Falls Church adopts FY 2026 budget, trims real-estate rate to $1.20 and sets contingencies amid economic uncertainty

The Falls Church City Council adopted the fiscal year 2026 operating budget and capital improvement program and approved a package of related ordinances May 12, setting the real-estate tax rate at $1.20 per $100 of assessed value and passing utilities rate updates and fees.

City Manager Shields and Finance Director Kiran Bawa presented the revisions that led to the final package. Shields said a downward revision of about $1.2 million in local tax revenues required adjustments; the budget before council reduces some spending and sets aside a revenue-contingency reserve of roughly $535,000. The council adopted the primary budget ordinance (TO25-02) on a 7-0 vote.

The council also adopted the tax ordinance (TO25-03) setting the real-estate tax levy at $1.20; the vote was 7-0. The personal property tax rate did not change. Staff said the net effect of the adopted rate combined with rising assessed values would mean the median home still sees an annual tax-bill increase of about $550 despite the 1-cent rate reduction. Staff also noted average household impacts for utilities: sanitary sewer charges would rise about $14 annually and stormwater about $10 annually under the new schedules.

Finance Director Kiran Bawa, who announced she will leave the city in July, summarized changes since the council’s March presentation: a $261,000 set of general-government spending reductions, a $145,000 reduction in the school transfer, and capital-program adjustments including rooftop solar for Aurora House and a reprioritization for some parks projects. The CIP adopted for FY26–FY31 totaled approximately $25.8 million in the coming year, including a $9 million transportation/roadway investment and $14 million for sanitary-sewer system projects.

Shields said “one of the main initiatives in this year’s budget is increasing our street maintenance budget” by $700,000 to a $2.2 million pavement and roadway maintenance program so the city can pave more streets in FY26. The budget also includes roughly $2.1 million in compensation investments for staff, including a 5% merit pool and a police COLA/Career Step adjustment.

Councilmembers debated the trade-offs between near-term tax relief and preserving reserves. Several members said the region’s economic signals — and forecasts of rising unemployment — justify a conservative approach with contingency funds. Councilmember Flynn described the contingency as a safety net to protect city operations and vulnerable households if economic conditions worsen. Councilmember Snyder supported the package and emphasized that growth brings costs such as higher school enrollments and additional sewer demand.

The council also authorized staff to form a solid-waste task force to study moving curbside collection costs out of the tax rate and into a dedicated fee. Shields said the task force will convene soon, bring recommendations in August and could lead to an August first-reading ordinance and September second-reading action so any change would be reflected in bills mailed this fall if the council moves forward.

Why it matters: The adopted budget balances a modest tax-rate reduction with an emphasis on maintaining reserves, funding public-safety pay adjustments and increasing pavement maintenance, while setting aside contingency funding in a time of regional economic uncertainty. The council and staff emphasized that the municipal finances remain strong — with policy-level reserves and favorable credit — but that near-term caution was prudent.

Ending: The council approved the budget and companion ordinances unanimously and asked staff to monitor monthly revenue indicators. Members said they will reassess allocations and contingencies as new data arrive in quarterly reports and in the coming months’ budget reviews.