Bacon's Rebellion

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Alexandria’s Capital Spending Problem

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by

James A. Bacon
in ,

Alexandria faces 10-year capital spending tab of up to $500 million more than budgeted.
Alexandria City Hall — city faces 10-year capital spending tab of up to $500 million more than budgeted.

Alexandria City Manager Mark Jinks is right: It’s probably a good idea to put on hold the $1.4 million design work for a proposed $20 million expansion on the Chinquapin Recreation Center pool, as well as series of $25,000 “way-finding” signs. The city has massive capital spending commitments that are not so discretionary.

As reported by the Washington Post, Jinks has tallied up some major expenditures for the city of 150,000.

  • The city’s share of the escalating cost of the Washington-area Metro heavy rail and bus system will increase $90 million over the next 10 years.
  • Repairs to schools will cost $200 million, while repairs to other city facilities could add $80-$239 million over the $85 million already budgeted.
  • Storm and sanitary sewer projects will cost $150-$200 million, although the state may cover some of that expense. Households will be dunned an additional $120 to $180 per year to cover the cost.

Of course, none of these capital expenditures cover the cost of unfunded pension liabilities faced by the state and every Virginia locality — a shortfall that could well come due within the next ten years.

Questions: Alexandria is said to be one of the few counties in the country that maintains a 10-year capital improvement budget. Are other Northern Virginia localities taking their long-term Metro exposure into account? Are other Virginia localities planning for the long-term cost of facilities maintenance and storm-water improvements? Do governing bodies appreciate that when they build expensive new facilities that they are incurring maintenance/repair obligations down the road? Just asking.

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8 responses to “Alexandria’s Capital Spending Problem”

  1. John B Avatar
    John B

    “Alexandria is said to be one of the few counties in the country…”.

    Counties??? When I was a resident it was a city.

    Just kidding, Mr. B.

    1. Acbar Avatar
      Acbar

      Alexandria County did exist! Its name was changed to “Arlington.”

  2. LarrytheG Avatar
    LarrytheG

    Spotsylvania recently got an Audit presentation and the Auditor told them that both the school system and the county – from this point on would have to show it’s net position in it’s CAFR and that net-position had to include their pension-fund liability which would be – millions of dollars.

    So much for the counties having to “balance” their budgets, eh?

    At any rate – these guys who consider themselves Fiscal Conservatives then wanted to argue that this was a State Liability – not theirs…because every year they sent the state money for pensions.

    At which point – the Auditor had to explain – like he was talking to small children or morons or idiots , that – no.. these were the pensions for their own employees … that they hired and worked in the county and that the State was only collecting money for their pensions and it was up to the county to decide how much money they wanted to send – or not…

    That if they did not have the State do the pensions – it would STILL be the SAME liability.

    At which point – they “discovered” that they were NOT putting enough money into the system – annually – to keep the deficit from growing because the pension fund was not performing as it has in the past.

    I don’t think Spotsylvania is an “outlier” for most counties in Va but I suspect that counties like Fairfax and Henrico … have a more professional and realistic appreciation of the realities…

    Most counties in Virginia – run by elected citizens – know little about finance.. not for their county and likely not for their own affairs either… – they’re depending on Social Security and whatever IRA/401K was done for them… by their job … and even fewer of them have put aside enough finances to deal with their health care – or long term care if they end up needing assisted care or nursing home care.. Many folks expect MedicAid to pay for their nursing home care… instead of their own finances.. and that, in turn, boomerangs to the State MedicAid program (second only to education) where 1/3 of it’s costs are for – nursing home care.

    1. TooManyTaxes Avatar
      TooManyTaxes

      Larry, I agree that all local government pensions, VRS or not, are local liabilities. Each participating entity is responsible for its own payments and shortfalls.

      Fairfax County’s pension situation is plain and simple disastrous. As I recall, the funding level for its multiple pensions for FY 2015 was c. $238 M. That was about 11 plus cents on the tax dollars. Excluding the Public Schools, unfunded pension liability is around $1.9 B. Fairfax County and its schools offer pensions that exceed those of any surrounding localities. And both the supervisors and the school board are busily playing their violins as the flames are present.

