The Washington PostDemocracy Dies in Darkness

Local governments in D.C. region revise budgets, halt projects to blunt economic impact of covid-19

County Manager Mark Schwartz attends a board meeting in Arlington last year. (Sarah L. Voisin/The Washington Post)

Alexandria officials have begun placing long-awaited projects such as a new Waterfront Park on hold. The D.C. government has frozen hiring and will forgo salary increases. And in Montgomery County, a proposal for a supplemental property tax increase is dead.

The financial impact of the shutdown of businesses and organizations caused by the coronavirus pandemic is quickly coming into view. Local government officials said they stand to lose millions of dollars in revenue, which is certain to affect services. Several have begun revising their budgets and cutting spending.

In Arlington, County Manager Mark Schwartz told the County Board that his staff estimates a nearly $56 million drop in revenue for the coming year’s budget. D.C. officials anticipate having to cut $607 million in spending in the current fiscal year, which ends Sept. 30, and reduce spending by about the same amount in the upcoming fiscal year.

“What was unthinkable two months ago is now in front of us,” Schwartz said. “Businesses have laid off staff, residents have lost jobs, schools have closed, and only the most essential functions continue. In over 30 years of my public service, I have seen nothing like this.”

The latest on the coronavirus in the District, Maryland and Virginia

Schwartz ordered an immediate hiring slowdown, deferred capital projects and slowed discretionary spending. His revised budget maintains only the current levels of service, removes all salary increases, and places many projects on hold.

A public hearing on the revised budget proposal and tax matter will be held April 23. The board is scheduled to vote April 30.

Teryn Zmuda, deputy chief innovation officer and chief economist at the National Association of Counties, said counties across the nation are experiencing major financial effects, including revenue shortfalls and extensive costs from responding to the pandemic.

She said counties are also continuing to providing critical services.

“Budgets and the financial viability of our counties are being hit hard at the local level,” she said Wednesday during a conference call with reporters.

D.C. Mayor Muriel E. Bowser (D) this week froze hiring, salary increases and government travel. Exceptions are limited to the city’s coronavirus response, public safety, human services and school staffing.

“Just as residents and businesses are making tough choices, the District will make tough choices, too,” Bowser said.

D.C. Chief Financial Officer Jeffrey S. DeWitt said the District started the year with 77 days of reserves, the highest reserve levels in the city’s history.

“On February 1st, when we were looking at the revenue, our sales taxes were up 10 percent, more than projected, our income taxes were up 6 percent,” he said. “The economy was really, really humming along.”

The pandemic shut down the city’s hospitality industry, which accounts for almost half its $1.6 billion in annual sales tax revenue, and the retail industry, which left many people out of work, according to DeWitt. He said the District is projecting a loss of about $607 million in revenue through September and will have to reduce spending by about $600 million in the next fiscal year as the economy slowly recovers.

“We’re a AAA [bond-rated] city; we’ll get through this fine,” he said. “But that doesn’t mean there’s not going to have to be adjustments to our budget, because the revenues we budgeted for are not coming in.”

District officials will submit a revised 2020 budget in early May reflecting the cuts to the local portion of the $15.5 billion budget. The city has discretion over nearly $10 billion.

Virus shrinks budgets just as need soars

Some officials in Northern Virginia appealed to their congressional delegation for a new stimulus package to help governments whose budgets are affected by the public health crisis.

The Northern Virginia Regional Commission, which is made up of 13 local governments, wrote to five lawmakers, including Democratic Sens. Mark R. Warner and Tim Kaine, seeking relief.

Several pots of revenue, including sales and meal taxes, make up nearly $1 billion budgeted for this fiscal year, the letter said. For some jurisdictions, that money is more than 54 percent of their total revenue, the letter said.

“Your support for our local governments is critical if we as a region and nation will recover from this crisis together,” the letter said.

Alexandria City Manager Mark Jinks on Tuesday said he will scrap his proposal for a 2-cent increase in the property tax rate and a 4.5 percent increase in the storm sewer fee because of the financial havoc that the pandemic is causing.

“Revenues were growing steadily, the prospects for long-term growth were good, and that has changed dramatically. We talk about having multiyear budgets. This feels like multimonth budgeting,” he said.

The city’s revenue is expected to decline by $36 million in the next three months, the end of this fiscal year, and is expected to continue to slide by about $56 million in fiscal 2021, which starts July 1.

The city manager’s proposed revised $753.3 million operating budget for fiscal 2021 is 5.8 percent lower than the $799.9 million operating budget he previously offered.

Jinks said he will advise the City Council to defer capital projects such as the $30 million Waterfront Park and flood mitigation, and the $100 million in funding for a new high school, for two years. He is also freezing city employee pay and instituting a hiring freeze, with some exceptions. The city will use about $8 million it has in two rainy-day funds reserved for economic downturns, Jinks said.

“I think it’s going to keep raining for the next 18 months,” Jinks said.

Fairfax County Executive Bryan J. Hill on Tuesday released a pared-down version of his proposed budget that does away with an increase to residential property taxes of as much as 3 cents. The increase would have added about $23 million in revenue geared toward affordable housing.

Hill’s new $4.6 billion spending plan also wipes out a proposal for a 4 percent tax on tickets to movie theaters and other entertainment venues that would have generated about $3 million to fund expanded library hours at 11 locations, scholarships for county parks programs and field maintenance at schools. He also eliminated proposed cost-of-living salary increases of 2 percent for the county’s 12,000 employees.

The Fairfax County Board of Supervisors is scheduled to adopt its new budget next month.

The Loudoun County Board of Supervisors adopted a $3 billion budget on Tuesday and set in motion a plan to try to address a revenue shortfall in fiscal 2021 of up to $100 million, according to a news release. The board agreed to put $100 million for planned expenditures into a reserve that will be released if revenue materializes to support these expenditures, the release said.

Prince George’s County spokeswoman Gina Ford said County Executive Angela D. Alsobrooks (D) is working with the council on the budget.

Although Montgomery County Executive Marc Elrich (D) has not submitted a revised operating budget to the council, lawmakers have already rejected his proposal for a 3.18-cent supplemental property tax increase to go toward education spending.

Elrich said the council will decide how to plan for the coming fiscal year but said he still thinks elected officials should consider funding needs in education and housing beyond the coronavirus response.

The council will hold remote budget hearings on April 16 at 1:30 and 7 p.m.

“When this is all over — and this will be over — we’ve still got a county to run, an education system to operate,” Elrich said.

Rachel Chason, Antonio Olivo and Rebecca Tan contributed to this report.

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