Slumping revenue projections, as well as refunds to Fairfax County for misallocated sales tax, will increase Alexandria’s projected shortfall of $10.5 million in the current fiscal year, according to city documents.
Prospects for the city’s proposed fiscal 2010 budget — to be presented Tuesday by the city manager — are also bleak. Under current tax rates and revenue policies, the outlook is about $35 million less than original revenue projections for the next fiscal year, which starts July 1.
Alexandria will have to pay Fairfax County about $1 million in sales tax and real estate tax settlement refunds, according to city officials.
Businesses typically give sales tax to the state, which is then sent back to local jurisdictions. However, independent cities in the state often receive sales tax that should be sent to their surrounding counties, necessitating the refunds.
The city’s real estate assessments are expected to drop less than the projected 3 to 6 percent, but revenue projections in other areas — particularly sales taxes, business license taxes, recordation taxes and earnings on city investments — have slumped during the down economy.
Business license taxes, though not collected until March, are down about 50 percent since July 1 compared with the same period last year. Deputy City Manager Mark Jinks said the “diversity of business licenses is such that you’re not likely to see major drops, but you are likely … to see an increase … that is less than what we’ve seen historically.”
Mayor William D. Euille said Alexandria’s 324 foreclosures recorded during the first 11 months of 2008 were “peanuts” compared with surrounding jurisdictions, and that the level has dropped off further since then.
Management and Budget Director Bruce Johnson, though, said that the drop-off could have been an aberration, due to mortgage giants Fannie Mae and Freddie Mac’s moratorium on foreclosures late last year, and didn’t necessarily mark a stabilization of the real estate market.
A number of cuts are being implemented to address the potential $10.5 million shortfall in revenue, including $6.1 million in spending cuts.
