Alexandria City Council Budget Work Session on CIP and Revenues - February 27, 2026
Alexandria City Council Budget Work Session on CIP and Revenues - February 27, 2026
On February 27, 2026, the Alexandria City Council held its first budget work session of 2026, focusing on the proposed Capital Improvement Program (CIP) and general fund revenues. The session included presentations on the 10-year CIP, revenue forecasts, fee adjustments, tax rate options, economic development initiatives from the Alex Forward framework, and a legislative update from the Virginia General Assembly. No formal votes were taken; council members provided direction and requested follow-up memos on several items.
Discussion Items
- CIP Overview: Director of Finance Arthur Wicks presented the proposed 10-year CIP (FY2027–2036) totaling $2.01 billion, with a year one capital budget of $238.7 million. The overall plan is down about 3% from the previous approved plan due to a large FY26 appropriation. Key changes include:
- Affordable Housing Funding Recharacterization: Real estate tax dedication now goes directly to the capital fund, improving management. The total dedicated to affordable housing from the real estate tax, meals tax, and Amazon HQ2 cash capital is $126 million over 10 years.
- Sanitary Sewer Capacity Purchase: A proposed $22.2 million in FY27 (plus $43 million total including reprioritized balances) to purchase capacity from Fairfax County to alleviate forecasted needs. Further discussion set for March 16 work session.
- Pitt and Gibbon Combined Sewer Capacity Project: The previously planned $24 million project was removed; staff will pursue property-by-property floodproofing using prior-year balances.
- Debt Capacity Concerns: The city is approaching its debt limit, with remaining debt capacity dropping to about $15 million in FY31 (within 0.02 percentage points of the limit). General fund support for CIP (debt service + cash capital) is projected to grow from $141 million in FY27, with notable jumps in FY28 and FY29 driven by ongoing projects.
- Alternative Penny Proposal: Staff presented an option to raise the real estate tax rate by one cent, generating $4.9 million recurring and $2.4 million one-time in FY27. Using this as cash capital in FY27 could reduce borrowing, saving about $700,000/year in debt service; in FY28 and beyond, the recurring revenue would offset the debt service increase. Councilman Newby clarified that this would not shorten debt repayment but reduce total debt.
- Specific Project Questions:
- 200 Block of King Street: Council discussed temporary improvements (platforms, bollards) at an estimated $300,000 and long-term street-scaping at $3–4 million. Staff noted that temporary measures could be moved later. Council directed a memo on maintenance costs for the 100 block.
- Affordable Housing Bond Issuance: Council requested a memo on potential size and timing of a larger housing bond package, noting that such borrowing would be taxable (higher interest rate) and impact debt ratios.
- Witter Wheeler Campus Planning: Council questioned the removal of planning funds. Staff explained the funds were reprioritized for other needs, and that master planning could follow the Duke Street land use plan (expected end of 2026). Council suggested considering additional support for coordinated planning.
- Playground Renovations: Council asked about flexibility of contingency funds for parks. Staff confirmed the CIP is designed to allow reprioritization as needs change.
- King/Commonwealth Bridges: Council sought assurance that planning for improvements under the bridges aligns with VPRA’s bridge timeline. Staff expects 30% plans soon; construction of city improvements would follow after bridge work.
- Waterfront Flood Mitigation: Council requested a March update on flood mitigation options, noting recent National Park Service news may affect design. Staff committed to providing a budget memo integrating that update.
- Flood Action Projects: Council asked for an overview of the ordering and funding of stormwater projects. Staff agreed to provide an update from the flood action team.
- Torpedo Factory: Council acknowledged that the CIP does not yet reflect a 10-year vision; staff noted that the RFP process will inform future capital investments.
- Public Pools: Council inquired about the plan for replacing the Old Town Pool (closed for FY28 season) and the status of splash pads (Calasanto expected by Memorial Day 2026). Staff explained the renovation schedule.
- Dash CIP: Councilman Newby asked about a federal grant for bus replacement. Staff confirmed the grant (low-emission/no-emission) freed up local funds to match another grant for facility repairs. The grant will be brought forward in a spring supplemental appropriation.
- General Fund Revenue Overview: Morgan Routt presented revenue highlights:
- Total proposed budget: $977.3 million. No tax rate increases proposed.
- Revenue growth (~$20 million) almost entirely from real estate taxes (3.4% assessment increase). Other local taxes (sales, meals, lodging) are soft.
- Vehicle personal property tax: values have leveled off; one-time revenue from 100% assessment ended. Council asked about revisiting the $5,000 vehicle exemption threshold.
- Fee Adjustments: Several fee increases are proposed, including parking meter rates and Sunday enforcement. The stormwater utility fee increase continues a multi-year plan. Council chose to defer questions to future departmental work sessions.
