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J.J. Smith (user 90) - Comments by Date

To: City Council, Mayor, and City Manager

General property tax revenue has increased 9 times faster than population growth over the last ten years indicating a government gone wild looking for ways to spend the taxpayers’ money.

There are several areas of opportunity for the City Council to reduce the cost of government and reduce taxes.

And where might be the best areas to look for savings? Payroll stands out. The city has increased payroll at 7 times the rate of increase in our population.

If our payroll in proportion to revenue were the same as Savings to the city would be:
All Virginia Independent Cities $102,000,000
All Virginia Municipalities $90,000,000
Fairfax and Arlington Counties $80,000,000
Alexandria 2001 $50,000,000

The City of Alexandria’s workforce can and should be reduced to give the taxpayers of the city a tax cut and to diminish the size of the city government on the community. It is doable without affecting services.

According to the Bureau of Labor Statistics, non-farm business productivity, which excludes manufacturing, was up 24.6% from 2001 to 2011. Had the city government realized these kinds of productivity gains, the number of city employees would have dropped from 4,334 to 3,579 even after allowing for our population increase.

Assuming the government services sector is inherently less amendable to productivity increases, cut in half the BLS figure, and we could be at 4,163 employees.

America's Protected Class III, a 1994 study, estimated that state and local government employee counts could be reduced by 19.2 percent without reducing public services. Bill Clinton’s initiative “Reinventing Government” aimed to reduce the Federal workforce by 12%.

The City Council, working with the city staff, can seek:
• Reduction in the size of the staffing of the city government
• Bring the pay scales to more realistic levels
• Continue its efforts to increase the productivity of the city work force
• Use of contract labor for some functions the city performs. Privatize these functions
• Consolidate or eliminate some of 76 boards and commissions that absorb staff time
• Continue efforts to move all employees to defined contribution plans

A part of this effort should focus on why Alexandria cannot be more business friendly. Thriving businesses produce jobs and tax revenues. Evidence would point to a hypothesis that the city is not business friendly. Over the last ten years:

• Sales tax revenue, excluding restaurants, down 9.3% adjusted for inflation
• Restaurant sales tax revenues down 16% after adjusting for inflation and for the 4% surcharge levied beginning in 2009.

The school budget appears to also offer opportunities for savings.

The school is top heavy with administration. These positions and the pay scales can be reduced. According the Auditor of Public Accounts of Virginia, Alexandria City Public Schools (ACPS) spends, as proportion of total revenues, 40% more than the average school district on administration and overhead. One would think we could spend less than the average as the city has 4 times the density of population of all cities in Virginia. Were the administrative costs of the ACPS in line with the average of all schools, the city could save over $8,000,000 a year.

Disturbing reports over the last several months provide antidotal evidence, as revealed by the press, indicates that more savings are possible in the ACPS system.

After repeated inquiries of the ACPS superintendent’s staff, it was unable to provide any evidence of or reasoning for its projected increase in student population over the next five year, thus, their projections are suspect and likely made up out of whole cloth.

I have a concern about the proposed Potomac Yards Metro stop. Based on figures provide to me by the city, the discounted cash flow to the beginning of 2011 indicates an $18,000,000 loss to the city. The city claims a breakeven in cash flow in 2019. That date is misleading; 2019 is when positive cash flows begin to eat into the cumulative losses. The breakeven point is 2037. Of course, the breakeven date could be even further out if the staff’s projections are too optimistic.

J.J. Smith (90) | User | May 1, 2012 - 8:14 AM | FY 2013 Budget Process

January 28, 2011

To the Mayor of Alexandria and Members of the City Council

I encourage the city council and staff to look for ways to reduce the city’s spending, cut taxes, and refund last year’s unnecessary tax increase.

Last year the City Council approved a property tax increase to cover a projected $44.2 million dollar deficit. The increase was unnecessary. Based on the latest figures available from the city (November 2010), and adjusting for seasonal variation based on FY 2010 patterns, I project the city will have a $36 million surplus in FY 2011. The final surplus for 2010 was $42 million. Somehow the Council panicked and imposed an unnecessary 8% tax increase.