      Alexandria’s combined sanitary and storm water sewer system has several discharge locations that ultimately hit both the Potomac River and the Chesapeake Bay. Raw sewerage is regularly dumped into the water system. The City has a mess on its hands.

  3. Andrew Roesell Avatar
    Andrew Roesell

    Dear Jim,

    Here is a link to Fairfax County’s Capital Improvement Projects “with future fiscal years to 2025.” http://www.fairfaxcounty.gov/dmb/fy2016/advertised/cip/cip.pdf

    Sincerely,

    Andrew

  4. LarrytheG Avatar
    LarrytheG

    In terms of pension liabilities – the issue is – is the county obligating enough funding from it’s operating revenues to pay for the upcoming year pension benefits.

    and is that amount – a predictable “enough” so that next years budget can have an accurate line item for pensions pay out.

    What that number actually is – is affected by things like inflation/COLA, how many new retirees… and how many retirees died. And there is a second category known as Other post-employment benefits (OPEB) which is retiree health insurance, life insurance and deferred compensation which also can vary according to the cost of health insurance…

    This is one of those areas where a LOT of us consider it .. written in stone that we will get in pension and health care benefits is what we were promised. In other words – despite all the expressed opinions about government being corrupt and incompetent.. we expect 100% “competence” when it comes to our pension benefits just like we expect Medicare for cheap and an ambulance when we dial 911.

  5. DonR Avatar
    DonR

    Good post. Alexandria is pretty well run from a transparency and “future think” perspective. What happens in Alexandria could be a bellweather event for other localities. Let’s hope the super – geniuses in Richmond who monopolize power in the state are (for a change) paying attention.

  6. LarrytheG Avatar
    LarrytheG

    Not just Alexandria – ALL local and State Government – now have to DISCLOSE pension liabilities up front – which is causing many localities like Alexandria – to reassess their other planned expenditures, loans and resulting liabilities.

    ” On August 2, 2012, the GASB published accounting and financial reporting standards that improve the way state and local governments report their pension liabilities and expenses, resulting in a more faithful representation of the full impact of these obligations. ( EFFECTIVE DATE – Statement No.68 will take effect for governments in fiscal years beginning after June 15, 2014 (that is, for years ended June 30, 2015 or later).”

    ” ………. net pension liabilities will be reported on governments’ balance sheet, providing citizens and other users of these financial reports with a clearer picture of the size and nature of the financial obligations to current and former employees for past services rendered.”

    ” Statement 68 requires governments providing defined benefit pensions to recognize their long-term obligation for pension benefits as a liability for the first time, and to more comprehensively and comparably measure the annual costs of pension benefits”

    http://www.gasb.org/jsp/GASB/Page/GASBSectionPage&cid=1176163528472

    As I had related earlier – the Spotsylvania BOS – self-avowed fiscal conservatives seemed unaware and confused as to why this new rule directly affected THEM. Their thinking was that this is a state problem.. and they just send money to the state to cover their own county pensions -but that it was/is the state with the liability….

    I found that discussion amusing… given these guys continuing public pronouncements about how they would operate the county – fiscally responsibly – UNLIKE the State or Federal Govt which had “unfunded” liabilities…

    I think this would be a great subject for a separate blog post – perhaps Jim can persuade the blogger known as “Bosun” to weigh in with his perspective or perhaps DonB a bona fide businessman… who likely knows first-hand what a balance sheet really looks like!

    GASB Statement No. 68, Accounting and Financial Reporting for Pensions – sounds so innocuous but it’s a game changer for local and state budgeting because it now REQUIRES that citizens be told more of the “truth” about claims about “balanced budgets”.

    Let me add – this SAME concept has been applied to Social Security and Medicare over a 100 year time horizon – which then translates into a 100 trillion dollar “unfunded” liability… because it is never acknowledged in that dialogue that what funds Social Security – the FICA tax – it generates almost a trillion dollars annually – towards that liability.

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