Arlington, VA

by Peter Rousselot March 9, 2017 at 12:15 pm 0

Peter Rousselot

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.

ARLnow.com reported last week that the County Board has approved the County Manager’s request to advertise a property tax rate for 2017 up to 2 cents higher than the current rate and potentially the highest tax rate since 2001:

County Manager Mark Schwartz said the hike would pay for what he described as the “extraordinary circumstances” facing the board in increasing costs for APS and Metro.

Failing to Carry Over Last Fall’s Close-Out Surplus

The Manager’s proposed FY 2018 budget is supposedly driven by “extraordinary circumstances” attributable to increased funding demands from APS and Metro. To close this “gap,” the Manager’s proposed budget incorporates a 2-cent property tax rate increase to generate $14.8 million.

The Manager fully highlighted these “extraordinary circumstances” last fall, but he and the County Board failed to act then to address that potential budget gap.

Metro is critical to Arlington and our entire region, and our critically-important schools are experiencing dramatic enrollment increases. Without much-needed fundamental reforms, the long-term costs represented by APS and Metro will indeed put tremendous upward pressure on Arlington’s property tax rate in every year for the foreseeable future.

However, any need to increase that rate in 2017 is entirely attributable to Arlington’s failure to follow recommendations that John Vihstadt, the Civic Federation, I and others made regarding last fall’s $17.8 million “close-out” surplus.

In a column last October, I proposed that the Board defer almost all of the proposed expenditures that the Manager recommended for that $17.8 million surplus, and hold in reserve virtually all those funds for first-priority use to bridge any budget gap for FY 2018. Instead, the Board approved spending almost all that surplus. That was a mistake that should not be repeated.

Necessary Changes at APS

As John Vihstadt noted at the County Board’s February 25 meeting to advertise a 2017 tax rate, APS’ exploding enrollment will require substantially increased funding over time, but APS should no longer be permitted to rely on a blank check from the County to provide funds for APS enrollment growth just because our schools are — and we want them to continue to be — top ranked.

Instead, the time has come for the County Board to condition increased funding on APS’ willingness to implement changes — particularly with respect to new school construction — to reduce substantially the per-student cost of new seats.

Current APS practices regarding per seat construction costs for new schools are neither necessary to sustain excellent schools nor fiscally sustainable unless other core County services are to be “crowded out” and/or we are to incur successive annual property tax rate increases that further degrade affordability for all Arlington residents.

Necessary Changes at Metro

Arlington should go on record now in support of fundamental reforms of Metro funding and governance at the interstate compact level, such as those recommended by the Federal City Council.

Conclusion

Before the FY 2018 budget review process ends this April, the County Board should:

  • direct the Manager to reserve almost all of any fall 2017 close-out surplus to lessen upward pressures on the 2018 tax rate,
  • condition any increased APS funding on APS implementation this year of reforms to lower per-seat construction costs substantially, and
  • express support for Metro reforms at the interstate compact level.

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 27, 2016 at 12:15 pm 0

Peter RousselotPeter’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.

Arlington County seeks public input on the Manager’s recommended allocation of $17.8 million in surplus “one-time” close-out funds (from FY2016) and on the Board’s proposed budget guidance to the Manager for FY 2018.

The Board will vote on both matters in November.

Discussion

Kudos to the Board and Manager for embracing reform in choosing to discuss the surplus close-out funds’ allocation and the Board’s budget guidance in October and wait to adopt them in November. This gives the public more time to weigh in before decisions are made.

Submit public comments on both matters here.

Arlington should follow certain principles to guide its decisions in allocating the close-out surplus.

  1. As a matter of prudent financial management, a fair and reasonable percentage (i.e., a % higher than 0%) of any close-out surplus always should be allocated to moderate the tax rate and/or reduce bonded indebtedness.

Adopting this principle would mean only that a fair and reasonable percentage of the FY2016 close-out surplus would be earmarked for property tax rate moderation in calendar-year 2017. Adopting this principle would NOT necessarily mean that the calendar-year 2017 property tax rate would fall, rise or remain the same. A final decision on that would be made next year.

What is “fair and reasonable?” That should depend upon the close-out surplus amount in any given year and careful consideration of public input. But the fair and reasonable percentage should be multiplied against the entire surplus, and set aside for consideration next year before any final decisions are made regarding how to allocate the remaining surplus.

Similarly, we should consider using some percentage of the close-out surplus for early debt retirement when that makes financial sense. The County’s bond capacity is limited, and retiring debt early will help free up more capacity in addition to reducing interest expense.

  1. The remainder of the close-out surplus (after setting aside a % for tax rate moderation and any debt reduction) should next be considered to address any emergency that requires funding before final adoption of the FY2018 operating budget.

An “emergency” expenditure is one that simply cannot be deferred until the FY2018 general fund (operating) budget is approved in April 2017. Reasons for not waiting until April 2017 might include the complete loss of a current vital opportunity or the strong likelihood of sharply escalating costs to meet a core government function.

However, the County should first determine whether it already has an appropriate reserve fund set aside to cover an emergency before tapping surplus close-out funds.

  1. All other proposed uses of the close-out surplus automatically should be deferred, and the remaining funds’ allocation should be decided in conjunction with the FY2018 budget process.

