Inflation, Labor and Real Estate Markets Impact County Executive's FY 2024 Proposed Budget

A tight labor market, inflationary pressures and a commercial real estate market slow to recover from the effects of the pandemic, are all factors impacting the proposed FY 2024 Budget, presented by County Executive Bryan Hill today. Hill told the Board of Supervisors that the budget is focused on stabilizing the county’s “core” – employees and existing programs.

The budget is based on a flat $1.11 Real Estate Tax rate, but Hill included $90 million to be allocated at the board’s discretion. The current rate would result in an average property tax bill increase of just over $520.

“Balancing the impacts of inflation, the labor market and other economic pressures with the need to fund critical programs and services has made this a difficult budget year,” said Hill. “But I am very proud of the work of our budget staff and all our employees in managing through these challenges and moving forward to meet the needs of our residents.”

Residential and Commercial Property Values

The increase is based on a 6.97% residential equalization rate (the market-driven property value changes) for 2023. That rate reflects a slowdown in the residential market at the end of the year. Commercial real estate values have seen a limited rebound, but for the third year in a row, the county’s largest commercial real estate segment, office elevator buildings, posted a negative equalization change.

Personal Property Taxes

Skyrocketing vehicle values last year prompted the board to provide tax relief by adopting an 85% assessment ratio for trade-in values. While still at historically high levels, vehicle values are now on the decline. Staff will continue to evaluate vehicle value trends and will make a final recommendation to the board about the assessment ratio prior to budget adoption.

Support for Schools

Hill is proposing funding a 6.3 percent operating increase or $144.1 million over the FY 2023 Adopted Budget Plan, for Fairfax County Public Schools (FCPS) priorities in FY 2024 , including employee compensation. In addition to the General Fund transfer, support for debt and capital obligations, the FY 2024 Budget includes $143 million for programs such as Head Start, School Health, Behavioral Health Services, crossing guards, field maintenance and other costs.

Employee Compensation

Of the $134.51 million recommended increase in county disbursements, $92.73 million is targeted towards employee pay and benefits. Hill’s proposal calls for fully funding performance, merit and longevity increases. Based on the pay plan, general county employees will receive an average 4.06% increase and public safety employees will receive an average 4.39% increase.

An increase of $7.8 million is also included to support employee retention and recruitment efforts that will align the county’s pay structures with the market. Recent initiatives to address these issues have included hiring incentives targeted to those job classes experiencing the most severe recruitment challenges and reviews of salary compression to improve employee retention.

Inflation

Inflationary impacts on the county budget will necessitate an additional $18.05 million to cover contract rate, utility and information technology cost increases along with lease adjustments, among other considerations. Federal Reserve actions to increase interest rates to curb inflation may result in an economic slowdown with further consequences for the county’s economic outlook in the coming year.

Facilities

An additional $5.31 million and three new positions for facilities are included in the budget proposal. Funding is allocated for the South County Police Station and Animal Shelter, scheduled to open later this year, and the new low-cost PAWS (Pet Assistance and Wellness Services) Clinic; the new Patrick Henry Family Shelter projected for completion in late 2024, and full-year funding for Patriot Park North. Funding and three new positions are also included to operate the Springfield Center Without Walls.

Targeted Limited Investments

Hill told the board that this budget, in contrast to previous years, does not include significant investments in top county priorities. He noted, however, that smaller, targeted investments are included for some of the county’s most urgent needs and that progress continues in many areas thanks to other funding sources, like federal stimulus funds. Targeted limited investments are proposed for the Office of Elections, Park Authority social equity initiatives, a behavioral health system navigation program and the Tysons Community Alliance, among other initiatives.

Capital Improvement Program

In recognition of the ongoing pressures on the capital program, including escalated construction costs and borrowing costs, staff has closely examined short and long-term capital needs and, in addition to adjusting project estimates to reflect inflationary impacts, several projects have been accelerated, offset by others that have been deferred, based on extensive discussions with agency and facilities staff. Accelerated projects include the Tysons Fire Station and the Criminal Justice Academy while projects that are recommended to be moved back include the Tysons Police Station and the Chantilly Regional Library. The proposal also recommends increasing the average annual bond capacity allocated to Parks.

Strategic Plan

Concurrent with the budget release, Hill noted the release of the first Countywide Strategic Plan Annual Report, outlining progress the county has made towards the proposed strategies in the plan.

Next Steps

Budget public hearings are scheduled for Tuesday through Thursday, April 11-13. Markup (when the Board makes changes to the advertised budget) takes place on Tuesday, May 2, and the Board adopts the FY 2024 Budget on Tuesday, May 9.

Learn more about participating in the budget public hearings, including by phone or video submission. You can also email testimony to the Clerk to the Board's office or call with questions at (703) 324-3151 (TTY 711).