Budget Proposal

Shortly after the City's Manager presents his annual budget proposal each year, state law requires that the City Council adopt a ceiling for the real estate tax rate that might be considered during the budget process. Once that rate is "advertised," the Council cannot adopt a rate that is higher, but may go lower. 

Three years ago, the City Council was able to adopt the first reduction in the real estate tax rate in 15 years, bringing the rate from $1.13 to $1.11. This year, the City Manager has proposed maintaining the current $1.11 rate. If the City Council were to adopt the City Manager's proposal, this would be the 8th straight year that the rate has remained the same or decreased.

The Council voted last month to advertise a rate of $1.15, leaving the possibility of a four-cent increase for consideration. In February, the City Manager presented his proposed Operating Budget for Fiscal Year 2025 (July 1, 2024 - June 30, 2025) and his proposed Capital Improvement Program (CIP) for Fiscal Year 2025 through Fiscal Year 2034.The City Manager has proposed a prudent budget that responds to emergent needs and community priorities, while respecting the capacity of our taxpayers. Yet, the City Council has heard input from members of our community concerned about unmet needs within our schools, housing, public safety, food insecurity, early childhood education, after-school services, and beyond. To allow for consideration of some of those requests, the Council allowed flexibility for a potential tax rate increase.

This is the first "big" decision of the City Council's annual budget process, which will culminate in the adoption of the budget on May 1st.

The City Council held two public hearings to receive testimony on the budget last month. We will have two more opportunities this month.

This week will be the deadline for City Council members to submit their proposed amendments to the budget. To be considered, these amendments must have the support of at least 3 members of the Council.

The most important decision the City Council makes each year is the adoption of the annual operating budget and capital improvement program. The operating budget generally funds the on-going costs of government (primarily personnel), while the capital budget funds one-time expenditures that provide the community with an asset (new schools, new roads, new playing fields, transit buses, etc). 

This budget will be adopted in an uncertain environment, with impacts in the real estate market driven by higher interest rates, and where we continue to see inflation impacting the cost of talent and raw materials, two things local governments buy in large quantities. 

In Virginia, the structure of municipal finance is heavily reliant on real estate taxes. Consequentially, in Alexandria the real estate market, both residential and commercial, dictates our budgetary fate. After seeing the healthiest growth in our real estate tax base in over 15 years, last year we saw slowing. For 2024, we are now seeing the slowest growth in our real estate tax base in 15 years.

The City Manager's budget includes a 3% growth in the General Fund, providing $26.9 million of new revenue to fund a $911 million General Fund operating budget.

Only $7.5 million of the new revenue came from the real estate tax. Another $8 million is projected to come from new consumption-based tax revenue, including the dining tax, sales tax, and the hotel tax. Another $5 million of new revenue is projected to come from personal property taxes, including the vehicle tax.

Yet on the expenditure side of the ledger, we are seeing increases in costs across our balance sheet, driven by new costs for cash capital and debt service to support City and School capital investments, new investments to support student enrollment growth, the costs of regional and local transit services and the impacts of new collective bargaining agreements for our City employees (police, fire and labor and trades).

While the City Manager's proposed budget increases overall City spending by 3%, the City Manager proposed a higher 4% increase in spending for the Alexandria City Public Schools.

The City Manager's proposal suggests $13.3 million of new money to cover increases in the debt service for ACPS construction projects and $10.3 million of new money to cover increases in the ACPS Operating Budget. The $10.3 million increase in the operating budget fully funds the Superintendent's proposed budget request, but it does not fully fund the additions to the budget request made by the School Board. Together, the increase in ACPS debt service and the proposed operating budget increase directs nearly ALL of the new revenue available to the City, to ACPS.

With the impacts of average assessment increases included, this means the average single-family homeowner would pay $243 more in 2024 than in 2023 under the City Manager's proposed budget. The average condo owner would pay $179 more in 2024 versus 2023 in the City Manager's proposed budget.

If the City Council were to adopt a 4-cent tax rate increase, the average single-family homeowner would pay $628 more in 2024 than in 2023 and the average condo owner would pay $349 more.

