Ken Elston
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Monthly Archives: May 2017

New Manassas Tax Rate

When I decided to run for Council, Jackson Miller told me that I was making a mistake, because I was, he said at the time, liked by my neighbors. I announce the Christmas parade, was a lay leader in the church, volunteer in the community, and, sure enough, as soon as I announced my willingness to join the Council, a part of the population was immediately “against” me. Serving in the city is a balancing act of time and energy management. With a demanding job and a family I enjoy spending time with, sacrifices have to be made to attend the meetings and the readings and the hours of committee work. What makes these kinds of sacrifices worth it? The answer: doing good for the community. I ran because I saw that our City Council was pushing major projects down the road consistently. I was concerned that major costs [like $2.5M in shared services with the jail], were common knowledge but not sufficiently addressed at budget time. Did anyone think that important projects were going to get any cheaper, or were they going to get any less necessary for the community?
With the FY18 budget, we have an opportunity to fully fund the city manager’s proposed operating budget, and allow our staff to get on with the good work. And, we have an opportunity to make a very important investment in our community. It’s easy to bang the drum to raise the battle cry of no more taxes. Let’s face it, who like to pay taxes? But, as is the case with so much of governing, the issue at hand is complex and nuanced. Budgets shouldn’t really be a partisan issue, this is something that is in everyone’s interest to get right.
It may be a little harder to tell the story of saving money in the long run and committing to a strategic plan, but that is just what we are doing with this budget. I want to end a cycle of putting things off, costing the city more, and I want to protect our credit rating, as well as protect our citizens from spikes in taxes. Those projected tax spikes are in potential budget projections, and available in the budget documents.
Trying to put the city on a sustainable and secure financial footing is my goal. I will not play political football with the tax rate. Citizens should know that there are many positives represented in this budget for our city, and I will try and clarify a few thoughts here.

The tax rate always receives loads of attention and investigation.
The tax rate in the city, between 1993 and 2017, when one removes the dedicated Fire and Rescue Levy, declined 1%- from a 1993 rate of $1.24 to a 2017 rate (minus the levy) of $1.22. Tax revenue has not kept up with inflation…by a long shot. Inflation since 1993 has been over 50%. Long-term citizens can look at that rate history in this Northern Virginia community as one heck of a cumulative savings over many years, and it is fair to recognize that such financial decisions have played a significant role in the look, growth and changes in the City of Manassas. What also should be recognized is that those many years of stagnant rates have left an important need to address the question of sufficiency within the budget. Does the tax rate support the strategic plans of the city?
Some citizens have made it very clear that they feel the pain of taxation. My family does, too. I teach at a state school. We have two kids in school, one of them in college. While many of us feel the burden of paying our taxes, Manassas City has one of the lowest tax burdens in Northern Virginia. There is a difference between the tax rate and the tax burden.
Even though the tax RATE is relatively high in the region, the ACTUAL BILLS are relatively low for the region, mainly due to low assessments compared with the rest of Northern Virginia. It may be important to clarify that I have supported tax relief for the hardest hit and least able to pay, and Manassas has one of the most generous tax relief programs in the region. Veterans, the elderly, and the working poor do have access to relief, as well as important services.
In hearing from citizens about this issue, some have brought varying tax inflations to us; however, upon investigation, these variances from the city’s actual percentages have been because the home values have risen. Many citizens were able to take advantage of the financial crisis in the housing market. Houses were purchased through foreclosure and short sale, at deep discounts. For most of us who own homes, our residence is our major investment. An increase in that value, after a shrewd investment, is a major net positive for the owner, and the increase in assessment validates that. Others have improved their homes, and the City is working to encourage reinvestment and make that easier and more attractive to homeowners to do so.
I have worked to support economic development and encourage business growth in the City. I do that because it helps to shift and share the tax burden. Investment pays dividends to our citizens. Quality of life goes up. We attract businesses and professionals to the city. Is that important? Well, the analysis I saw from what just one business, Micron, adds to the city economy showed that every dollar of city investment in that business brought seven to the city. Investment is a powerful tool leaders have to build a brighter civic future.

