Information Technology $30.2 Tax Administration $22.6 Finance $8.4 Other $13.0 3.3% 0.8% COUNTY DEBT $118,797,992 LEGISLATIVE-EXECUTIVE FUNCTIONS $27,716,001 County Executive$6.4 County Attorney $6.4 Board of Supervisors $5.2 Other $9.7 52.7% SCHOOLS $1,889,356,380 Transfer $1,717.0 Debt Service $172.4 FY 2014 GENERAL FUND DISBURSEMENTS = $3,586,369,722 * 18 * In addition to FY 2014 revenues, available balances and transfers in are also utilized to support disbursement requirements.

  19. Question of Sustainability • County experienced robust revenue growth from FY 2000 to FY 2010 • Home values increased, on average, 8.8% per year • Commercial values increased, on average, 9.1% per year • Median Household income increased, on average 2.3% per year • From FY 2009 to FY 2014 everything changed • Home values decreased, on average, 2.4% per year • Commercial values decreased, on average, 3.1% per year • Median Household income is projected to increase, on average 1.8% per year • In the future, modest growth is anticipated • Home values are projected to grow between 2% and 3.5% for the next several years • Commercial values are growing at 1% or less

  20. The FY 2015 Forecast Preliminary revenue estimates project increase of less than 3% One-time balances were used in prior years Forecasted disbursement needs, based on drivers mentioned previously, are anticipated to increase at approximately 3.25% or $116.6 million So an imbalance of $32 million needs to be addressed (based on the last official forecast)

  21. Budget Drivers Some of the major factors contributing towards the projected budget shortfalls in FY 2015 and FY 2016: Utility Costs Inflation Operations of the Silver Line Contractual obligations Contract rate increases Slow economic recovery Compensation and benefits Pay adjustments Health benefits Employer contribution for retirement benefits • Population Growth • School Enrollment Growth • School ESOL Growth • Reduced funding from the State • Federal Sequestration • Public Safety requirements • Fairfax-Falls Church Community Services Board (CSB): • Infant Toddler Connection (ITC) program growth • Intellectual Disabilities (ID) program growth • Safety Net programs • One-Time Balances used in FY 2014

  22. The Disbursement Forecast Increases include: Fairfax County Public Schools $ 40.7m Pay and Benefits $ 37.4m 69 New Positions $ 9.5m All Other $ 29.0m $116.6m

  23. How You Can Help Us With The Challenge • Today, we will discuss: • What are the important priorities for County decision-makers to keep in mind when developing the multi-year budget? You will each receive 3 “dots” to place as you choose on the Board’s designated priorities. • Ideas you have for meeting the budget challenges. You will have a discussion in your small groups and then report out to the larger group.

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