Town Manager´s Budget Message

July 1, 2008

The Honorable Mayor
And the Members of the Town Council
Town of Vienna
Vienna, Virginia 22180

Dear Mayor and Council:

As required by Section 5.1 of the Town Charter, I herewith submit the budget for the Town of Vienna for the fiscal year beginning July 1, 2008.

During the past year the generally poor economy in the country and slowdown in the Washington, D. C. area created concerns for all local governments in terms of realizing revenue projections and meeting out of control commodity prices. Town of Vienna staff began analyzing the effects of the local economy on our operations to determine what the effect would be on our budget for 2008/09. On a positive economic note, during the past year the Town saw its rating on debt obligations increased from AA- to AA by Standard and Poor’s.

We approached the Fiscal Year 2008/09 budget process with the goal of moderating any spending and tax increases without jeopardizing our newly improved bond rating. Balancing tax rates with the need for increased funding to keep pace with the rising costs of fuel and other commodities and services necessary to maintain our infrastructure and service delivery levels required us to closely examine our spending patterns and future needs.

As happens every year, local governments have had to keep close watch on the actions of the Virginia General Assembly as there have been numerous bills introduced that would negatively affect certain revenues received and counted on by the Town. Each year local government is forced to fight to retain revenues that rightfully belong with local government while, on the other hand, the General Assembly offers no assistance in the way of providing new sources of funding. At the time of preparation of this memorandum there was serious action to curtail several Commonwealth funded revenue sources that have dwindled over the years in order that the Commonwealth of Virginia could balance its budget. All too often local governments that have acted responsibly when preparing their annual budgets have been, in fact, penalized when the Commonwealth chooses to reduce local funding to balance its budget.

The FY 2008/09 budget is the twenty fourth budget that I have had the honor to prepare for the Town of Vienna and preparation of this budget presented a number of challenges to the staff. It was our goal, when we began preparation of the budget that we keep expenditure increases to a minimum even in the face of pressure from increasing commodity prices and to moderate any necessary tax increases.

Department heads were advised to avoid any increases in full-time staffing and to keep all other expenditures as close to FY 2007/08 levels as possible. The Departments did a commendable job in presenting proposals for my review and my revisions to those budgets were minimal.

We continue to experience a weakening in the rate of increase in assessments and our community is not unique when compared to others throughout the country. However, existing residential assessments did increase, albeit by only .22% from January of 2007 to January 2008. Commercial property increased by 7.17% for the same period but that increase is lower than the corresponding increase experienced last year. Overall, our total existing property base increased by only 1.84% as our tax base is heavily residential. Commercial property now accounts for 23% of the total assessed valuation in Town.

Residential construction in Vienna is still relatively vigorous as evidenced by building permits issued since January 1, 2008. In 2007, 57 building permits were issued for all types of construction of which 7 were for construction of new single family homes. As of the first week of March 2008, 67 permits have already been issued of which 18 are for new single family residences. The increase in the number of permits in 2008, especially single family homes, provides strong evidence that Vienna continues to be one of the most desirable places to live in the metropolitan area even though the general economy is ailing. Redevelopment and remodeling of existing structures continued in 2007 with new construction valuation exceeding that of the previous year. While the real estate market in our area has cooled from previous levels, the situation in Vienna is better than that found in many jurisdictions in Northern Virginia. Our revenue forecasting last year, which was on the conservative side, has resulted in less pressure being placed on our budget preparation for FY 2008/2009. Slow steady growth in Vienna versus a high growth/fast slowdown economy allows us to maintain our steady progress.

For 2008 the average existing residential assessment increased by 0.22% over 2007 while the average existing commercial assessment increased by 7.17%. Overall, existing assessments less new construction, increased by 1.84% compared to an increase of 1.49% in 2007. For the 2007/08 budget the Town of Vienna increased the tax rate by 1.34 cents of which .62 cents was attributable to eliminating the annual vehicle decal. The increase in taxes for the “average” tax bill was 6.49% including the amount for the loss of vehicle tax revenue. Assuming two vehicles registered to an address, the net increase in the total average tax bill was 2.42%. To reiterate an earlier statement, conservative revenue forecasting along with realistic expenditure estimating has enabled us to prevent significant increases in the taxes levied.

