Alexandria staff warn slow growth in assessments, modest revenue gains for FY27 as federal uncertainty bites

City finance staff told the Alexandria City Council at a Saturday budget retreat that the city's FY27 revenue outlook is constrained and subject to national economic uncertainty.

"You've already mentioned a couple of times here that 58% of our revenue comes from property taxes," Deputy Director of Finance Laura Gates said, noting that residential values remain broadly stable but assessment growth has slowed. Gates and Morgan Route, director of management and budget, said early data show modest assessed-value growth for calendar year 2026 and that residential assessment growth is expected to be around 2.7% for FY26 and FY27 while commercial assessments remain weak.

Staff warned of limited near-term upside: early receipts and forecasts produce a preliminary estimate of roughly $5.2 million in new general-fund revenue for FY27, or roughly 0.5% growth over the current budget. "We think about, that's $5,000,000 in new money for next year's budget," Route told the council, adding the figure could change as later data arrive.

The presentation emphasized three risk factors likely to affect local revenue: a partial federal shutdown and related business sentiment; tariff-driven construction cost uncertainty that can delay capital projects; and consumer spending declines that have depressed consumption taxes such as meals and transient lodging. Gates said business license tax receipts (about 4.5'5% of general-fund revenue) are not visible until returns are filed in March, creating an additional forecast uncertainty.

Because the city relies heavily on property taxes, staff highlighted timing effects: calendar-year assessments (based on Jan. 1 valuations) affect two fiscal years, so weakness in the market this winter would depress revenue for FY27 and beyond. The manager told council the city will set a revenue-estimate cutoff in January to finalize the manager's February budget submittal.

What it means for policy: staff recommended limiting base operating growth and asked departments to identify 1% recurring savings; they advised ACPS (the school division) to limit its operating transfer request to 1.5% so the city can preserve flexibility for other obligations. The staff presentation made clear that without offsets or additional revenue, much of the $5.2 million could be consumed by debt service, capital support and the one partner growth commitment already signaled to the schools.

The council and staff agreed to continue monitoring federal and regional data, update forecasts when new receipts arrive, and accelerate outreach to partners and the public once the manager's proposal is released.