Blog posts are the personal views of Letty Hardi and not official statements or records on behalf of the Falls Church City Council

Dear Friends,

I hope your December is off to a good start – somehow we’re down to just 3 weeks left in the year! We’re wrapping up city business at our final meeting next Monday night, where we will issue “budget guidance” for the upcoming fiscal year. I’ll share the initial local revenue forecast we heard in our annual City Council-School Board dinner, which includes a very healthy 6% revenue growth. I’ll also share highlights from a regional economic forecast from the Stephen Fuller Institute. Read on to understand what this means for next year’s tax bills – I’d welcome your thoughts.

Before Thanksgiving, we did vote to advance the Accessory Dwelling proposal for further board and commission and community feedback. There are a few notable changes to the draft proposal in response to your input, including prohibiting short term rentals in any future accessory dwellings that get built. Stay tuned for more engagement opportunities in 2025, ahead of a final vote in April 2025.

Besides our meeting next Monday night, you can also catch us at our final office hours of 2025 next Wednesday morning.

Stay warm,
Letty

PS – Santamobile starts tonight!

What Happened This Week:

(1) FY26 Revenue Forecast

Here’s the TL;DR, with the slide deck here for those who want to dive deeper:

• Falls Church will outperform our neighboring localities with a projected 5.9% revenue growth next year, primarily because we don’t have the high commercial vacancies which drag down property values. Note our neighbors’ revenues will be much more tepid, if not flat.
• New construction and economic development efforts in the City will produce 50% of the expected growth in revenue for the City in next year’s budget. Without that growth, the City revenue forecast would be a more modest 2.9%.
• Because the City continues to be a desirable place to live with limited housing supply, residential property values, and therefore assessments, are projected to increase around 6%. At the current $1.21 tax rate, that means the median homeowner’s tax bill will increase $529 next year.

• With revenues from new growth, the City also faces population and school enrollment growth, which puts upward pressure on costs. We also heard the schools’ presentation on enrollment projections and budget needs. The schools expect 159 more students next year, a 5.8% increase over last year.
• In total, the preliminary school budget request will be an 8% increase over last year – 2% more than our revenue growth, which results in a $2M budget gap.
• The details for the schools’ $5M additional budget request is here, with $1M out of the $5M for new teachers for enrollment growth and the remaining $4M for other needs.

(2) Regional Economic Outlook

Several of us attended a program with a regional economic forecast, which was pretty sobering. Coupled with much uncertainty ahead on top of a weak regional economy means lower propensity for private sectors to invest or consumers to spend.

• DC used to grow faster, now trailing national GDP growth, job growth, population out-migration, etc
• If we didn’t have data centers in the region, our growth would only be half of what it is
• Only Detroit MSA ranks lower than DC MSA in the US
• Incoming federal administration change: back to office/early retirements, agency relocation with multiplier effect (for every 1 fed job, could lose 3-4 total jobs), immigration impacts, agency closures, reduced fed spending

The Fuller Institute also issues monthly reports on the DC economy where you can read more and follow along. Their excerpt from November: “The region is standing at a crossroads of our economic future. Employment growth has slowed and even declined in key sectors like cyber security and federal employment. Local jurisdictions have not made meaningful progress in adding to the supply of workforce housing, which means that an increasing share of working families are priced out of the market, and the local political winds have turned against our best performing sector, data centers. In less than two months a new administration will take charge with the stated goal of decimating federal employment in the region. Uncertainty is the most positive way to think about where the region may be headed.”

The changes we discussed in our work session are shown in the mark up of the budget guidance document, which we will discuss and vote on next Monday.

Letty’s Thoughts: I am grateful we have a much rosier local economy than our neighbors – 6% revenue growth is more than strong and continues to defy more typical years of 3% growth. So despite the current budget gap, we are in a much better position than others. The regional economic outlook is also important backdrop as we kick off next year’s budget. While we are expecting strong revenues locally and may be somewhat insulated from broader macroeconomic risks, there is still some risk when it comes to our budget, our residents, and businesses who could be impacted by federal workforce changes. This uncertainty plus the impact of $500+ tax increase for the median homeowner and balancing the needs across the city will be top of mind for me as we set budget guidance next week, which includes guidance on our priorities and any tax rate increases or decreases.

What’s Coming Up:

Monday, December 9 – City Council Meeting*

–> This is our final meeting of the year and where we will adopt formal budget guidance to the schools and general government. We will recess until our first regular meeting of 2025 on Monday, January 6, 2025. Between January and March, staff and School Board will be working on their proposed budgets which will come before us on March 24, 2025. Then City Council’s role in budget season takes over where we’ll hold our own work sessions, community town halls, etc. We will adopt the FY26 budget in May 2025.

Wednesday, December 11 – Ask the Council Office Hours (9 am, City Hall)

*Mondays (except 5th Mondays and holidays) at 7:30 pm. You can access the agenda and livestream here, including recordings of past meetings