Newsletter

Fairfax County warns budget could be ‘challenging’ due to slowing real estate market, rising staff costs

The Fairfax County Government Center building (staff photo by David Taube)

Local officials are already preparing for “one of the most challenging” budget talks in years due to inflation, the changing real estate market, and staff retention challenges.

Right before the Thanksgiving holiday, Fairfax County staff offered supervisors and the school board an early look at projected revenues, expenditures, and points of potential discussion as the county and Fairfax County Public Schools (FCPS) prepare to release proposed budgets early next year.

The fiscal year 2024 budget forecast that staff presented on Nov. 22 didn’t paint a particularly rosy picture, however.

Board of Supervisors Chairman Jeff McKay called the forecast “a real mixed bag.” County staff said that generated revenue remained “healthy,” but others weren’t so sunny.

“This is probably going to be one of the most challenging budgets in my 11 years on the [school] board,” Braddock District School Board representative Megan McLaughlin said. “It’s going to be a tough one.”

Springfield District Supervisor Pat Herrity concurred, saying there wasn’t “a lot of good news in here.”

As is the case across the county, the local real estate market has been slowing due to increasing interest rates and rising prices. While it increased from last year, growth is expected to flatten going forward for the rest of 2022 and into 2023.

Fairfax County staff forecast a dip in revenues available for fiscal year 2024 (via Fairfax County)

Non-residential tax revenue is in even worse shape, at least partially due to the change in work-from-home habits resulting from the pandemic. It’s expected to increase by only 0.6% compared to last year when the growth was about 2.3% compared to 2022.

While hotel, retail, and apartment revenues are all expected to increase next year, office revenue is expected to decline between 5% and 6%, raising concerns among some supervisors and school board members.

Braddock District Supervisor James Walkinshaw said he has talked to companies in the county that have no intention of renewing office leases due to decreased need with more employees now teleworking.

He called it a “slow-moving crisis” that could create a “very significant hole” in terms of missing revenue.

“[This] is very troubling,” Walkinshaw said. “It’s a structural challenge now in our economy…I’m not confident we have our arms around what that challenge is going to look like over the next 5 to 10 years.”

New construction and transient occupancy (or lodging) tax revenue are also expected to grow, but at much lower rates than prior to the pandemic.

Real estate taxes are the largest source of revenue for the county, providing more than two-thirds of generated money. Last year, home values soared, while commercial tax revenue dropped, resulting in a 3-cent decrease in the real estate tax rate.

All told, revenue is predicted to rise by about $266 million, a 3.8% increase from last year, per the presented forecast.

However, revenue isn’t keeping pace with expenditures, due mostly to anticipated staff salary increases.

Between recruitment and retention challenges and inflation, an additional $159 million will be needed for salaries and benefits compared to the current budget — plus another $113.5 million for school staff. Adding in other costs, the county and FCPS are looking at a combined shortfall of about $125 million for fiscal year 2024, which begins July 1, 2023, staff said.

Since this is a baseline forecast, a number of county and school priorities were not taken into account, including infrastructure upgrades, increased investments in affordable housing, and an expansion of early childhood education programs.

As county staff and McKay both reiterated, the forecast is only an estimation subject to change.

“As the economic outlook is uncertain, staff is approaching FY 2024 revenue forecasting very conservatively,” the presentation said.

Adoption of the fiscal year 2024 budget remains six months away. Advertised budget plans for the county and schools will be released in February with final votes coming in May 2023.

Read the comments…

Recent Stories

Fairfax County is no longer considering a proposal to allow more housing in Wolf Trap’s Crowells Corner neighborhood. The Site-Specific Plan Amendment (SSPA) submission has been withdrawn by its nominator, county…

Police blocked off southbound Route 29 at Centrewood Drive after a fatal pedestrian crash in November (via VDOT Northern Virginia/Twitter) The Fairfax County Police Department is doubling down on traffic…

Fairfax County firefighters respond to a fire in the 1000 block of Westwood Drive (photo by M. Clark via FCFRD/Twitter) A firefighter was injured while responding to a house fire…

Inside the Fairfax City Regional Library (staff photo by Angela Woolsey) Redevelopment Proposed in Bailey’s Crossroads — “Several community members who attended a Fairfax County Planning Department presentation on a proposal…

Chris Green is one of the DMV’s finest fitness instructors. A Lululemon and South Block ambassador, he is a coach and mentor to so many. He embodies grace, positivity and motivation in ways that no one else can. If we could all learn a thing or two from him, the world would be a much better place. He does so much for others, and does so with a smile on his face 99% of the time.

He recently ruptured his Achilles and has an incredibly long and tough journey ahead. As if COVID hadn’t impacted fitness professionals enough, throw this in the mix and it’s a double, even triple whammy. CG is no longer able to work and do what he loves for the time being because of this and we’d love your support.

Read More

Submit your own Community Post here for just $99.

The Rhea Baker State Farm Agency is proud to support Shelter House in providing safe places to be during quarantine. Shelter House’s mission is to prevent and end homelessness and domestic violence. Right now they are providing over 200 hotel rooms to those in need in our community. In the past year, across all programs, Shelter House served nearly 500 households comprised of over 1,500 individuals, 60% of which were children.

Of the households that exited shelter, over 70% moved to permanent housing. The Baker Agency has served Vienna and Tysons residents and business owners since 2007 and proudly offers insurance solutions for you home, condo, auto insurance, life insurance and more. We offer complimentary reviews and coach teen drivers to safer, better drivers, and to help keep your auto insurance rates down! We are always happy to talk or text at 703-847-6880.

Submit your own Community Post here for just $99.

×

Subscribe to our mailing list