Arlington, VA

by Peter Rousselot September 26, 2013 at 1:00 pm 0

Peter’s Take is a weekly opinion column. The views and opinions expressed in this column are those of the author and do not necessarily reflect the views of ARLnow.com.

Peter RousselotIn a column last month, I urged Arlington County to explain the enormous growth in the size of its cash surplus relative to its operating budget.

Deputy County Manager Mark Schwartz took the time to write a detailed response. Mark deserves kudos for providing it.

Mark’s response presents some explanations that make sense, but provides other material that is cause for significant concern. Since Mark has referenced too much material to address adequately in one column, I’ll discuss today two aspects of that material: general cash management policy and the transportation capital fund.

General Cash Management Policy

The material Mark presented reveals the lack of a coherent, consistent policy for when, how, and under what circumstances taxpayer-funded cash ought to be accumulated in, and then spent from, the multiple different types of Arlington County funds he described.

Some funds have very specific purposes, accumulate cash for a short time, and then spend that cash on the purposes specified. That’s good, but the county ought to have a policy to do that for all its cash surplus funds.

By contrast, Arlington Public Schools does have a coherent, consistent cash management policy that is designed to apply to all its cash surplus funds: At APS, the fund balances don’t just sit there and grow indefinitely.

Transportation Capital Fund

Arlington County’s Transportation Capital Fund (TCF) is an example of a fund that is accumulating taxpayer cash without any adequate explanation for how and when the money will be spent.

Moreover, the following critical TCF details are missing:

  1. the expected cost of each of the individual projects specifically mentioned;
  2. how the total cost of all projects specifically mentioned compares with the total amount of money accumulated in the fund;
  3. the financing plans for any shortfall between the total cost of all projects specifically mentioned and the total amount in the fund, and
  4. how the county proposes to pay for other known and desired, but unmentioned, projects that are eligible for payment out of the fund.

Frankly, this lack of transparency with respect to the TCF suggests one of two things:

  1. lack of effective planning, or
  2. a cynical attempt to hide the county’s true intentions for deploying scarce taxpayer dollars.

Either way, this is not good financial management.

Peter Rousselot is a former member of the Central Committee of the Democratic Party of Virginia and former chair of the Arlington County Democratic Committee.

by Peter Rousselot August 22, 2013 at 1:00 pm 1,062 0

Peter’s Take is a weekly opinion column. The views and opinions expressed in this column are those of the author and do not necessarily reflect the views of ARLnow.com.

Peter RousselotIs Arlington’s cash surplus too large?

It’s a $200 million question in search of persuasive answers.

In an important letter published in the Arlington Sun Gazette last week, Arlington civic activist David North explained why he believes that Arlington’s cash surplus is way too large. David makes a good case that in a relatively prosperous county like ours, a cash surplus, general contingency fund in the range of no more than $100 million is about right. $100 million represents about 10 percent of Arlington’s current total operating budget.

However, in the earlier Sun Gazette story that prompted David’s letter, it was revealed that Arlington’s actual cash surplus is about $300 million.

A decade ago, Arlington’s then-$70 million cash surplus was in line with David’s rule of thumb. That $70 million cash surplus represented about 10% of Arlington’s FY 2004 total operating budget.

But today, Arlington’s $300 million cash surplus is about 30 percent of Arlington’s FY 2014 total operating budget.

Are there persuasive reasons that Arlington’s cash surplus needs to be $200 million more than the $100 million general contingency fund that David North recommends? Maybe, but Arlington County has not provided such reasons.

Theoretically, Arlington might be able to justify laying aside the extra $200 million if it could explain persuasively that none of the extra $200 million is part of a general contingency fund at all. Instead, Arlington theoretically might be able to convince reasonable people that:

  • all of the extra $200 million is earmarked for specific worthwhile projects or other uses that the Board has approved, and
  • it is necessary to accumulate in advance all or part of what it is going to cost to pay for those projects or uses.

But, if Arlington cannot provide a persuasive explanation for the need to retain the extra $200 million in cash, it ought to proceed to redirect these funds into alternative uses. Finally, Arlington needs to reassure the public that at least $100 million of the $300 million actually is set aside in a general contingency fund.