Citizens and leaders have validated city needs that require attention.
Most citizens do not mind committing to a share of services, improvements, and a better future for our city. This assessment is based in personal experience and scientific research. Citizen willingness to share the load is based in the excellent return they get for that investment, in terms of services and quality of life, as well as a feeling of contributing to the enterprise of community. Again, citizen surveys drove final staff recommendations represented in the CIP. We pay for those surveys. We pay for analysis and staff. We also pay for financial advice.
Financial advisors, Davenport and Co., have said that the City must demonstrate a commitment to investment. They also recommended that the tax adjustment, setting aside money to fully fund the CIP, should happen sooner, rather than later. That same analysis shows that tax rates would have to jump steeply- over 5 cents- in near future years, if we do not plan ahead. Doing a smaller raise in taxes now minimizes rate shock and benefits family budgets in the long run. It saves taxpayer money.
Last year, based on Council discussions and citizen surveys, the Council voted- unanimously- to support the CIP. There have been some changes made to that plan; however, there has been no new debt added to that five-year CIP in this new budget. Some of the support from Council seems to have evaporated in the face of actual funding requirements. Citizens might question their representatives’ intentions. Are leaders committed to maintaining infrastructure? Modernizing? Catching up in areas that have been neglected? Are they committed to keeping the city competitive in Northern Virginia? To the strategy they offered staff to guide budget development?

I am not alone in pushing for transparency in communication with citizens and for easier, faster communication. While not every wish can be attained and not every idea can be pursued, there can and should be greater communication. Too often, comments in social media are too simplistic, misleading or intended to cause emotional impact. Neighbors reached out to me to add to the public discourse on social media, however, I prefer to be careful, thoughtful and accurate, and I have no wish to be at odds with any of my neighbors even when we have honest disagreements. That said, investment in the community [be that land acquisition, park and trails development, public safety facilities, ball fields, road improvements, incentives for economic development] requires planning for financial capacity. It may not be a wise practice to advertise a willingness to sacrifice public assets (like land) to any plan that allows us to save short-term dollars. The city is in a stronger position when we have reserves intended to address needs.
Past Councils have kicked the can down the road time and time again, rather than provide consistent and predictable support for the City’s needs. No one really believes that costs for major projects will go down in future. Costs generally go up. It is the value of the dollar that tends to go down. How much of taxpayer money has been wasted through penny-wise/pound-foolish planning? We have moved to change that wasteful and damaging process.

The AAA Bond Rating is something to be celebrated and protected.
The better the bond rating, the cheaper the city’s cost to borrow for major projects. It is also a boon to attracting businesses, because the bond predicts a city’s probability of default. Triple A means that probability is pretty much at 0%, so bring your business to our stable community.
The bond rating is a snap shot of financial health. Part of that health is based on the reserves that some of us fought hard to get into the budget over just the past few years. Committing to reserves protects and strengthens the rating. Far more importantly, it creates sufficient capacity for the city to accomplish goals.
There are things that a bond rating review does not supply. For instance, it does not look at the state of the infrastructure. As an analogy, an individual might have a great credit score, but the home they live in might have a roof that is caving in. The roof has to be fixed, right? That great credit score will help that individual do that, but the individual has to act and manage the costs in such a way that the great credit score isn’t damaged by that new debt.
Past Councils changed city policy to lower the percentage of budget that MUST BE kept in reserve. Those Council decisions allowed the city to spend large portions of what should have been reserves. This practice has a negative effect on capacity, and it had to be addressed before the bond rating could improve. Financial advisors have also counseled the city to address the level of outstanding bonds per capita. Between 2006 and 2013, total outstanding bonds dropped 32% (from around 76.3M to about 49.3M]. Outstanding bonds per capita dropped more steeply (45%- from $2,150 to $1,183). The City has allowed its debt service to fall off, without building significant reserves. This does not indicate a commitment to invest in the city. Simply, we have to remain competitive with our neighboring jurisdictions, and, with this budget, we are just getting back to normalized civic investment.
On page 307 of the FY18 budget, titled Debt Management, take a look at the Ending Fund Balance line to the right of the page. It zeroes in 2027, but the proposed pre-CIP funding funds projects to 2022. So what happens if we don’t look further down the road? 2023-2027 would require additional funding. That’s higher taxation. Strategic planning now puts us in a much better financial situation to manage things financially and smooth the impact to our families over the years. In other words, some Council Members are working to avoid tax spikes to families in the future.