In addition, the City Manager has proposed no increase in the annual Residential Refuse Fee of $500, which covers the costs of trash, recycling and yard waste collection (among other services). This fee is paid only by the 20,647 homeowners who receive City trash collection.

The stormwater utility fee is proposed to increase to address stormwater management and Chesapeake Bay clean-up mandates. This fee is paid by all property owners, including non-taxable properties. The new annual fee will be $90.75 for condos, $136.12 for townhomes, $324.10 for small single-family homes and $541.25 for large single-family homes.

In addition to the budget documents linked above, all questions asked by members of Council during the process are posted online, along with answers, for the public to review. Any request to change the proposed budget must be initiated with a budget question, so it is a good window into the thoughts of your elected representatives. 

The City Council continues to meet weekly to review every aspect of the budget during topical budget worksessions. These sessions are open to the public and recorded.

There is no more important process than the adoption of our annual budget. The budget is a reflection of the values of our community and I look forward to working with our residents and my colleagues to craft a budget that is reflective of those collective values. 

Let me know your thoughts!

In my installation speech when I was first sworn in as Mayor over 5 years ago, I talked about the intersection of policy decisions and the municipal services they support: "A development decision is also a decision about public safety, about schools, and about human services, because that is what it supports." 

If my words at the beginning of my tenure as Mayor were correct, the announcement of the end of Entertainment District proposal for Potomac Yard last week, near the end of my tenure, was perhaps the most negative financial event for our schools, public safety and human services in recent history. Regardless of your perspective on the North Potomac Yard proposal, it held the potential to dramatically reshape Alexandria's economy, easing the burden on our residential taxpayers and enabling expanded investment in critical services to our residents, as well as yielding new land for a school, open space and committed affordable housing.

A month ago, Alexandria's Finance staff provided the most detailed view yet of the estimated financial impact on the City's budget. The net return to the City's balance sheet was projected to be cash flow positive in the first year and continue to appreciate, leading to a $490 impact (either tax decrease or service increase) for the average Alexandria household after only the first phase.

But that is now in the past, as this proposal, and the economic potential it represented, will remain unrealized. With a new 20-year lease within the existing shopping center now taking effect with the death of this proposal, very little will likely change in much of North Potomac Yard for quite some time. While there are developable properties on the site, they will be constrained by the persistence of the shopping center and its large surface parking lot. This will also significantly delay the City's receipt of important proffers required with development, most importantly a new school.

Since the December economic development announcement for North Potomac Yard, a lot has happened. There will be much to unpack about our experience over the past 3.5 months of public consideration of this proposal. The City (myself included!), the Governor, the General Assembly, Monumental Sports and Entertainment and JBG all made significant mistakes during this process. We'll all take lessons from the experience.

The City was never able to bring a formal, fully-formed proposal to the community for its consideration. To do so, required General Assembly action. Ultimately, the Senate of Virginia never held a vote on the legislation adopted by the House of Delegates, nor was the proposal included in the budget adopted by the General Assembly.

Economic growth in Virginia has enjoyed bipartisan support, particularly during eras of divided government in Richmond. While this proposal is gone, all Virginians should be wary of economic development proposals becoming just another vehicle for partisan warfare. The high quality of life that Virginians enjoy with relatively low taxation is the product of that bipartisan work.

There were legitimate concerns raised in Alexandria and Richmond about this proposal. Those concerns enriched the discussion and the creativity of the proposal as it began to evolve. At the same time, there were things that occurred during this process that pushed the limits of what is appropriate.

If we simply gave up on considering any worthy initiative at the first sign of adversity, we would not have a Potomac Yard Metro Station, a Virginia Tech Innovation Campus, a redeveloped waterfront, new schools, new sewer infrastructure, a redeveloping Landmark Mall, etc. Big, transformational projects are difficult. They require negotiation, collaboration and concessions. Unfortunately, there was never a productive collaboration between the Governor and the General Assembly leadership to work through the concerns raised during this process.