What Arlington is doing fairly could be described as unilateral layaway financing. Desi Arnaz, a 1950s comedian, would have known what to say in this situation, “Arlington, you’ve got some ‘splainin’ to do.”

Peter Rousselot is a former member of the Central Committee of the Democratic Party of Virginia and former chair of the Arlington County Democratic Committee.

by Peter Rousselot October 9, 2019 at 3:30 pm 0

Peter’s Take is a weekly opinion column. The views and opinions expressed in this column are those of the author and do not necessarily reflect the views of ARLnow.com.

If the County Manager follows recent practice, he soon will propose how to spend any budget surplus remaining after closing out Arlington’s budget for fiscal year (FY) 2019, which ended June 30.

What percentage of this “close-out surplus” will the Manager propose to spend immediately?

What’s been happening

Typically, 47% of surplus dollars are automatically allocated to APS under a revenue-sharing agreement. Most of the remaining surplus is often allocated to “commitments already made by the Board.” Missing is a clear, written statement explaining how, when and why such “commitments” were made. Also missing is a written, publicly available policy clearly defining a “one-time” expenditure, and why “one-time” surplus funds are frequently spent on recurring needs.

Recently, the County Manager has reduced the close-out-surplus amount somewhat from previous years — when annual close-out surpluses ran as large as $36 million. But neither the Manager nor the County Board has fully adopted a key reform proposal recommended by the Arlington County Civic Federation (Civ Fed):

In 2016, Civ Fed passed a resolution urging “the Arlington County Board to annually consider setting aside a fair and reasonable amount of any surplus for the reduction of real estate taxes.”

Because the Board has allowed the Manager to allocate, or spend, almost all surplus cash at closeout without waiting until the following Spring when needs or shortfalls in the coming fiscal year are known with greater certainty, decisions on how millions of dollars are spent remain largely beyond taxpayers’ scrutiny.

Beyond the “close-out surplus”

What the Manager and the public generally call the “close-out surplus” reflects only a small part of the County’s overall surplus cash on hand. Once allocated, surplus funds end up in what is called the County’s “Fund Balance,” similar to what we would think of as a savings account. With these huge cash surpluses accruing year after year (some of which remain allocated but unspent for long periods of time), the size of Arlington’s Fund Balance has grown very large.

For example, as of June 30, 2018, the County reported combined fund cash balances of $634.8 million.

Do you know if, when, where, and how Arlington plans to spend the current Fund Balance?

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by Peter Rousselot October 2, 2019 at 2:30 pm 0

Peter’s Take is a weekly opinion column. The views and opinions expressed in this column are those of the author and do not necessarily reflect the views of ARLnow.com.

On September 23, APS posted the latest version of its Arlington Facilities and Student Accommodation Plan (“AFSAP plan”). This 78-page plan is based on APS’ latest estimates of enrollment growth.

Highlights of the AFSAP plan include huge projected seat deficits at the elementary and middle school levels over the next Capital Improvement Plan time horizon. There are no specifics about exactly where many of these needed new seats will be located nor how they will be financed.

Elementary school seat deficit

The elementary school seat deficit is particularly troubling.

The 10-year projections establish a need for nearly 2,500 more permanent elementary school seats county wide in Fall 2028-29.

Initial social media commentary on the AFSAP plan criticized APS for not being more creative about design options:

“WHY IS KEY ELEMENTARY 2 STORIES? Seriously, though, we own property practically beside the Metro, in the shadow of 10+ story buildings. Build up! (And I’m a Key parent-the lot could host Key and a neighborhood school).”

APS certainly needs a design makeover: up not out; preservation of mature trees and green space right at design outset; provide only facilities critical to instruction. But the core problem the AFSAP plan exposes is the glacial pace of County and School Board members in producing a long-range plan locating new school seats at specific sites–four years (!) after the Community Facilities Study Group’s recommendations.

Amazon

Amazon’s new HQ injects an even greater sense of urgency into providing the missing plans.

In a late 2018 interview, then County Board Chair Katie Cristol tried to downplay Amazon’s impact on our schools:

“[T]he increasing tax base coming from [Amazon]…will more than supplement [the increase in student population attributable to new Amazon employees living here].”