Examination of the City’s Annual Report, the School Board’s budget submission, the Comparative Report of Local Government Revenues and Expenditures published by the State of Virginia Auditor of Public Accounts, reveal several areas in which to focus investigation:

• Payroll
• Education
• Pension
• Transit
• Boards and Commission
• Commerce
• Debt

City Payroll – The Elephant in the Room

The city payroll, adjusted for inflation, has risen at almost double the rate of population growth and more than double the increase in households. In 2001, city payroll was $258 million; today it is $340 in 2001 dollars. Are the city’s employees overpaid? Are we overstaffed? Do we really need more staff in light of lower demand brought about by the poor economy and efficiencies created with better technology?

From the city’s November report, average weekly wages in Alexandria for the second quarter of 2010 are:

Accommodations $ 451
Professional Services 1,789
Retail 653
Other Services 1,181
Public Administration 1,988
All Sectors 1,245

Public sector employees are paid 60% more than all sectors and 11% more than professional services – accountants, doctors, lawyers. However, it should be noted that public sector employees include Federal government employees.

City payroll has risen 63% over the last ten years and 32% after an adjustment for inflation. Last year, after adjusting for inflation, the corresponding figure was a 41% increase in city payroll over the prior ten years; thus, there appears to be a slowing down of the rapid rate of increase we have seen over the last 10 years.

Nevertheless, there is still room for considerable savings. Were we to pay the same percentage of revenues in payroll as in 2001 and as in the following jurisdictions, the annual savings would be:

City in same proportion of revenue as in 2001 $5 million
All municipalities in Virginia $26 million
Virginia independent cities $42 million
Fairfax/Arlington Counties combined $103 million

Clearly there are savings to be had in a more realistic staffing and payroll structure. A reasonable target would be 60% to 62% of total revenues, assuming no change in the revenues. This would create savings of $44 to $56 million. About $8 of this can come from the school board as described below.

School Budget

Administrative overhead in the school system must be cut back. Were our school system to reduce its overhead payroll to be in line with Fairfax County and the overall Virginia average, savings would be $8.3 million and $8.4 million respectively. It makes one wonder how the school system in good conscious can ask for a $12 million increase in compensation: a 6.6 % salary increase and a 8.8% benefits increase.

And are we getting good value for our money from the school system? Cost per student is up 46% from 2001, or 12% adjusted for inflation. Recent years show a reversal of this trend; cost per student peaked in 2008 at more than $18,000 per student. Are our metrics of a successful program up 12%? According to the school board, only 30% of the metrics that measure student achievement are being met.

Are there other savings in the school system? Probably. Here is an example: fifty-five percent of students qualify for free and reduced meals. This is about double neighboring jurisdictions despite the city having a 28% higher per capita income than the Washington DC MSA and 3% more than Fairfax County. Should our qualifications for free or reduced meals become more rigorous? With over a million free meals a year, there are likely some savings to be found.

Pension Costs and Its Potential Threat

The total assets of the Employee Retirement Plan Trust are $291.6 million. Of that $291.6 million, $17 million is a Defined Contribution component. In a nutshell, the advantage of the a defined contribution plan is that city employees share risks with the taxpayer; with a defined benefit plan, the taxpayer bears all the risk.

In 2003, unfunded pension liabilities totaled $18 million. At the end of June 2009, the latest report available from the city, the liability totaled $193 million, a ten times increase, with no growth in number of employees. Year-end averages for the years 2006 – 2008, were $145 million and rising. To put this unfunded liability in perspective, the unfunded pension liability is 31% of total city revenues and 58% of net assets of the city. The good news is we are better off than Illinois where the ratio of unfunded pension liabilities to total revenues is 60%.

The city has taken steps to arrest this threat before it gets out of hand by offering only a defined contribution plan to new employees and having city employees pay 20% of their health care coverage. That is a good start, but more needs to be done. I suggest the city move towards 100% of all retirement plans be converted to and become defined contribution plans. I suggest that the city, like most private businesses, pay a significant share of the employees’ health care coverage and the employee pay for any family participation in health care coverage.