The fact that this partisan warfare ended a potential economic development initiative before it could be considered fully, is unfortunate. The fact that this happened while the General Assembly considers another budget that places over 80% of the cost of Alexandria schools on the backs of Alexandria taxpayers, while systematically underfunding state services so that local governments must pick up the tab, is particularly galling.

But to understand why this proposal was on the table in the first place requires a step back a bit. 

This year, the City will collect $856.4 million from a variety of tax and fee revenue sources to fund the costs of the City's government, including our schools, public safety, human services, transportation, infrastructure investment, debt service and more.

A little over 62% of that money will be raised from the real estate tax. Twenty years ago, 51.5% of our budget was funded by the real estate tax. By digging a little deeper, the story becomes even more stark. Two decades ago, 69.6% of our real estate tax revenue came from residential sources, either residential taxpayers or the owners of residential multi-family buildings. Today nearly 81% of real estate tax revenues come from those sources, with only 19% coming from our commercial tax base.

As a contrast, while our friends in Arlington have faced some of the same factors, their commercial tax base is 23% of their total tax base, which has led to Arlington having the lowest real estate tax rate of any major jurisdiction in the region. In Fairfax County, their commercial tax base is now just a little over 16% of their overall base.

What happened? The short answer: A lot of things:

• Obsolete office space converted to other uses, demand for office space dropped and retail space consumption plummeted, leading our office and retail sector to drop from over 24% of our tax base to 17%.
• With high demand for multi-family rentals, our multi-family rentals went from 12% of our tax base to 20.5% 
• Our residential properties generally appreciated at a much higher rate than commercial properties over those two decades.

That leaves us in a place where today residents of Alexandria are footing a larger percentage of the cost of their government than they ever have. The trajectory that we have seen over the past two decades shows no sign of abating in the future.

The only true way to change this trajectory is through economic development. Alexandria has had some successes:

• Landmark Mall is becoming the mixed-use village that we always intended, anchored by the new Inova Alexandria Hospital.
• We successfully attracted the Virginia Tech Innovation Campus to Potomac Yard, joining the neighborhood with the Institute for Defense Analysis, the American Physical Therapy Association and more.
• We successfully attracted the National Science Foundation and its 2,400 jobs to Carlyle.
• We have begun to achieve the economic potential of our waterfront with the development on the south end of our Potomac River shoreline.
• We are seeing the Oakville Triangle mixed-use vision come to life, anchored by an Inova HealthPlex.
• Hilco Redevelopment Partners is transitioning an obsolete coal-fired power plant on our waterfront to a modern mixed-use community.
• Decades of planning in Carlyle is paying dividends, as further mixed-use comes to life in that corridor.
• We have also made large investments in the infrastructure to drive economic growth long into the future, most significantly with the Potomac Yard Metro opening last May.

That Metro Station is a key component of a larger vision for a mixed-use North Potomac Yard. For decades, City plans have assumed that over time, the existing shopping center and its acres of surface parking, would give way to a new mixed-use neighborhood, with residential, commercial, entertainment, a school, park land and much more. The North Potomac Yard Plan, includes the area north of East Glebe Road continuing to the City border, and allows over 7.6 million square feet of development.

Much has changed since those plans were originally approved. New office development was on life support before the pandemic. In a post-pandemic world, there is essentially zero new office development occurring in the DC region. Existing office portfolios are defaulting at an alarming rate as tenants decide not to renew their leases. The economic growth of our region's future will be experiential, the types of non-residential uses that cannot be virtualized.

With this proposal now dead and the shopping center likely to remain for the foreseeable future, we must now pursue large-scale economic growth elsewhere in the City, pursue greater austerity in the provision of City services or prepare taxpayers for a more significant burden in the future. Those are challenges that future City Councils will grapple with along with Alexandria residents.

I am appreciative of the dedicated work of our Alexandria Economic Development Partnership (AEDP) team and our City staff from so many different agencies who worked to present this concept to the public. I am also appreciative of the detailed engagement by residents of our community throughout this process.

River Renew Digging Concludes

Two and a half years ago, we celebrated the groundbreaking of the largest infrastructure project in Alexandria's history. For decades, the combination of stormwater and sanitary sewage has overwhelmed portions of the Combined Sewer System that serves a 540-acre area in Old Town.