But Cristol didn’t address whether these incremental revenues would be more than offset on net by increased costs attributable to new residents (both Amazon employees and others).

Moreover, APS won’t be the only public claimant for the incremental revenues we hope Amazon will generate. There will be enormous other public claims on those revenues. Arlington is dragging its feet by failing to produce a long-range public facilities financing plan that resolves these competing claims in a site-specific way.

Arlington has failed to develop an integrated, community-supported, long-range financing plan for all necessary new public facilities (including, but not limited to, schools)

Will we have the bond capacity to make all the transportation (including Metro), schools, parks, fire stations, affordable housing and other public investments that will be required? Will we have such bond capacity under several different, but all plausible, alternative economic scenarios? Note: as taxes increase to meet these added costs, those tax increases will inflate the costs of many other items, including “affordable” housing. Are there one-time alternatives to bond financing, e.g., the County’s huge surplus cash reserves

When asked to choose among needing more new school seats, new acres of park open space, and new units of affordable housing, we don’t know now how the community would prioritize those choices because the community hasn’t been asked.

Conclusion

The APS Advisory Council on School Facilities and Capital Programs (FAC) prepared an excellent 2018 report on future school facilities needs. But many of that report’s recommendations have not progressed due to the lack of an appropriate sense of urgency by the County and School Boards.

Successful long-range facilities planning must follow these principles:

  • publication of several alternative financial scenarios and their direct costs, opportunity costs, and benefits
  • soliciting and honoring the community’s priorities among those scenarios
  • specific goals and timetables by which critical decisions must be made
  • accountability for meeting those goals and timetables

Arlington lacks such a long-range plan today because it has failed to follow these principles.

A highly credentialed and knowledgeable APS activist provided me with this assessment of the new AFSAP plan:

“What’s not discussed here is that we need to create 3,347 additional seats over the last CIP. That roughly translates to another $250M (not including land acquisition costs) over the [last] CIP.”

When, where, and how soon will the missing plans be provided?

Peter Rousselot previously served as Chair of the Fiscal Affairs Advisory Commission (FAAC) to the Arlington County Board and as Co-Chair of the Advisory Council on Instruction (ACI) to the Arlington School Board. He is also a former Chair of the Arlington County Democratic Committee (ACDC) and a former member of the Central Committee of the Democratic Party of Virginia (DPVA). He currently serves as a board member of the Together Virginia PAC-a political action committee dedicated to identifying, helping and advising Democratic candidates in rural Virginia.

by Peter Rousselot April 12, 2018 at 2:45 pm 0

Peter’s Take is a weekly opinion column. The views and opinions expressed in this column are those of the author and do not necessarily reflect the views of ARLnow.com.

In two columns last fall, I asked: Does County government commit too much surplus revenue for spending?

Progress on unallocated closeout surplus

In his proposed FY 2019 budget, County Manager Mark Schwartz notes that he has whittled down the level of surplus funds available at closeout.

“[T]he amount of funds that are ‘discretionary’ for allocation at closeout have been reduced annually ($11.1 million in FY 2017, compared to $17.8 million in FY 2016 and $21.8 million in FY 2015). Of those closeout funds that have been made available, immediate spending has been limited to commitments already made by the Board or for emergency needs,” the budget wrote.

This is a positive step.

More budget reforms

However, of these closeout funds, the majority remaining after allocating the APS revenue-sharing portion is automatically allocated to “commitments already made by the Board.” Missing is a clear, written policy explaining how, when and why these other “commitments” were made.

The County Board essentially has allowed the manager to allocate/spend the remaining closeout funds without adequate opportunities for residents to weigh in on millions of dollars of spending.

The Civic Federation has asked that a fair and reasonable portion of surplus funds be plowed back into the coming-fiscal-year budget to reduce the need for a tax-rate increase. County officials, however, claim that best practices dictate that surplus funds be used only for “one-time” purposes since the county cannot rely on future surpluses to meet ongoing needs.

But there is no written, publicly available policy clearly defining what a “one-time” expenditure is, and this “one-time” money is often spent on recurring needs.

What experts say

At a County Board work session last spring, Public Financial Management, Inc. (PFM) described how other jurisdictions manage their fund balance accounts.