We have continued our past practices of using realistic projections along with direction to each department to keep increases in expenditures to moderate levels. The FY 2008/09 budget is based on a real estate tax rate of 20.91 cents per $100 of assessed valuation which represents an increase of .95 cents from the FY 2007/08 tax rate and one cent from the “no increase” rate as determined by Commonwealth law. Further discussion of the meaning of the “no increase” tax rate follows later in this memorandum as well as explanations for the necessity for the increase in the tax rate.

The Town of Vienna has received the Distinguished Budget Award from the Government Finance Officers Association of the United States and Canada (GFOA) as we continue to receive this prestigious award for every year that a submission has been made. GFOA states that those jurisdictions that receive the award have assembled and adopted a document that exhibits proficiency in policy, operations, financial planning and communications. Our FY 2008/09 budget will be submitted for the award and we expect to receive the award yet again.

The Fairfax County Office of Assessments has provided us with data showing that the total taxable assessed valuation on the tax rolls as of January 1, 2008 increased by $141,942,790 or 3.68% over the previous year. Existing property assessments increased by $64,718,370 or 1.84% and new construction along with additions to existing properties accounted for the balance of $77,224,420. The new construction and additions to existing properties were split approximately 86/14 between residential and commercial properties compared to a 33/67 split in fiscal year 2007/08 reflecting some larger commercial construction that came on line during 2007/08. The new construction/additions to existing properties breaks down to 256 residential parcels and 12 commercial properties for an average of $259,522 per residential property and $898,906 per commercial parcel.

Local governments in Virginia are permitted to increase the property tax on existing properties by one percent without this increase being considered a tax increase thereby establishing the “no increase” tax rate. Any real estate property tax rate above the “no increase” rate is then considered a tax rate increase and we are required to follow Commonwealth law and advertise this fact to our residents. The Town goes beyond statutory notice requirements by publishing any proposed rate increase in our monthly Town Newsletter and on our web site in addition to the notices printed in a newspaper. We attempt to make our budget process as transparent as possible and take the steps necessary to inform our residents of the facts relating to our proposed budget.

For the fiscal year 2008/09 the Town of Vienna effective “no increase” real estate property tax rate is 19.91 cents per $100 of assessed valuation versus the 2007/08 levy of 19.96 cents, a reduction of .05 cents. The fiscal year 2008/09 budget is based on a rate of 20.91 cents, an increase of one cent per $100 of assessed valuation or 5.01%. Below is a summary, by fund, of the 2008/09 budget:

Departmental expenditures will be discussed later in the budget message. Following is a chart that displays the effect of the real estate tax rate and water and sewer service charges for fiscal year 2008/09.

1. Estimated Median Market Value from 2008 assessment data
2. Based on quarterly usage of 19,000 gallons including the service charge

The General fund budget for fiscal Year 2008/09 totals $20,512,899 an increase of $806,432 or 4.09%. Personnel related expenditures account for $600,807 or 74.5% of the increase.

In FY 06-07, the Town of Vienna implemented new compensation and classification system for all employees. The consultants again reviewed the plans during the FY 08-09 budget cycle to insure that our position classifications and pay levels continue to be competitive with our surrounding jurisdictions. No modifications were found to be necessary other than an overall l.5% market adjustment to the pay ranges.

Expenditures in non-personnel related accounts have increased by $205,625 or 3.58% over Fiscal Year 2007/08 levels. Listed below are expenditures for General Fund departments with a comparison to the 2007/08 budget. There are no employee changes in the General Fund for Fiscal Year 2008/09. In addition to normal step increases, funds have been included for a one and one-half per cent market adjustment for all employees.

We also plan to begin utilizing the new records storage building at Nutley Street during fiscal year 2008/09 saving an estimated $23,000 in storage rental costs per year. The elimination of the rental fees is shown in the respective departmental budgets.