This combination results in this mixture ending up in the Potomac River and other waterways. This will now end.

The star of the show is a 380-ton Tunnel Boring Machine (TBM) named "Hazel." Hazel is 15 feet wide and can excavate enough soil to fill 3 dump-trucks in 15 minutes.

Last month, Hazel concluded here 2.2 mile journey, digging all the way from the Alexandria Renew Enterprises facility to the shaft at Pendleton Street adjacent to the site of the old Robinson Terminal North site.

On Saturday April 13th, you are invited to join our celebration, as we will gather at the Pendleton site to celebrate the completion of this phase of the important project.

Three and a half years ago, the Alexandria Renew Enterprises Board of Directors, the governing body of Alexandria's sewer authority, approved the issuance of $454.4 million contract to Traylor/Shea. This joint-venture completed the final design and is constructing the tunnel network that will address overflows into the Potomac River from the combined sewer system that serves Old Town.

It was seven years ago, when the General Assembly enacted legislation that required the City to address remediation of our Combined Sewer System by July 1, 2025. While the City will miss this deadline by a bit, we have largely met this timeline. This year, the Governor signed legislation enacted by the General Assembly to extend the deadline.

With remediation expected to require nearly a half billion dollars, the City requested funding from Commonwealth coffers to assist in this challenge. The City has now received over $140 million of commitments from the Commonwealth thanks to the support of Former Governor Northam, and our General Assembly delegation, specifically Former Senator Saslaw.

The construction work is occurring primarily at 4 sites, the three outfall locations and the location of the Alexandria Renew treatment facility. 

The challenge of this project is significant. We certainly did not plan to rectify this outfall on the timetable that the Commonwealth dictated. Even with the timetable, Alexandria remains ahead of many jurisdictions around the nation on this issue and we will be the first in Virginia to remediate our Combined Sewer System. Stormwater planning and work coordinated with redevelopment activity has left us better situated than most.

This is a significant investment in the cleanliness of our water ways. As a community, we have had to be patient with this significant construction work, but the legacy of cleaner water will benefit generations to come.

Vision Zero Update

A little over six years ago, the City Council adopted our Vision Zero Action Plan, with a vision to end deaths and serious injuries on our roads by 2028.

A few weeks ago we celebrated an important milestone in our efforts: Last year, we had zero traffic fatalities in our City. While this is the first time we have reached this milestone since we began our Vision Zero journey, we know that the work is not yet complete. But we do know we are making progress.

The data shows that crashes have slowly trended downward over the last few years. Overall crashes involving pedestrians have stayed steady at roughly four or five per month. Last year we had 15 crashes that resulted in a serious injury.

Each of these tragic incidents change the lives of the victims and their families in dramatic ways. But for each tragedy, there are also countless close calls and near misses that don't get reported.

In Alexandria, we are fortunate to have pedestrian scale, walkable neighborhoods with urban amenities throughout our City. Yet if residents do not feel they can safely traverse the streets of our City, then all the urban amenities are for naught. 

The City has invested millions of taxpayer dollars to improve pedestrian safety throughout our community. Those resources have included improving pedestrian access to schools, building and improving sidewalks, crosswalks, traffic calming efforts, bike lanes, new signalization, and more. 

Yet there are still areas of our City where sidewalks are non-existent or unusable, intersections are unsafe and unsafe driving is rampant. We must improve the safety of our streets for all users. Doing so requires changing the behavior of all users of our roads.

My view is that in order to significantly improve pedestrian safety in our City, we will have to be willing to make trade-offs in the pursuit of safety.  The data show that the changes that will most significantly improve safety are also the most controversial in our community. 

For instance, the first phase of the King Street Complete Streets effort involved the removal of parking, narrowing of travel lanes, improved crosswalks, signage, new bike lanes, etc., to reduce speed and improve safety. The initial analysis showed that the project has reduced speed, reduced crashes and improved safety.

