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How Will Sequestration Impact Oakton, Fairfax County?

County will have to raise taxes or increase its commercial real estate occupancy rate, FCEDA head says.

Sequestration threatens to destabilize the Northern Virginia economy, and some say the effects of the across-the-board cuts to federal programs and contracts will be felt across Fairfax County. 

"Businesses are in business because they know how to plan for problems and deal with them. But not knowing what to plan for is devastating to them," said Gerald Gordon, president and CEO of the Fairfax County Economic Development Authority.

Localities across the Commonwealth are bracing themselves against the uncertainty of sequestration. Congress failed to reach an agreement on $1.2 trillion in debt reduction by March 1, which means the U.S. military will be forced to cut $46 billion and domestic defense spending will be cut by $85 billion this year alone. 

Annual federal procurement in the County  $25 billion Federal civilian employment in the County:  4 percent

*Source: Fairfax County FY 2014 Budget

Fairfax County Executive Ed Long's proposed 2014 budget includes $3.6 billion in General Fund expenditures, which pays for most county services and departments. But 62.4 percent of the General Fund is derived from real estate taxes, and in December 2012, the county's office vacancy rate was 14.6 percent, up from 13.8 percent in 2011.

Long asked the County Board of Supervisors in his budget to approve a 2 cent increase in the real estate tax rate, while contending with $20.52 million in agency reductions, including the elimination of 91 merit positions. Additionally, there would be no merit increases for County employees in 2014. 

One result of the economic uncertainty is that prospective commercial tenants have put on the brakes on moving to Fairfax County, Mount Vernon District Supervisor Gerry Hyland said.

"I think it's going to slow down everything as far as the decision-making and until they know that we have reached stability in our federal government and that the Congress has finally started governing and working together rather than against each other," Hyland said. "I think people are going to sit on their hands and do nothing until the waters get calm, because they are certainly not calm now. There's nothing but waves in the sea of government." 

Leasing activity in 2012 was at a five-year low in Fairfax County, with 9.7 million square feet of available lease space, according to Long's budget presentation Tuesday.

And in order to maintain its level of services, the County will have to raise taxes or increase its commercial real estate occupancy rate, Gordon said.

"The individual property buyer and the corporate buyers of services are going to definitely be impacted by this," he said. "They are going to slow their purchasing, which is going to hurt the economy."

A recent study by George Mason University found that nearly 10 percent of the 2.1 million jobs that would be cut under sequestration would come from Virginia. Of those, 136,191 Virginia jobs would be lost due to defense cuts; another 71,380 jobs in this state would vanish thanks to non-defense cuts. The Commonwealth could also see a $20.8 billion loss in gross state product.

December 2012 Unemployment Rates

National Average 7.6 percent Arlington County 3.3 percent Alexandria City  4.2 percent Fairfax County 3.7 percent Loudoun County 3.8 percent                     

In February, Virginia's Republican Gov. Bob McDonnell told President Obama sequestration could send Virginia into a recession.

"Sequestration-mandated reductions will be implemented with no regard for relative national priorities. These reductions will have a potentially devastating impact in the Commonwealth, with the Northern Virginia and Hampton Roads regions at the greatest risk," wrote McDonnell.

What effect do you think sequestration will have on Fairfax County? Tell us in the comments section below.

Anoneemous March 04, 2013 at 01:38 PM
Might be a good idea for state and county politicians to plan for what everybody predicts is coming, which means appropriate downsizing of state and local governments. Readers... what say you?
John March 04, 2013 at 05:33 PM
Agree.
John May 22, 2013 at 01:59 AM
Bring it on!

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