Fairfax County Board of Supervisors Chairman Gerry Connolly (D) talked about roads, revenue and real estate, Monday night. And though things are going well here, there may be some rocky times ahead.
IN A COUNTY dependent upon real-estate taxes for more than half of its General Fund income, the declining home-sales market will have a huge impact on both the county and school-system budgets. And unless the figures change drastically between now and the next budget session, he warned, there'll be some pretty serious belt-tightening here.
Connolly was addressing the quarterly meeting of the West Fairfax County Citizens Association (WFCCA), and he began by giving an update on some of the Board's priorities, such as gangs, affordable housing, tax relief and transportation.
When the Board began targeting gangs, he said, only three of the county's 26 middle schools had after-school programs to keep its students productively occupied and off the streets. Now, said Connolly, "I'm proud to say that, by this September, all our middle schools will have five-days-a-week, after-school programs."
HE SAID students this age are especially vulnerable to gang influence, and it's believed that giving them something else to do is "key to gang prevention." Besides that, said Connolly, "If we can divert a kid from joining a gang, we can save a lot of money [paying for the adverse effects] later on."
He said Fairfax County's anti-gang program — working with the schools, businesses, faith community and nonprofit groups — is seen as a model in the state. He noted, as well, that six Boys and Girls Clubs are being established throughout the county to reach out to at-risk youth.
Regarding affordable housing, Connolly said that, when the Board dedicated a penny of the tax rate to preserve affordable housing units (ADUs) in the county, it's goal was to save 1,000 ADUs within four years. "We've now preserved 1,200 in two-and-a-half years," he said. "And if we can hit 2,000, we'll have saved twice as many in four years as in the entire, 14-year history of the ADU program."
Already, he said, Fairfax County has gone from "being a lagger to a leader" in this area. But there's still work to be done. He said just 28 percent of the police and 22 percent of the firefighters can afford to live in this county, and those numbers are "probably much less" for the sheriff's deputies.
In the realm of tax relief, Connolly said the Board took three actions that helped the citizens:
* It reduced the tax rate to 89 cents per $100 of assessed valuation — down from $1.23, four years ago. For the average homeowners, it meant a tax-bill increase of about $280-$300, while the value of their home rose an average of $100,000.
* The county abolished the car-tax decal and fee for about a $58/year savings to residents. It did so on Connolly's initiative and, he said, "We're the only Virginia jurisdiction that eliminated the fee, as well."
* Fairfax County also went to the maximum exemptions allowed by state law in exempting assets and income for senior citizens. Said Connolly: "This meant that 2,200 more seniors [here] qualified for tax relief."
HE THEN discussed the latest real-estate figures unveiled earlier Monday afternoon at a joint meeting of the Board of Supervisors and the county School Board. And the picture, while not exactly bleak, was certainly eye-opening and cautionary.
For FY 2007, the county's real-estate tax base grew by 22.7 percent, with homes accounting for the vast majority of that number. But for FY 2008, the real-estate tax base is projected to increase by just 3.6 percent — with homes accounting for just 1 percent of that figure.
Although Fairfax County has seen some tremendous increases in home values and sales prices over the past five years, the runaway gravy train seems to now have run out of steam. According to county statistics, the number of home sales is declining, the inventory of homes on the market is rising — and they're remaining unsold for longer.
Between January and June 2005, some 8,590 single-family homes and 2,502 condos sold here. During that same time period this year, 6,058 single-family homes (29.5 percent less) and 1,848 condos (26.1 percent less) sold.
Overall, 33 percent fewer homes sold this May than last May; and 38.6 fewer, this June than last June. As a result, more active listings are on the market. In May 2005, some 2,660 homes were listed here, compared to 8,811 listed this May — for a 231.2-percent increase. In June 2005, 3,181 Fairfax County homes were listed, compared with 9,153 this June — for a 187.7-percent jump. "This is a huge increase in the inventory," said Connolly.
Not surprising then, in 2004, homes here sold in an average of 19 days, and in just 21 days in 2005. So far this year, they're staying on the market an average of 56 days. Said Connolly: "This is the highest number of days since the economic recovery began in 1999."
According to the Northern Virginia Association of Realtors and Multiple Regional Information Services, in June 2005, some 8,123 active listings remained on the market. A year later, in June 2006, that number has almost tripled to a whopping 23,976. "That's a huge jump," said Connolly. Meanwhile, average home prices are rising, but just slightly.
"THIS PATTERN is similar to what we saw in 1990," explained Connolly. "But unlike 1990, prices appear to be holding steady. Home values are holding up OK; they're not plummeting. I believe it's a substantial correction in an overheated market, and it was probably inevitable. And it's not during a recession, but during a period of economic growth."
He said home demand is still there and, although mortgage interest rates have increased, they "aren't through the roof. So we don't see a crash in the real-estate market, just a cooling."
The duration and extent of this cooling are not yet known. And county officials expect other revenue sources to experience moderate growth for the FY 2008 general fund revenue. But real-estate taxes will still comprise nearly 60 percent of the general fund income. And an overall revenue growth of just 3.27 percent is expected in FY 2008, compared with more than 5 percent in FY 2007 and nearly 8 percent in FY 2006.
With such a steep drop in income, said Connolly, "The county won't be able to have more than 3-percent growth in expenditures, and the schools, 3.5 percent. There'll be pain and gnashing of teeth [by both entities] so the county will be able to have a soft landing and not a crash."
Still, he said, the decreased revenue would be felt even more sharply if the Board hadn't cut the real-estate tax by 13 cents in the last fiscal year and 11 cents in this fiscal year. Otherwise, residents would be feeling the effects of falling from 16.1 percent and 12.9 percent, revenue growth rates, respectively, to the projected 3.27 percent.
PLEASANT VALLEY resident Lynn Terhar, former head of the County Council of PTAs, noted that county school employees have "no control over rising health-care costs." But Connolly said the schools received $90 million to $110 million increases in county revenue over the last several years.
Indeed, the school system got a nearly $106 million increase in funding for FY 2007 and a nearly $113 million hike for FY 2006. But for now, that money tree seems to be rapidly losing its leaves.
So unless there's a dramatic increase in the county coffers, said Connolly, "Next time, they'll only get $48 million more — which means they'll have to absorb health care, [pay] step increases and the like, [themselves]."