The second phase of the work on King Street was an even more dramatic overhaul of the corridor, including reductions of travel lanes, pedestrian islands, crosswalks, etc. When the City Council and Traffic & Parking Board received the initial analysis of those changes, as with the first phase, crashes have been reduced and average speed has been reduced. 

On Seminary and Quaker, the City reduced speed limits to improve safety.  When that action was reviewed, it also indicated a reduction in speed and crashes.

On Seminary Road, the road was narrowed, safer crossings for pedestrians created and new areas for pedestrians and bikers created. While the pandemic delayed the data collection and analysis, a year and a half ago the City released a similar analysis of those changes. The report showed what we expected:

• Traffic volumes, travel times and crashes went down.
• Speeds decreased slightly
• Traffic did not appear to divert to neighborhood streets

At a few problem intersections, the City created a "Leading Pedestrian Interval" to allow residents to get a head-start crossing before traffic can move. Allowing right turns on red was pushed by the Federal Government during the 1970s as a response to the energy crisis. Some communities in the country are banning right turns on red to improve pedestrian safety by reducing complexity at intersections. Last year we implemented both of these changes at over 30 intersections.

Last year, we also:

• Reduced the speed limits on 3 roads
• 'Daylighted" 9 intersections
• Added 300 linear feet of new sidewalks
• Added or upgraded 90 crosswalks
• Made safety improvements to 33 intersections
• Added or upgraded 1,800 linear feet of bike lanes

But there is so much more work to do in the interest of safety. Our work plan for this year includes intersection audits, new safety enhancements, new neighborhood slow zones, intersection improvements, new enforcement efforts, education and much more!

The ideal condition on our roads is to separate users by mode, particularly when there can be large disparities in speed. That means building new sidewalks and new lanes for bikes.

Alexandrians should be able to use our streets safely. We will have to take ourselves out of our comfort zone to make that happen. Ultimately, these efforts will not only provide mobility options for our residents, help achieve climate initiatives, but also save lives.

Solar Power At Home

Are you interested in harnessing solar power for your home?

Beginning today, you can sign up to participate in Solarize Alexandria!

Solarize Alexandria is a partnership between the City, the Northern Virginia Regional Commission, and LEAP. 

The goal is to increase the deployment of solar power generation in our residential communities. In addition to reducing emissions and reducing your power bill, the City of Alexandria provides a real estate tax exemption for qualifying solar installations.

The program begins with a free assessment from the program installer. Sign up today! 

Elsewhere in this newsletter, I discuss the significant milestone reached in our RiverRenew project. For many communities, this would be a once-in-a-generation infrastructure project. For Alexandria, this is but one of numerous major water-related infrastructure projects we have under way.

The efforts to address both of Alexandria's flooding challenges continue as well, dominating our capital infrastructure plan.

For Alexandria, this flooding risk presents itself in a variety of ways. Our residents have endured 5 storm events in the past 5 years (July 8, 2019, July 23, 2020, September 10, 2020, August 15, 2021 and September 16, 2021) where the intensity and duration of the rain has far-exceeded the design capacity of our storm sewers, resulting in devastating inland flooding. That devastation has accompanied more familiar risks the City faces with shoreline flooding from the Potomac River, primarily in Old Town.

Along the Potomac River shoreline, the City is working to advance a significant project to address backflow of river outfalls, overtopping of our bulkheads and inundation of our storm sewers. The City formalized an interim agreement with Skanksa/JMT, a contract team, under the Progressive Design-Build Model that has been selected for this work.

The contractor team has now provided their initial findings. These findings are demonstrating the benefit of Progressive Design-Build, as their planning efforts have been to reduce cost and risk by eliminating underground storage and by redesigning the pump station plan. They have proposed a more targeted plan to replace bulkheads along the shoreline. This month, additional public meetings are planned to gain feedback and input on these proposals.

In addition to the progress the City is making along the waterfront, the City is also making significant progress in addressing some of our inland flooding challenges, which have been occurring due to more frequent and more intense rain events. These storms are causing our residents and businesses to suffer significant financial loss due to damage from flooding and sanitary sewer backflow.