Following is a summary of significant changes in General Fund department expenditures compared to the FY 2007/08 budget:

Legislative:

The Legislative budget (Town Council, Boards and Commissions, Legal services, Town Clerk, Elections, volunteer Fire Department allocation and Donations) has decreased by $10,618 or 1.57%. There are no significant changes in the Town Council, Boards and Commissions or the Town Clerk budget. In the Elections budget we have deleted the appropriation for subsistence for the election workers as Fairfax County has now assumed total responsibility for the selection and appointment of election poll workers. In the Legal Services budget the costs for legal and prosecuting services have been increased by 3% as requested by the Town Attorney. The Volunteer Fire Department budget was returned to its previous level now that the building renovation project has been completed. The Donations budget saw funding levels reduced among various agencies.

Administration:

The Administration budget (Town Manager, Administrative Services, Risk Management, Public Information and Information Technology) has increased by $22,646 or 1.43%. There are no significant changes nor new program additions contained in these budgets for FY 08-09.

Finance Department:

The Finance Department budget will increase by $59,451 or 4.66% over the Fiscal Year 2007/08 budget. There are no significant changes in the Finance Department budget other than in the Central Services Division where we will secure a three year maintenance contract for our telephone system versus the current annual contracts. This takes into account the age of the system and will allow us to defer replacement of the system until the economy improves while guaranteeing service over the next three years. Without a three year extension there is a risk that maintenance services may no longer be available for our system.

Police Department:

The Police Department budget for Fiscal Year 2008/09 is $5,603,041 which represents an increase of $301,664 or 5.70% over 2007/08 levels. No new positions, sworn or civilian, are in this budget. We have increased funding in the areas of maintenance contracts for our new CAD/RMS system and to contracts and services to cover infectious disease post-exposure evaluation and follow-up for officers that may be exposed to disease while on duty. We have also included funds for updating of our records for the reverse 911 telephone notification system and funding for the purchase of surveillance equipment for the Criminal Investigations Bureau.

Public Works:

The Public Works Department budget for Fiscal Year 2008/09 is $6,718,034 which represents an increase of $319,002 or 4.99%. In the Street Maintenance budget we have increased funding for asphalt repairs accomplished in-house as we have found that our employees are capable of additional work now that we have acquired a new model asphalt spreader and through use of the asphalt milling apparatus. In the Vehicle Maintenance budget we increased the amount of funding for fuel due to the wide fluctuations that have occurred in the oil markets.In the Refuse Disposal budget we were able to reduce landfill expenses based on our experience and projected fees. No other significant changes are included in the Public Works budget.

Tax Relief Programs:

Total funding for tax relief programs (real estate property tax and revitalization tax exemption) is estimated to increase by $5,845 or 2.05% for Fiscal Year 2008/09. Vehicle decal tax relief was eliminated in fiscal year 2007/08 with discontinuance of the vehicle decal program.

Parks and Recreation:

The Parks and Recreation Department budget is $2,747,315 which represents an increase of $37,605 or 1.39% over fiscal year 2007/08 levels. In the Administration budget we have increased funding for web support as the Parks and Recreation web site requires constant updating due to changing programs and activities. We have also included funds to purchase publishing software in order to upgrade our media presentations. Reductions have been made in other areas of this division to moderate necessary increases.

In the Programs division we will purchase audio equipment for the auditorium to replace existing older equipment. The Town does receive revenue from plays that are held at the Community Center.

In the Parks Maintenance budget there is increased funding for HVAC maintenance to reflect increased costs, with all facilities except the Community Center covered by this budget. A number of physical improvements include resurfacing the basketball court at Glyndon Park, a new roof for the Maintenance facility at Nutley Street (old DPW Vehicle Maintenance facility), and an irrigation system for Glyndon Park baseball field.

In the Community Center budget funds have been included to replace the commercial oven and for fire exit lighting and equipment. There are no other significant changes.

In the Special Events budget $22,500 has been included for a 4th of July laser show in place of the fireworks normally held at Waters Field. We have also included a line item for expenditure of donations made to the Friends of the Vienna Town Green. A corresponding amount is shown in revenues to offset the planned expenditures.

In the Teen Center budget funds have been included to replace the existing pool table.

There are no significant changes to the Historic Preservation Division budget.

