County Budget Cuts, Tax Hikes on the Table Next Year

(Updated at 4:45 p.m.) Facing a potential $41-56 million budget gap, the Arlington County Board is signalling that service cuts and tax rate hikes may be included in next year’s budget.

At its Tuesday meeting, the Board provided guidance to County Manager Mark Schwartz on the upcoming Fiscal Year 2022 budget, covering July 2021 through June 2022. Underlying it all is a big drop in tax and fee revenue caused by the pandemic.

“Our challenge in Fiscal Year 2022 will be to support our community as it continues to deal with an unprecedented medical, economic and educational emergency, even as the County faces continued fiscal uncertainty,” Board Chair Libby Garvey said in a statement.

“Our guidance to the Manager today starts what I expect to be a difficult conversation with our community about priorities, cuts to programs and services, and potential tax increases over the coming months, as we focus our limited resources on defeating this deadly virus, preserving our social safety net, protecting public health, and supporting our students and those in our community who face food and housing insecurity,” she said. “While the budget situation is serious, Arlington’s financial fundamentals remain strong.”

In a press release, the Board detailed what they want Schwartz to include in his proposed budget next year, including:

• “Reducing programs and services where necessary”
• “Consider a real tax rate increase, increased cigarette taxes, and a plastic bag tax”
• “Fund affordable housing, with a primary focus on preventing evictions and providing housing grants”
• “Food assistance, COVID-19 testing, contact tracing, personal protective equipment, and an anticipated vaccine program for the virus”
• “Funding… to implement Rank Choice Voting in Arlington…  and the Police Practices Group’s recommendations”
• Funds to open the new Long Bridge Aquatics and Fitness Facility, and a recommendation on when to open the new Lubber Run Community Center
• An evaluation of “the advantages and disadvantages of moving to a utility model for funding stormwater management”

The Board’s guidance also calls for funds to be set aside “to support collective bargaining implementation,” following the May 1, 2021 implementation of a new Virginia law that allows localities to recognize and negotiate with public employee labor unions.

While reserve funds and federal coronavirus funds may help close up to half of the anticipated budget gap, Schwartz and his staff told Board members that difficult decisions may still be necessary. County revenue from commercial real estate taxes, as well as sales and meals taxes, is down significantly.

“The bottom line” is that “there is a significant gap to close,” Arlington County Budget Director Richard Stephenson said. “It will require some tough choices in the development and adoption of the FY 2022 budget.”

Board member Matt de Ferranti asked the public to be aware that the Board is “seeking options.”

“As much as we might wish we were fully immune from economic challenges, we are not,” he said. “There won’t be good options — there will only be least bad options.”

Board member Christian Dorsey said the Board does not take the possibility of tax increases lightly, and cautioned against a budget that prioritizes other aims above the marginalized in Arlington, who have been disproportionately hit by the pandemic.

“It’s certainly not lost on me or any of you that we have a really blunt tool in adjusting real-estate taxes to raise revenue,” he said. “It’s a blunt tool that can cause harm to the people you’re seeking to try and help with other government expenditures and services.”

Arlington’s current property tax rate of $1.026 per $100 in assessed value is below that of neighboring Alexandria ($1.130) and Fairfax County ($1.1835), county staff pointed out in a presentation, though average housing prices are generally lower in both jurisdictions.

At Tuesday’s meeting the Board also approved the allocation of $22.4 million in funds left over from last year’s budget, mostly to boost the current budget. Some funding will also go towards possible county government job cuts, and to partially reopening two branch libraries.

From the press release:

The Board unanimously approved using most of the $22.4 million in funds available with the close-out of the FY 2020 Budget to address needs associated with the coronavirus pandemic in FY 2021 and FY 2022.  $13.4 million will be used to help close the significant revenue shortfall in FY 2021 based on revised revenue estimates provided in September by the County Manager.  Another $5 million will be used to offset anticipated costs in FY 2022 of continued COVID-19-related impacts on health, safety, and the economy. The Board also approved an employee separation contingent of $1.8 million and an operating contingent for the County Manager of $2.0 million for unforeseen needs.

The Board changed the Manager’s recommended allocations to shift $170,000 from the Manager’s proposed employee separation contingency allocation to fund the opening of the Westover and Shirlington branch libraries as “Library Express” locations. The facilities will provide safe, sustainable walk-in services in areas where data shows there is the most need for such services. The County plans to open the two branches in January. Operating hours will be Tuesday-Thursday, from 11 a.m. to 4 p.m. There will be a 30-minute limit for patrons inside the library, and capacity will be limited to 25 percent.

The county budget process is set to kick off in three weeks, on Dec. 9, with a virtual Budget Community Forum hosted by Schwartz.

Jo DeVoe contributed to this report