Federal budget worries prompt Arlington savings

November 16, 2012

Arlington County manager Barbara Donnellan will ask elected officials Saturday to allow her to set $3 million aside in a reserve fund in case massive federal government cuts kick in this winter as a result of budget sequestration.

Donnellan called the prospect of such cuts “serious, but manageable,” partly because Arlington doesn’t receive much direct federal money, although about 60,000 Defense-related jobs are based in the county and many more privately employed federal contractors, associations and lobbying firms call it home.

If the budget cuts happen, Donnellan said, Arlington’s growth rate would probably stall, but not reverse.

“We’ve been through 9/11 and for months after, this wasn’t a really popular place to come to,” she said. “Our second hit was the [Base Realignment and Closure] cuts, and we got hit worse than anywhere else in the country. We also lost the Patent and Trademark Office,” which relocated to Alexandria.

If a lot of federal jobs are cut, that would be bad news for the county, she continued, but added: “As a local government, you have to be flexible. We’ve weathered a number of these things. It’s almost like planning for a disaster, and we’re getting better at it.”

The $3 million is a pittance in the $1 billion county budget, but Donnellan and Michelle Cowan, the county’s director of management and finance, said it should be sufficient for a short-term contingency. The direct federal money that goes to Arlington is primarily used to fund Section 8 low-income housing grants, community development block grants and some grants to schools.

Several million dollars more in federal money is passed through state government, and the loss of that is harder to quantify, the officials said. The biggest danger for Arlington lies in the indirect impacts. Commercial businesses pay about half of all county property taxes, and vacancy rates in commercial buildings are approaching 20 percent.

“For every office building that is vacant or every job cut, there are taxes not paid, meals not bought,” Cowan said. “We’ve already seen some impact because of vacancy rates . . . The private sector has a freeze on leases until it’s clear what’s going to happen.”

The federal government owns 7 to 8 million square feet of office space in Arlington, including the Pentagon, but it leases far more.

“We are really concerned, but one thing Arlington has going for it is location,” Cowan said. “The Pentagon isn’t going anywhere, and a lot of contractors are mission-critical to the federal government. . . . It could be rocky for a couple of years, but if you look out five, seven, 10 years from now, investors are going to through with [new construction plans]. It helps that we have reserves and we manage conservatively.”

Patricia Sullivan seeks out news about Alexandria and Arlington County for the Washington Post.
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