City Council Meeting

Daniel AlexanderstaffI'm not recommending that tonight. But it's a central context for why you'll see these measured adjustments as we go through this presentation. Education is our single largest general fund obligation. The slide shows the tuition history and trend line. The key point is that tuition has grown steadily over time, driven by operating realities, compensation, benefits, instructional needs, and inflationary pressures. This is a structural obligation, not a discretionary initiative. Our responsibility is to fully fund the contract while maintaining overall fiscal balance

That is the dividend of disciplined financial management. This slide shows the composition and growth of the real estate tax base. Our total valuation increased 5.9%. It also shows the mix of property types, both residential and commercial categories. The important point is that a built-out city, valuation growth is essential to sustaining service levels because real estate taxes are the single largest revenue source in the general fund. We also track composition closely because diversification matters stability over time. Total assessed value increased 5.9% for calendar year 26. Our tax base remains approximately 68% residential and 32% commercial. Existing residential values increased 4.6%

while existing commercial increased 0.5%. New construction declined year over year reflecting rather than structural shifts. The key takeaway is that this year's growth is driven primarily by appreciation and existing residential properties, which reinforces the importance of long-term diversification and redevelopment in a largely built-out city. This slide shows the allocation of each dollar across service areas. The key message is that the city's spending is concentrated on core services residents expect every day. Education support, public safety, infrastructure and mobility, and a central city operation. The FY2027 proposal does not shift priorities. It protects core service delivery. The FY27 general fund totals 207.5 million dollars.

This slide shows the FY27 general fund revenue total at $207.5 million, matching expenditures as required by law. The composition underscores why diversification matters. Real estate remains the dominant revenue source. This is a consistent theme I mentioned earlier and a consistent theme for a built-out jurisdiction. Growth and diversification strategies remain essential to long-term stability. This slide highlights the main revenue changes from FY26 to FY27. Key items include $6.9 million in real estate tax revenue, including 4.7 million associated with appreciation. 2.1 million in meals tax revenue, including approximately 1.3 million associated with the proposed rate adjustment. 5 million in assigned fund balance utilization and 1.7 million in school aid.

The point is to provide context. As you note at the left end of the chart, Fairfax City remains competitively positioned among Northern Virginia communities. We'll continue to monitor these comparables because we want a rate structure that supports competitiveness while sustaining core services and our capital commitments. The slide provides regional context for meals tax rates. The key policy rationale here is diversification. Meals tax is partly paid by non-residents, people who use city amenities and services while they dine here. Also the last meals tax adjustment in Fairfax occurred in 2004. This provides context for why meals tax is part of the overall balanced strategy. This section shifts from the general fund to other funds that have distinct revenue

This adjustment supports those obligations. This slide provides the scale of the five-year capital improvement program. The five-year total is approximately $637.3 million. The FY27 appropriation is $83.1 million. There are 84 total projects over the five-year period. A significant portion, $208 million, is associated with school renovations. This is a major investment program aligned with our priorities and voter-approved commitments. This slide summarizes the general fund-supported portion of the CIP. The key message is that the city continues to invest in core infrastructure and asset preservation. streets, facilities, public spaces, and long-term maintenance. These investments reduce long-term costs and protect service reliability.

This slide shows the funding sources supporting the CIP. The core point is diversification. We use a blend of funding sources including bonds, pay-as-you-go transfers, state and federal funds, and utility or dedicated revenues depending on the project type. The slide shows CIP expenditures and includes an important note. In FY27, infrastructure repair and maintenance transition from the CIP into the operating budget. This is a classification and transparency improvement. It reduces the general fund transfer shown in CIP because those projects are now appropriately reflected as operating expenses rather than capital. This investment is still occurring, is reflected differently for accuracy and clarity.

sustainability. This is the comprehensive municipal financial plan, not just the general fund. This slide outlines policy changes and emerging pressures that could affect the city's financial outlook. They include a potential 1% local sales tax for school construction, transient occupancy tax authority expansion, collective bargaining, national and regional economic conditions, and shifting environmental, social services, and transportation funding landscapes. The takeaway is that our reserve policies and discipline approach are important because the external environment can change quickly. This slide summarizes the overarching message for this fiscal plan. This proposal makes modest competitive adjustment.

direction and refinement. This is just the beginning. The slide previews the planned work session topics. notably on March 3rd we will hold the joint meeting with the school board will continue general fund discussions review historical real estate tax trends and discuss setting the maximum real estate tax rate to advertise on March 10th we will focus on meals tax proposal and continue our general fund questions on March 24th we will review the CIP and the stormwater utility fund and water fund on April 7th we reserve time for additional general fund discussion if needed on April 14th we'll discuss any council identified topics and on April 28th we'll hold the final work session present draft changes and deliberate prior to adoption the schedule provides multiple

Jackson BarlowSo why look at capital needs? So anticipated growth is going to put a strain on your infrastructure and your facilities. And generally, to maintain levels of service, you need to expand those those facilities, except for in situations where maybe you have excess capacity. So part of our analysis is to look what are the current situation, the current state of affairs for your facilities, for your capital facilities, and then what would be needed to serve growth. And as we saw the budget presentation earlier, you know, there's limited resources here in anywhere, in every community, every jurisdiction. So there's limited resources, and typically a general fund is going operations, capital then is sort of the next is potentially an extra, something else that

As it stands now, this would be, they're not included, and this is focused on those types of facilities, infrastructure that are funded through general fund dollars so that if your stormwater system is an enterprise fund, the assumption is that it's covered through your rates and fees, and also there would be a city involvement. It's, you know, so treat, you know, in a case. But if there are other elements that fall into that category, those parameters, we can add them as well. But as it stands now, it's the general fund supported facilities.

Anthony AmosThank you. I only have two comments, both regarding March 10th, and I'd be curious on my colleagues' thoughts. Because of both public comment and the public hearing, potentially in the budget, I feel like it would make sense to have the child care go first before the FY27 budget public hearing. Since we'll have guests here, We don't know how long that'll last. We don't know how many people will come out. So that's the first item. And then similarly, for the work session, having beacon landing go first before the small area, because small area zoning, meals tax, and general fund questions, that's likely to easily be an hour, half, two hours. So those are my two requests.