County Board action on all other proposed uses of close-out surplus funds should be automatically deferred until more is known about the County’s financial position in the coming calendar year. Close-out surpluses are “one-time” funds rather than ongoing revenue. They exist solely because the County collected more tax revenue than required to meet its budgeted commitments. Therefore, these funds should be used for nonrecurring expenditures (e.g., replacing a bridge, acquiring land, etc.) rather than for supplementing the County’s ongoing operating expenses.

Conclusion

The County Board should direct the Manager to reconsider his current recommendations by applying the guiding principles discussed above.

by Peter Rousselot September 15, 2016 at 12:15 pm 0

peter_rousselot_2014-12-27_for_facebookPeter’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.

As my fellow columnist Mark Kelly and I both have previously advocated, it’s time to overhaul the seriously-flawed process Arlington County government has been using to allocate any surplus funds left over at the close of the County’s fiscal year.

Discussion

Both Arlington County and Arlington Public Schools (APS) have fiscal years that end on June 30. Both the County and APS are required by law to adopt a balanced budget. In many years, Arlington County has closed its fiscal year with substantial surpluses. Since APS receives the lion’s share of its revenues from the County under a revenue-sharing arrangement, APS automatically receives its defined pro-rata share of any locally-generated Arlington County revenue surpluses.

However, in past years, each Board has utilized sharply-contrasting processes for deciding what to do with any such surpluses.

School Board’s Current Close-out Process

The School Board first receives, posts on its website, and discusses in a public meeting its staff’s recommendations regarding how to allocate any surplus funds. But, the School Board does not vote on its staff’s proposal until the following month. This process allows the School Board to:

  • discuss the initial APS staff recommendations at a public meeting, and
  • receive a public report from the APS Budget Advisory Committee, and
  • wait a month to get further input from the general public, before finally
  • adopting the final allocation of any APS surplus funds.

County Board’s Current Close-out Process

The County Board’s current close-out process is seriously flawed because it fails to provide the extra month for input from the general public that the School Board’s process provides. For example, last November, the County Board approved $21.8 million in new spending from surplus funds without providing that extra 30-day public review and comment period.

In 2015, the general public was denied a reasonable opportunity to discuss and comment about the Acting County Manager’s recommendation that this was the very best way to allocate last year’s $21.8 million revenue surplus:

  • $1 million for economic development, including incentives to attract new businesses to Arlington
  • $7.8 million for land purchases and other capital investment, including schools
  • $0.8 million for a “larger than anticipated” class of fire recruits
  • $11.2 million to maintain investments in the Affordable Housing Investment Fund and housing grants
  • $1 million for any unexpected needs or issues that may arise next year

Many activists allege that County staff deliberately overestimate expenses and underestimate revenues in the operating budget the County adopts each spring. These activists claim that staff does this so that during the following fall’s fiscal year close-out, the County government can take advantage of a public review and comment period that bears little resemblance to the far more lengthy spring review and comment period that the full operating budget annually receives.

County staff have indignantly countered that any such suggestions are false because the County’s spring budgeting approach simply demonstrates prudent financial planning for which the staff should be praised not criticized.

It isn’t necessary to resolve this continued annual debate over motive, because there is a far better process available to guard against the possibility that the staff’s motives might be suspect.

Conclusion

Starting this fall, the County Board should adopt a new fiscal year close-out process similar to the process long utilized by the School Board.

by Peter Rousselot November 12, 2015 at 12:15 pm 0

peter_rousselot_2014-12-27_for_facebookPeter’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.

Early in 2016, the new County Board should overhaul the seriously-flawed process the current County Board uses to allocate any surplus funds left over at the close of the County’s fiscal year.

Background

Both the County Board and the School Board have fiscal years that end on June 30. Each Board is required, by law, to adopt a balanced budget. In many years, the County Board has closed its fiscal year with substantial surpluses. Since the School Board receives the lion’s share of its revenues from the County Board, the School Board receives a pro-rata share of any such locally-generated surpluses.

However, each Board currently has very different processes for deciding what to do with such surpluses. The School Board’s approach is far superior to the County Board’s approach.

Discussion

At its Nov. 19 meeting, the County Board is scheduled to vote to allocate tens of millions of dollars in prior fiscal year surplus funds. The County Board has scheduled that vote based on a proposed allocation contained in a staff report not posted on the County website when this column was submitted to ARLnow.com. This is exactly the same process the County Board has followed for years. You can review last year’s County staff report’s recommendations regarding how to allocate prior fiscal year surplus funds here.

Many activists believe that the County overestimates expenses and underestimates revenues in the operating budget it adopts each spring. They claim the County does this deliberately so that during the following fall’s fiscal year close-out, the County can eliminate a public review of its close-out recommendations comparable to the public review the budget receives in the spring. County staff counters indignantly that any such suggestions are false because the County’s spring budgeting approach simply demonstrates prudent financial planning for which the staff should be praised.

It isn’t necessary to resolve this heated annual debate over motive because there is a far better process available to guard against the possibility that the activists are correct.

The School Board first receives, posts on its website, and discusses in a public meeting its staff’s recommendations regarding how to allocate any surplus funds. But, the School Board does not vote on its staff’s proposal until the following month. This much fairer and more transparent process allows the School Board to:

  • discuss the initial APS staff recommendations at a public meeting,
  • receive a public report from the APS Budget Advisory Committee, and
  • wait a month to get further input from the general public, before finally
  • adopting the final allocation of any APS surplus funds.

Conclusion

The new County Board should adopt the School Board’s close-out process.

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.

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