The InTowner
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From the Publisher's Desk...

DC HAS EFFECTIVELY RUN OUT OF MONEY — WHAT NOW?

Here’s the reality: As of right now, the District’s current fiscal year, which began last month, is already in the hole to the tune of a $175 million projected budget shortfall. This is thanks to $100 million less in sales and income tax receipts due to the recession; and in addition to various spending excesses, the anticipated further $35 million federal stimulus funding did not materialize. As for next year, based on current projections, while the situation might be marginally improved, a $135 million shortfall is still being factored into the calculations.

Five years ago the District’s cash reserves were at an all-time high of $1.6 billion but today they have dwindled to a mere $61 million. During the three most recent of those years, as the Mayor’s budgets pushed more and more spending –- all the while the Council going along — while at the same time the recession was taking its toll on revenues which were decreasing, the solution was simply to draw from the reserves. Now, however, the days of draw-down are over; what’s left must be there to ensure interest payments on outstanding bonds and to fulfill other debt service obligations.

So, what now – what do we do?

In a November 5th posting on the Washington Post’s “All Opinions Are Local” blog, Ward 2 Counmcilmember Jack Evans, who chairs the city council’s finance and revenue committee, stated the following:

“Without reserves available to close our spending gap, and no more room to borrow, we must either raise revenue, cut spending or both. Because our rates in commercial property tax, personal and corporate income tax, and sales tax are already the highest in the region, and in some cases the nation, it is difficult to ask our residents and businesses to pay more, particularly in these tough economic times. . . .”

We are in complete agreement with Evans that raising taxes is not the answer; in fact, we are even more adamant on this point: it’s not a matter of it being “difficult to ask our residents and businesses to pay more” –- it really is a matter of it being impossible.

As it is, when homeowners receive their first-half current fiscal year real property tax bills at the beginning of March, substantial numbers will be surprised to discover that rather than seeing what they expected to be a welcome reduction in light of recession-caused decreased assessments, they will instead more likely see that the dollar amounts will either not have decreased to any meaningful extent or maybe even stayed about the same or even gone up somewhat. This is because, unknown to most property owners, last year the city council changed the tax computation formula in a way that ensured the taxable base would be higher.

What this will mean, of course, is that the city’s vast number of middle class and fixed income and retired homeowners will be in for a disappointment and any attempt to raise income taxes or other revenue on the backs of citizens could unleash a taxpayer revolt!

We need, therefore, to brace for real cuts in government programs and services –- and we don’t mean the nickel and dime stuff like arts and the humanities which don’t amount to a hill of beans. Nor do we mean the old gimmick of not spending to maintain much of our already crumbling infrastructure which is in the state it is now because of the refusal in prior years to deal with the issue. (Only in recent time has a turn-around gotten underway, thanks to sensible, targeted projects managed by the city’s transportation and public works departments and with the help of federal stimulus money –- which will soon run out.)

So, what to do? We hate to say it, but we must: Our new mayor and members of the city council will absolutely need to be prepared to furlough some of the “sacred cows” like the summer youth jobs program, to consolidate overlapping social service programs and eliminate ones that are not producing tangible benefits or results. Most importantly stop entering into expensive leases in privately owned office buildings and instead better utilize city-owned properties, including school buildings that are sitting idle and empty.

Further, start cutting back on outsourcing to contractors (most of which are out-of-state) and have the work performed by city employees, too many of whom are not effectively being utilized as it is; seriously cut back on the numbers of highly paid upper management personnel, too many of whom seem to spend more time erecting impediments to getting things expeditiously done to make life easier for businesses and residents.

We realize our suggestions are only a start. There are many other options to explore, including changing the culture of the bureaucracy that continually erects impediments that discourage entrepreneurs from launching new businesses, and if they proceed they then face often unreasonable delays in opening (which blocks the infusion of new revenue for the city); it should not take interminable months upon months to get the green light and certainly shouldn’t require the expenditure of huge sums for lawyers and permit expeditors –- no wonder DC has a reputation as one of the nation’s least friendly business environments.