Fairfax County’s development strategy of pursuing high-density residential development around Metro stations and other commercial centers (e.g. — Seven Corners, Lake Anne Village Center) will fail in its fundamental goal of generating large new tax revenues. This is due to the demonstrated fact that the cost of community services for residential services substantially exceeds the revenue it generates.
The need for massive new County tax revenues is driven primarily by the deteriorating fiduciary position of its four pension funds (civilian, police, uniformed, and education). At the beginning of the century, all four funds were essentially fully funded (97 percent to 102 percent), but they have deteriorated almost continuously since then. The FY2016 County annual financial report shows a $4.7 billion funding shortfall despite the quadrupling of County (and additional employee) contributions since 2000. That represents about a one-quarter shortfall in required funding across the four funds. This growing shortfall is why Moody’s issued a warning on the County’s AAA bond rating several years ago and the County made a commitment then to reach 90 percent funding by 2025. One obvious approach to addressing such a shortfall is to dramatically increase development that creates new taxable value.
From Reston’s perspective, this has taken the form of two County zoning initiatives linked to the revised Reston Master Plan:
- The passage last year of an amendment to the PDC/PRM (Planned Development Commercial/Planned Residential Mixed-Use) zoning ordinances to increase the allowable density from FAR 3.5 to FAR 5.0. From a Reston perspective, this primarily affects the Herndon-Monroe and Wiehle station areas as well as the southern half of Reston Town Center. The zoning ordinance also covers Commercial Revitalization Areas (CRAs), including Lake Anne Village Center. The two ordinances focus on commercial and residential mixed-use development respectively, and the residential-focused PRM would allow up to as many as 200 dwelling units per acre (DU/AC) at FAR 5.0. No place in the Washington metropolitan area has that much density.
- The recently proposed amendment to the Reston PRC (Planned Residential Community) which would increase the community-wide population density from 13 to 16 people per acre, about 21,000 people. More importantly, it places no limits (except Board discretion) on the number of DU/AC in “high density” development areas. This includes the Town Center north of the toll road and Ridge Heights to the south. Making the matter worse, the Reston plan was amended behind closed doors (not by the Reston planning task force) to eliminate any limits on high density multi-family development. Currently, the limit is 50 DU/AC.
Research on this issue by the US Government, private sector, and academia is extensive and it virtually all comes to this same conclusion. All these studies highlight the importance of methodology, assumptions, other values than tax revenue in development decisions, etc., but none we have discovered suggest that residential development will ever generate a net gain in tax revenues for the County.
Probably the benchmark study on COCS is an overview by the Farmland Information Center (FIC) of the American Farmland Trust in a public private partnership with the US Department of Agriculture last September. The overview records the results of analysis of the COCS by type of development in more than 150 communities, counties, etc., across dozens of states over more than two decades. The results of FIC’s studies show that, on average, for every dollar in tax revenues generated by tax revenues, the median residential development is a cost $1.16 in community services, a 16 percent loss. By contrast, commercial and industrial development costs $.30 in community services for every $1 generated in tax revenues, a better than three-fold tax revenue return for the County.
A second, academic “meta-analysis” of more than 100 communities across the country came to the same conclusion, but with slightly different results. It put the mean cost of residential services at $1.18 per dollar of tax revenue, and Commercial/Industrial and Agriculture/Open Space were also slightly less advantageous at $.44 and $.50 per dollar of tax revenue than in the FIC overview.
An additional important finding of this study is that the addition of 10,000 residents increases the residential ratio by one percent, that is, from $1.18/dollar to $1.192 per dollar. An implication of that finding is that the addition of 80,000 new residents to Reston’s station areas as planned would increase the $1.18-to-$1.00 ratio to $1.274 in community service costs for each dollar of tax revenue. Based on this study’s data, that expansion — when completed — would cost the County $50 million more per year in community services for Reston’s station areas than it would receive in tax revenues in 2017 dollars at current tax rates.
This is not the answer the County is looking for if it is trying to solve a growing long-term debt obligation problem. Its alternative options are limited, however, and would cause further deterioration of Restonians’ quality of life:
- The County could offset the losses generated by the residential development by equally massive — and tax revenue positive — commercial development. The key problem with this approach is that there is little demand for new office space in Fairfax County now as growth stagnates and office space per worker shrinks. In fact, as of last December, County data shows that the office space vacancy rate was 16.8 percent, nearly 20 million square feet of vacant space county-wide. Net office space absorption last year — new leases less new vacancies — was less than 250,000 square feet of office space out of 116 million total square feet of office space. On the other hand, the more loss-generating residential development that occurs now, the less the opportunity for tax revenue-positive future office and other commercial development.
- The County could demand substantially greater proffers from developers seeking high density development. Frankly, the County has never been very good at obtaining fair value from developers as they apply for new development, including improvements in transportation, education, parks and recreation. Moreover, with the moneyed motivation of developer interests in Richmond generating legal constraints on County proffer efforts, the County’s ability to elicit proffers is increasingly limited.
- The County could massively cut Reston’s community services and those of other County residents. This is basically what is happening in Reston, especially in the station areas, and it is leading to a major loss in the community’s quality of life. The County’s Reston plan calls for one elementary school when the planned population growth requires two elementary and one-each middle and high school. The County is not even trying to live up to its own urban parks or recreational facilities policies. And the County has lowered the acceptable standard for traffic congestion in urban areas — and still added a property tax on station area homeowners to pay for the improvements.
Given the County’s current intent on pursuing much greater residential density in Reston’s station areas and beyond by amending the Reston PRC (and having already amended the PDC/PRM zoning ordinances), Restonians should make every effort at every level to prevent the County from destroying the planned community that is Reston. If nothing else, Restonians ought to highlight to the County that increasing Reston’s urban density by increasing the allowable DU/AC in the Reston PRC does not serve the County’s interests even if it serves developers.
Terry Maynard, Co-Chair
Reston 20/20 Committee