Transit subsidies from the taxpayer in FY 2010 were $13 million. DASH had an operating loss of $9.6 million in FY 2010 on revenues of $3.7 million. Operating cost per mile in 2005, the last year the city kept that metric, was $5.72 and growing at a compound rate of 8%; I estimate that operating costs per mile now are likely to be about $9.00. Fares average $1.50; clearly we cannot make it up on volume.

Net assets of DASH are $14 million; it has 63 vehicles and land and construction in progress of $6.5 million.

Would the city be better off privatizing the system or selling it to Metro? If not, what are the economic cost and benefits of the City of Alexandria being the sole shareholder of the Alexandria Transit Company? By making the transit system a taxpayer instead of a tax taker, we can eliminate the $13 million subsidy and receive tax revenue from the enterprise.

We certainly do need to compound our problem in our transit system by building an inflexible light rail system.

Boards and Commissions

There are 73 boards and commissions. I cannot determine the expense associated with each, but from a random review I observe a city staff person assigned to each board or commission. That implies to me there is a cost associated with each board and commission.

Has the Council or staff done an audit of these 73 entities to determine their true costs and resulting benefits or the return on investment to the taxpayer? Are some more important to enhancing life in Alexandria than others? Does the Council have the courage to stack one against another in “payoff elimination brackets” to see which consistency lose out without regard to political pressures?

Business Friendly

Alexandria does not seem to be alluring to businesses. Retail sales tax revenue, adjusted for inflation, has fallen 11% since 2001, while restaurant and food collections are up about 43%. In combination the collection from these two sources is up only 4% over the ten-year period. Is this a reflection of either or both: people do not want to shop here or business people do not want to open a business here? The decline in business licenses issued over the last ten years would indicate that business people do not find Alexandria a hospitable environment.

City Debt

Although the city’s interest on debt has tripled in the last ten years, the city appears to be in good financial position with a AAA rating and a lot of headroom to borrow additional money. Future borrowing should only be for capital projects. “Soft” investments in “our future” for services, training, etc., are not to be confused with capital projects. I do not fully understand the city’s policy on funding capital projects from current sources or debt financing, but the criteria should be that if the project is a depreciable asset benefiting future generations, then let future generations help pay for some portion of the project by using long-term debt. But more importantly, can such a project show a reasonable return or enough return to make a hefty contribution to the amortization of the debt over the life of the project?


J.J. Smith

J.J. Smith (90) | User | January 28, 2011 - 3:08 PM | FY 2012 Budget Process


Thanks for your comments.

My numbers include the education system which the state does as well. If I took education personnel out of both equations, I shall end up with a narrower gap. Education employees are 39% of total employees state wide and 46% in Alexandria.

My sources are the Virginia Auditor of Public Accounts, the City Financial Annual Report, and the US Census Bureau for government employees:

Riots? I don't think so.

Joseph Judson Smith, III (90) | User | March 9, 2010 - 9:40 AM | FY 2011 Budget Process

I wonder if any of the anecdotes about city employees include any of the over 240 that make more than $100,000 per year.

The city has over 30 city employees per 1000 citizens whereas the rest of Virginia has less than 14 public employees per 1000 citizens. Double the average means double the possibility of unfortunate incidents happening to city employees.

Are we grossly overstaffed? Could we reduce our staffing by 50% by getting rid of the marginal producers and sharing the savings with the overburdened taxpayer and productive employees?

Joseph Judson Smith, III (90) | User | March 8, 2010 - 8:05 AM | FY 2011 Budget Process

Can the Staff and City Council explain why it takes 31 city employees to support 1000 residents while state-wide the ratio is 14 government workers, not including Federal workers, per thousand residents?

Bite the bullet an start eliminating paying positions. Fifty of the 67 positions recently eliminated were empty: real result was a reduction of 17, not 67. That's about a .4% reduction.