- Tax Rate Options: Staff presented options for raising various tax rates (real estate, personal property, meals, lodging, BPOL) and their revenue impacts. The maximum real estate tax rate must be set by March 10. Council discussed BPOL rates, noting the professional category is the highest in the region. Vice Mayor Bagley noted that Alex Forward recommends a tax competitiveness study; staff referenced a 2015 task force report.
- Economic Development Initiatives (Alex Forward): City Manager recommended $750,000 in one-time funding to implement five initiatives:
- Lease incentives for arts, entertainment, and innovation uses ($250,000) – concept grant program for tenant improvements.
- Business district activation and marketing ($275,000) – to improve communication during construction and support events (e.g., overnight shift, sidewalk sales).
- Continuation of Alex Open Rewards ($25,000) – an affinity program for independent retailers (currently 2,000 users, 731 businesses).
- High-growth small business incentive fund ($200,000) – grants for companies creating 20–30 jobs, to cover expenses like co-working space, equipment, or transit benefits.
- Innovation lab partnership with Virginia Tech for National Innovation Quarter ($2,000 – noted as typo? Actually $200,000? From transcript: “$200,000” was stated for the innovation lab, but the slide summary shows $200 for small business marketing and $2000? Need to re-check. Actually transcript:
Meeting Transcript
Okay, well, good evening, everyone, and welcome to our first budget work session of 2026. Tonight's topic is the proposed CIP and revenues. With that, I'm going to go ahead and turn it over to Director Route. That's correct. Good evening. Tonight's work session is on the capital improvement program. Revenues, we'll give a brief overview, and then we have a few fee adjustments. Um we want to discuss and also options for tax rates. Um we have a presentation on how it's hoarded and economic development and um a legislative update from the General Assembly session. Um we'll wrap up with the budget calendar. So we'll start with uh Arthur Wicks and the CIP. All right, good evening. Uh so we're gonna go through the proposed fiscal 2027 through 2036 uh capital improvement program tonight. Just wanted to note there's a few slides in here. Uh Jim already presented on them last night. We're just including them here. I'm gonna breeze through them pretty quickly, but because it's a CIP work session, be good to have that all together here. Okay, so uh as Jim mentioned last night, our 10-year proposed plan is 2.01 billion dollars with a year one capital budget of 238.7 million dollars. Um for the overall 10-year plan, this is down about 3% from the previous approved capital plan. Um, that's largely a function of fiscal 26's capital budget was a pretty big appropriation year, it's about 205 million dollars. The year 10 we've added to the plan is less than that, it's about 165 million. So, really most of that decrease is just the fact that what we added to the end was less than what we took off the the front of the capital plan. Uh this is our proposed CIP by uses. Um, really the only note I want to make here um that I don't think the manager touched on last night was within that $629 million dollar wedge for transportation, about 30% of that uh nearly 200 million dollars is our uh well amount of capital subsidy. So the money we pay into our regional transit network. One second here. We can go backwards. There we go. Um, so the guidance that the city manager gave to departments and the schools back in the fall, and that was reaffirmed as part of your uh the budget guidance, really called for uh a CIP that continued to execute the plan we had approved. Uh, and really not looking at a lot of changes, and if you did make changes, uh kind of staying within your levels. So, really, I just want to touch very briefly on three kind of exceptions or highlights and explain what's going on there. Um, because really beyond that, the CIP, there is not much in the way of material change from what we had approved in our plan last year. Um so the first of those items is affordable housing. Um, and really uh the difference here is is a more matter of how funds are being characterized in the final appropriation. So uh in previous years, there was the one percent meals tax dedication, which uh went from the general fund to the housing fund to the capital fund and was projected out 10 years. Then there was the dedicated penny. Uh portions of it were used to pay debt service and housing position costs and the operating budget, and the rest went to the housing fund and stayed there. And really now we're just moving that over to the capital fund. It makes managing how we lever how we use these funds and leverage funds uh in a more consistent way. It also lets us project out that what that dedication is gonna generate over 10 years. So if you look at the affordable housing section of the CIP, you'll see that the real estate real estate tax dedication is about 4.1 million going into the capital funds, and fiscal 27 is projected out uh over the 10 years. Between that, the meals tax dedication and the $1 million of cash capital we dedicate annually as part of the Amazon HQ2 agreement. Uh, that's a total of $126 million dedicated to affordable housing projects in the CIP. Mr. Wicks, I just want to make sure I'm tracking correctly though. So the real estate I get is now going straight to the CIP, but the meals tax will still follow the same path of housing than CIP. So two steps. Yeah. Okay. Yeah.
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