PFM noted that Fairfax, Loudoun and Prince William counties have a 10 percent operating/contingency reserve, twice Arlington’s level.

PFM also observed that:

  • Arlington’s General Fund reserve policy levels are below the median level and among the lowest in the triple-A group (Arlington’s bond-rating peer group).
  • FY 2016 is the second consecutive year of decline in the General Fund balance ratio, and this could begin to concern Moody’s, if it becomes a trend.

More County Board oversight

Too often, committed and allocated funds are established in the fund balance with substantial cash accumulating over time, apparently with little or no monitoring of the reasonableness of the balances. New York State’s Local Government Management Guide on Reserve Funds warns against this.

“Reserve funds should not be merely a ‘parking lot’ for excess cash or fund balances,” the guide wrote. 

The County Board should answer questions like these:

  • Has the financial purpose served by each reserve fund been identified and published?
  • Has a written reserve fund policy been developed and published?
  • Has the Board reviewed all reserve funds currently established, and determined if the balances in each are reasonable?

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by Peter Rousselot October 26, 2017 at 10:30 am 0

Peter’s Take is a weekly opinion column. The views and opinions expressed in this column are those of the author and do not necessarily reflect the views of ARLnow.com.

In last week’s column, I discussed the County’s General Fund (GF) Fund Balance. The County Manager subsequently posted a proposed FY 2017 Close-Out Report and 5-year budget forecast.

The 5-year budget forecast projects ballooning deficits in the out years.

Past Practices and Policies

Based on past County Board actions and policies, the County Manager historically has allocated the majority of any close-out surplus either to a spending category or, if needed, to keep the County’s reserves at the current required minimum (5 percent of operating expenditures).

The Manager also typically has identified a small remaining portion of the surplus (the available balance) that has not yet been allocated to any purpose. Over a seven-year period, this unallocated surplus has ranged from $36.1 million (FY 2012) to $11.1 million (FY 2017). Every penny of surplus revenue exceeding the dedicated 5 percent minimum operating reserve gets allocated to spending.

Last week, I posed this question:

Does County government commit or earmark too much surplus revenue for spending rather than beefing up reserves or offsetting tax or fee increases?

The answer is: yes. Therefore, the County Board should act this November to change or clarify the County’s policies regarding both allocated (particularly the “assigned” or earmarked portion) and unallocated close-out surplus funds. This transition might take more than one year because organizations and individuals have planned based on the County’s current seriously-flawed approach.

Increasing Reserves

Because the County holds a large balance of earmarked/assigned funds in its GF Fund Balance ($51,946,981 million in FY2016), it has argued that it has sufficient flexibility, and doesn’t need more than a 5 percent operating reserve.

The credit/bond rating agencies (Fitch, S&P and Moody’s), however, view this earmarked money as being of questionable availability to pay debts. So, they recommend that the County raise its dedicated operating reserve toward 10 percent. 

Offsetting Tax Increases

In 2016, the Civic Federation passed a resolution asking the County Board to use a “fair and reasonable” portion of the close-out surplus to offset tax increases.

Why? Because the cumulative impact of successive real estate tax increases (a combination of assessment and/or tax-rate increases) has become burdensome for many County residents and businesses, as The Washington Post has documented:

These cumulative increases — assessment or tax rate, or both — make housing less affordable for all Arlingtonians, and render our expensive commercial office space less competitive (as tax increases are passed along to tenants by property owners).

Real estate tax increases disproportionately harm residents living in the County’s committed “affordable” housing units — undermining the housing subsidies the County provides — as well as those lower/middle-income and fixed-income residents who receive no County housing subsidy.

Conclusion

The County Board should act this November to change or clarify Arlington County’s current seriously-flawed approach to allocating close-out surplus funds. This is a major issue that extends far beyond the unallocated surplus (this year: $11.1 million).

Whether the County Board chooses to lessen the impact of tax increases in the upcoming fiscal year, add to dedicated reserves or simply stash the cash in a flexible “unassigned” category, Arlington County’s current approach of spending or earmarking every penny of surplus revenue isn’t in our community’s best interests.

The current “budget roundtables” could be strengthened substantially if the public were offered a manageable number of choices, each of which would eliminate the ballooning five-year deficits forecast by the Manager.

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