And I think voters will see through attempts to make cuts that cause the most visible pain to citizens - kind of like closing the Washington Monument to cut the deficit.

Joseph Judson Smith, III (90) | User | February 21, 2010 - 7:08 PM | FY 2011 Budget Process

January 25, 2010

To Members of City Council, Mayor, and City Manager:

I have lived in Alexandria for 25 years and paid casual attention to the city’s governance and management - until now. Upon hearing of our city’s concern over a $40,000,000 potential deficit, I became curious as to how such a prosperous community could find itself in such straits and decided to do some research.

I studied the city’ s annual report, the report of the State of Virginia Auditor of Public Accounts, reports from the Bureau of Labor Statistics, and from the Securities and Exchange Commission. What I found was an astonishing lack of management, leadership, and governance in our city.

And here is why.

Growth of the population serves as a solid benchmark against which to compare growth in our government. Our population grew 11.6% between 2000 and 2009. How does an 11.6% growth in population manifest itself in growth of services and expenditures? One would assume they would be roughly in line, but not necessarily a direct correlation. After adjusting for inflation, here is what I found:

• Per capita personal income up 17%. Great!
• Total assessed property value up 106%. Great!
• General property tax up 45%. Four times faster than population growth.
• General property tax as percent of city revenue up 54%. Up 6.9 percentage points from 2000. Our city is more dependent on general property tax.
• City payroll up 41%. Up 16% faster than revenues and hogs 68.1% of revenues.
• Average city salary up 36%. Up five times faster than population growth.
• Total city expenditures up 54%. Up five times faster than population growth.
• Expenditures per government employee up 49%. Easy to spend money that ‘s not yours. Four times the rate of population increase. Is the quality of life in the city four times better than in 2000?

This looks like a pretty dismal record of milking a cash cow rather than conserving resources.

And just what may be the root causes of this?

When looking at the breakdown by general departments, some areas of concentration stand out and point to areas needing thorough investigation by the city administration:

Education spends $165,700,000, net after income. Is it top heavy with administration? There has been virtually no student growth yet school payroll is up 41.1%.

Public Safety spends $91,800,000, net after income. Up four times population growth? Are we four times safer than in 2000? Anecdotally I do not notice much difference. This looks like general overhead to me. Should not have grown four times as fast as the population growth.

General government spends $77,600,000, net after income. This looks like general overhead to me. Should not have grown four times as fast as the population growth.

And where might be the best areas to look for savings? Payroll stands out. The city has increased payroll at 3.5 times the rate of increase in our population.

If our payroll in proportion to revenue were the same as all Virginia independent cities, the savings to the city would be $24,000,000.

• If our payroll in proportion to revenue were the same as all Virginia municipalities, the savings to the city would be $9,500,000.

• If our payroll in proportion to revenue were the same as Fairfax and Arlington counties combined, the savings to the city would be $85,000,000.

• If our payroll in proportion to revenue were the same as Goldman Sachs, the savings to the city would be $97,000,000.

It appears that at a minimum no increase in compensation at any level of the government is justified and actually some tough decisions need to be made to get the payroll back in line with a minimum target of no more than 60% of revenues. If there is attrition as a result, so be it. We are in a tough economy with unemployment in Alexandria at 4.6% (U-3) and a projected U-6 rate of almost 8%. That compares to 6.2% and 10.6%, respectively, in the Metropolitan area. There are plenty of qualified people looking for jobs. It is time for the city employees to tighten their belts like the rest of us.

Raising taxes is an unacceptable solution. The job of the city government and leadership is to be faithful stewards of the resources of the city and its citizens. Constant vigilance to prevent the squandering of our resources and reducing costs must always be high on our leadership’s agenda.

The city payroll is the largest target and opportunity. Where the rest comes from is a challenge and charge to the city government and leadership from the citizens of Alexandria.


J.J. Smith

Joseph Judson Smith, III (90) | User | January 29, 2010 - 2:47 PM | FY 2011 Budget Process