The COVID-19 outbreak has caused “one of the most sudden economic downturns we’ve ever seen,” said Alexandria City Manager Mark Jinks Tuesday afternoon, just a few hours before releasing details about Alexandria’s proposed budget revisions.
Revenues are projected to be down by more than $35.8 million through the end of this fiscal year (June 30) — a huge turnaround from a projected $5 million surplus earlier this year — and down by more than $56.4 million in the 2021 fiscal year, which starts July 1.
There are several reasons for the decline, which Jinks outlined in his written introduction to version 2.0 of the budget. Those reasons include a major decrease in consumer activity from eating out to major purchases like new cars, reduced tourism and more.
Jinks wrote: “The revenue reprojections detailed in Section 4 for FY 2020 and FY 2021 show major declines in consumer-based taxes such as sales, restaurant meals, transient occupancy and personal property. These taxes are founded on consumers’ ability to pay and confidence in their current and future economic conditions. Economists project that with billions of dollars in investment losses and tens of millions of job losses, consumers will be cautious about buying new cars and other goods, eating out and spending on leisure travel. All of these consumer choices impact the City’s tax revenue collections. As the business segment suffers economic declines, business license and business equipment tax revenues will also decline, as will ancillary City revenues such as parking meter fees and parking ticket fines. Declining interest rates will also mean precipitous declines on what the City earns on its short-term cash investments.”
The full document is available at the bottom of this page.
The budget, overall, is “highly speculative,” Jinks said on the Tuesday afternoon conference call. "We do not know how long the COVID-19 virus is going to impact the economy, we do not know how long it will take our businesses to get back up on their feet, and we do not know how many of those businesses will not be able to get back on their feet, despite their efforts and the efforts of the City and the federal government to help get the economy back. So, during the next fiscal year, we will have a lot of uncertainty.”
In addition to uncertainty around the timing of our local economic recovery, it is not clear how much funding the City, the Alexandria Transit Co. (DASH), the school system and other entities will receive from the $2 trillion federal stimulus program. Federal money will close some of the gaps in the budget, but likely not all of them.
The silver lining: The City of Alexandria had gone through a lengthy prioritization process as part of the regular budget planning process in February, before the coronavirus outbreak changed all financial projections. City officials were able to go back to those priorities for guidance in planning this new budget.
Still, Jinks said, he couldn’t imagine going through this 10 years ago. The City’ technology capabilities with document sharing, virtual meetings and remote working made it possible for City staff to put in long hours at a safe physical distance.
Real Estate Tax Increase Deferred
To give homeowners and other property owners some breathing room, the planned increased in property taxes will be deferred. While the City could certainly use the revenue and real estate taxes give the city’s budget an “anchor,” that revenue was earmarked for Capital Improvement Projects that can be delayed a bit, Jinks said.
“An increase in the tax rate adds an additional burden to homeowners and other property owners,” Jinks said. “I think you’ll see the rest of Northern Virginia will largely follow suit on not raising tax rates that were proposed, and so by keeping the existing rates, we think that is a way of tempering the fiscal impact upon property owners.”
The tax increases were meant to fund specific projects, not fund the general operating budget.
“In looking at the projects they were intended to fund: They have merit, but do they have to be done in fiscal ’21 at the level the funding was proposed? I think the answer can be, and my recommendation is, that they can be deferred.”
The tax rate increases would have been directed toward improvements and changes to Waterfront Park and Old Town flood mitigation, and major renovations to the Minnie Howard Campus of T.C. Williams High School.
Those projects will move forward, just not as quickly as originally planned. There are sufficient funds to continue planning these projects and preparing for them, but it is now unlikely any contracts will be signed until the 2023 fiscal year.
A number of Capital Improvement Projects (CIPs) will be delayed or deferred because of the new economic reality.
In addition to the Waterfront and Minnie Howard projects noted above, the City will delay a number of other projects, including an assessment of the City’s fuel station at Wheeler Ave., a renovation of the Health Department Building (the department will still move as planned to the Mark Center), open-space acquisition funding and more.
The rebuilding of Douglas MacArthur Elementary School and plans for MacArthur students to temporarily attend school at the old Patrick Henry school are still in place and will proceed as originally planned.
A complete listing of projects is available in the budget packet below.
City employees will also feel the new budget as the city freezes salaries, stops new hiring expect for some critical needs, and suspends merit increases. Jinks believes these hiring and pay freezes will be occurring in cities and counties across the D.C. metro area. In addition, travel and training for Alexandria employees, new vehicle expenditures will be reduced.
The City is also proposing to reduce its transfer to Alexandria City Public Schools by $7.4 million. That amount is the equivalent to what had been budgeted by ACPS for raises and related expenditures, but the decrease in funds may come from elsewhere in the school’s budget. That decision about how to rejigger the schools system's budget to handle that decrease is up to ACPS officials and the school board.
How to Participate in the New Budget Process
Jinks will present his budget recommendations to City Council and residents on April 14 at the City Council meeting. There will be a public hearing on April 18, with work sessions following on April 21 and 27. The City Council is scheduled to adopt the budget on April 29.
For details about those meetings, participation and other details, please visit alexandriava.gov/Calendar a few days before each event for relevant information.