Addressing this challenge requires immediate and sustained action in the following areas:

• Infrastructure Investment and Maintenance
• Financial and Technical Assistance to Residents
• Development Policy Reform

As mentioned elsewhere in this newsletter, the City Manager's proposed budget includes another scheduled increase of our Stormwater Utility Fee, to further increase the resources available for investments in our storm sewer infrastructure. The new annual fee will be $90.75 for condos, $136.12 for townhomes, $324.10 for small single-family homes and $541.25 for large single-family homes.

The Stormwater Utility Fee revenue, paid by all property owners in the City (including non-taxable properties), will allow for an acceleration of major capacity projects and "spot improvements," an increase in channel maintenance, new "state-of-good repair" investments, property owner grants and new staffing in support of these projects and the system.

The increases of the fee over the past four years have allowed the City to quadruple the planned investment in stormwater mitigation since 2020 and support an accelerated 10-year program of infrastructure investment.

While these funds will address many smaller "spot improvement" projects, this funding will allow the City to undertake 11 of the top priority storm sewer capacity projects over the next decade:

• Commonwealth & Glebe: $34 million
• Ashby & Glebe: $16 million
• Hooffs Run Culvert Bypass: $60 million
• Edison & Dale: $13 million
• Dewitt Avenue: $15 million
• East Mason Avenue: $1 million
• Notabene & Old Dominion: $4 million
• Mount Vernon, E. Glendale, E. Luray & E. Alexandria: $10 million
• E. Monroe & Wayne: $3 million
• Russell & W. Rosemont: $6 million
• Russell & W. Rosemont (south): $8 million

The Stormwater Utility and Flood Mitigation Advisory Committee, is a citizen group constituted to provide advice to Council and our staff as we execute this aggressive investment schedule. This committee receives regular reports on the progress of these important investments.

A climate-resilient City requires investments and potentially new policies to ensure that residents of our City do not suffer devastating damage with such frequency.

Putting in place the infrastructure that can support a changing climate will be a significant undertaking for our community. It will involve a large commitment of new resources and possibly private property impacts. I am pleased that the City has made these new investments. Now we must continue to explore every option to accelerate this work.

Food Insecurity

From the beginning of the COVID pandemic, it was clear that the two levels of government, local and state, who are required to balance our budgets annually, could not address the immense financial need that has been created. Only the Federal Government could provide a sufficient amount of money to address some of these challenges. 

Almost 4 years ago, in May of 2020, the City received our first tranche of Federal CARES Act money. We quickly put that money to good use in benefiting the residents and businesses in need in our City.

While jurisdictions around the country faced real criticism for frivolous expenditure of these scarce funds, the City committed early in this crisis to ensure that we effectively used these funds to assist our residents and businesses who have suffered during this crisis and that we leave no dollar on the table. I believe we did just that.

As we concluded the original deadline for the expenditure of funds, the City used the entirety of the $27.8 million we received:

• $8.9 million was utilized for the City's COVID-19 response (City staffing, PPE, public health investments, etc)
• $4.1 million was utilized to address food insecurity in our City
• $6.5 million was utilized for emergency rental assistance and eviction prevention efforts
• $5.5 million was utilized for grants to small businesses
• $2 million was utilized to provide resources to non-profits addressing need in our City
• $800,000 was utilized to provide childcare to families in need

While each area of focus has continued to shape policy in Alexandria, the increase in food insecurity has remained an area of challenge, as well as an opportunity for innovation.

As we sought to better understand the increase in food insecurity, we committed funds from the subsequent American Rescue Plan to study the issue further.

Last month our Department of Community and Human Services released the result of that study, "Food Insecurity Report: Understanding the Disparities and Experiences of Hunger Across the City of Alexandria."

This report showed us that 8% of Alexandria households are food insecure and nearly half of the individuals in our City who are food insecure are ineligible for government assistance due to income.

While the survey detailed the numerous supports provided by government and non-profit partners to address access to food in our City, gaps remain, both in service, access and awareness.

This report gives us important guidance as we work to structure an appropriate safety net in Alexandria to ensure that no resident goes without food.