Planning and Zoning:

The Planning and Zoning Department budget is $729,914 representing an increase of $29,571 or 4.22%. Funding has been included in overtime expenses, reflecting actual expenditures in the past for the two inspectors for additional coverage that takes place after normal working hours. There are no other significant changes in this budget.

Transfers and Reserves:

We plan to transfer $97,000 into the sidewalk construction projects fund ($500 more than the 2007/08 allocation) and $30,000 into the Vehicle and Equipment Replacement Fund from the telecommunication tax revenues. We have also budgeted $200,000 in the General Fund Contingency Reserve account to be used for unanticipated expenses during the coming year. The PC replacement reserve continues to be funded at a level of $50,000, unchanged from last fiscal year.

Vehicle and Equipment Replacement:

Funding for the Vehicle & Equipment Replacement Program will increase by $30,938 over fiscal year 2007/08 levels. In most cases we have been successful in purchasing at costs below budgeted levels, retaining the savings in the fund. For fiscal year 2007/08 our purchases were $93,641 under budget. The average age of our fleet is now 5.38 years versus 7.44 years in 1999. This has been a very successful program both in terms of modernizing our fleet and conserving funds.

GENERAL FUND REVENUES

General Fund Revenues are projected to total $20,491,125 representing an increase of $784,658 or 3.98% over Fiscal Year 2007/08. Revenue from real estate property taxes is budgeted at $8,476,142 based on a tax rate of 20.91 cents. This represents an increase of $657,893 from fiscal year 2007/08. Other local taxes are expected to increase slightly, mainly due to increased enforcement of BPOL licensing requirements. Revenues from cable TV franchise fees, cell phones and land line taxes are now combined into a revenue line item “Communication Sales and Use Tax” with taxes and fees collected by the Commonwealth and remitted to the Town. Use of prior year surplus is at an amount that retains an unrestricted reserve at an appropriate level.

DEBT SERVICE FUND

By June 30, 2008 total outstanding general obligation debt of the Town, including that related to the Water & Sewer fund, will be $12,370,003. The total outstanding balance at year end represents .031 of one percent of the Town’s tax year 2008 property tax values, again well under the ten percent limit set by Commonwealth law.

In the Fiscal Year ending June 30, 2009, debt service payments, including interest, on the 1993, 1996, 1998, 1999, 2002 and 2006 issues will be $307,950, $365,463, $399,425, $407,920, $449,265 and $496,452 respectively for a total of $2,426,475. The principal retired will bring the Town’s total outstanding general obligation debt to a balance of $10,443,336 as of June 30, 2009 or just under 3/10 of one percent of the Town’s 2008 total taxable property value.

The Debt Service fund budget continues to be supported by receipts from the Meals and Lodging tax. Sufficient revenues will be available for principal and interest payments on existing debt after July 1, 2008.

WATER AND SEWER FUND

Expenditures for the Water & Sewer Fund total $6,549,065, an increase of $16,694 or .26%. There are basically no significant changes in the fund budget other than increasing the number of hours per week for the part-time Administrative Assistant assigned to Operations and Maintenance.

Based on our revenue projections it will not be necessary to adjust either the Water or Sewer service charges for fiscal year 2008/09. The Town is currently pursuing the feasibility of agreements with Fairfax Water to take over the Town water system and Fairfax County to do the same for our sewer system, or to negotiate a new water service contract.

SUMMARY

The 2008/09 Town budget was prepared with the goals of continuing all service levels, attempting to keep employee salary levels competitive, moderating any property tax increase and also maintaining utility rate levels. We were able to achieve our goal in the areas of retaining service levels, keeping wages competitive and maintaining utility rates but it did become necessary to recommend an increase in the real estate property tax rate.

It is evident that while assessments have moderated considerably from past increases the base economy of the Town is still strong and that strength is evidenced by the number of building permits issued to date. We have no reason to believe, at this time, that this trend will not continue.

Fiscal Year 2008/09 will be challenging to the Town government and its citizens but I am confident that all of us will weather the economic problems that lie ahead and that Vienna will continue to be a vital and strong Community.

Respectfully submitted,

John H. Schoeberlein
Town Manager