Back in the 1920s, Harry Byrd became governor of Virginia on what he called a "pay-as-you-go" platform. Byrd had an almost pathological hatred of debt, fueled in part by mounting debt problems of his family's business. Now, almost a century later, leaders across Northern Virginia have a very different view about the role debt should play in balancing the books. Local governments across Virginia have taken on more than $8 billion in debt.
"Some jurisdictions are having to be more careful with their debt load as they are small and have a weak real estate base," said Stephen Fuller, director of the Center for Regional Analysis at George Mason University. "Others see that having high quality infrastructure is the best way to support a growing economy that will enable them to pay off the debt."
Fairfax County has the largest debt by far, almost $4 billion. But Fairfax also has more people than any of the other jurisdictions. So the county's per capita debt burden is actually lower than Arlington or Alexandria. Financial reports show that local governments across Northern Virginia have been taking on increasing debt in recent years, and some believe that trend might accelerate in the near future. Because Congress is considering eliminating some exemptions for income tax on municipal bonds, local governments might consider taking on larger amounts of debt in the near future to take advantage of lower interest rates.
"There are some clouds gathering on the horizon that will impose significantly greater increases in costs for borrowing to issue bonds to finance long-term improvements," said Frank Shafroth, director of the Center for State and Local Leadership. "Local governments are asking themselves if they want to risk deferring borrowing knowing it might carry a much higher interest rate."
GOVERNMENT LEADERS say the old Byrd philosophy of "pay-as-you-go" is a relic of the past in much the same way as the policy of racial segregation associated with the Byrd machine. Although government officials acknowledge that local governments are taken on increasing amounts of debt, they argue that it's all relative to the amount of money the jurisdiction raises each year and how much value is tied to land in the jurisdiction.
"All the Northern Virginia jurisdictions are looking at the same metrics — they can't exceed a three percent limit of outstanding debt as a percent of assessed value, and annual debt payments can't exceed 10 percent of their total budget," said Joe LaHait, debt coordinator for Fairfax County. "Those two metrics are strongly abided by, and they are constantly monitored by the bond rating agencies who ultimately provide the ratings to every single jurisdiction in the state."
Arlington County has one of the highest per capita debt loads in Northern Virginia, an indication that county leaders are willing to use its bonding authority to borrow money to construct everything from schools to a new aquatics center at Long Bridge Park. Supporters of the county's efforts say the bond rating agencies approve because Arlington has an Aaa/AAA/AAA credit rating. Arlington is one of the few jurisdictions in America to have a triple-triple A credit rating, a distinction it’s held for 13 consecutive years.
"You could make a reasonable argument, I think, that we have got a number of different programs doing the same things sometimes and you could probably streamline some things in Arlington. There's no doubt about that," said Robert Hynes, a member of the Fiscal Affairs Advisory Commission. "But I also do not think there's a lot of great waste in the money they spend. They spend it well I think."
ONE POTENTIAL drawback for local governments deciding to take on more debt is the risk of violating self-imposed debt limits. In Alexandria, for example, city leaders are trying to find a way to finance a new Metro station at Potomac Yard. Last year, members of the Budget and Fiscal Affairs Advisory Committee sounded the alarm that the city was actually on track to violate its debt ceiling even without calculating the massive borrowing that would be needed to finance the Metro station, which could be anywhere from $200 million to $400 million. That means borrowing money to build the station would violate the city's debt policy at least temporarily.
"The idea was, I think, to make an exception that would be paid down and then go back to the guidelines — in other words break the guidelines," said James Bulter, former chairman of the Alexandria Budget and Fiscal Affairs Advisory Committee. "But I believe that they should carefully examine their options because the debt policy has a real meaning, and it should be followed if at all possible."
Local governments are not alone in trying to borrow money to balance the books. Last year, the commonwealth of Virginia's total debt increased to $37.3 billion, an increase of $1.1 billion, or 3.2 percent. According to a study by the nonpartisan State Budget Solutions, that means each private sector worker in Virginia has a state debt burden of more than $21,000. And the federal government problems with debt are well known.
"My own personal debt concerns me, so certainly the debt of my county does as well," said Ed Batten, a member of the Lee District Budget Advisory Group. "But when I look at what the demands are in this county, the human demands as well as what's going on in the economy, I think that what we are doing is the best we can do given the circumstances."