Some Want Extra Funds to Help Residents
City officials are patting themselves on the back for the District being able to amass a budget surplus. But critics suggest that whatever success the city enjoys has come at the expense of ordinary residents and businesses. The budget windfall has been fueled by exorbitant parking fees, the five cent bag tax, higher taxes for local businesses and increased income taxes for the wealthiest D.C. residents.
And even as elected officials crow about their success the news belies the grim reality on the ground. While the District is not in as dire straits as other jurisdictions, the pain felt by the 2008 economic meltdown and a stubborn recession has spared the lives of middle-class and low-income residents.
President and CEO of the D.C. Chamber of Commerce Barbara Lang reacted to the news by saying, "We want our money back."
"We call on [D.C. Mayor Vincent] Gray to exercise some fiscal responsibility and refrain from spending any surplus, especially when the Chief Financial Officer has projected further shortfalls in revenue for fiscal year 2013 of over $100 million," Lang said. "However, we at the chamber would go even further; it is our contention that rather than simply banking the money it should be used to revoke the income tax increase placed on residents and the new business taxes put forth in the fiscal year 2012 budget. It is time for the government to rein in on spending instead of squeezing residents and businesses."
An audit conducted by the accounting and management firm of KPMG said the District ended the year with $240 million more in revenue and savings than expenditures and an increase in the city's Fund Balance to $1.1 billion over the $890 million in the fund at the end of fiscal year 2010. D.C. Mayor Vincent Gray said that he is pleased that the city is doing well financially.
"One of my top priorities in office has been to stabilize and rebuild the District's financial health after years of spending down our crucial savings account," Gray, 69, said. "I'm proud that, despite a very challenging economic climate and difficult budgetary choices we were forced to make, the District government saved well, spent wisely and put ourselves in excellent shape for the future."
Despite the District's good fortunes the rest of the country and many of the city's residents are being buffeted by an economic storm that shows no signs of abating. The Rev. Graylon Hagler, senior minister at the Plymouth Congregational Church of Christ in Northwest, said a surplus should benefit struggling Washingtonians.
"The surplus should be spent on social services," Hagler said. "People are having a rough time and the government should be there for them. The government should take care of its citizens."
Gray, in a press conference Monday with Chief Financial Officer Natwar Gandhi, D.C. Council Chairman Kwame Brown (D), D.C. Council members Jack Evans (D-Ward 2) and Vincent Orange (D-At-Large) (in the audience), said controlling spending, instituting a hiring freeze on unfilled personnel positions and managing spending pressures has produced the surplus along with growth in the city's population and strong consumer spending. Gandhi said the city's commercial real property is a boon to it as well as the capital markets' positive view of the economic development taking place.
The District is a long way from its days under the federal government mandates financial control board from the mid-1990s to the end of September 2001. The mayoral administration of Anthony Williams from 1999-2007 put the city on a firm financial footing by promoting it as a destination for professionals and new businesses.
While the Great Recession of December 2007-2010 has had its toll, city leaders such as then-D.C. Mayor Adrian Fenty and D.C. Council Chairman Vincent Gray worked to make sure that the city's books were balanced. When Gray became the city's mayor in January 2011, he took over a jurisdiction that did not have the financial woes that some major cities had.
The District, according to the audit is doing better financially than New York, which is struggling to close a $242 million gap on a $70 billion budget, according to the Independent Budget Office, a non-partisan research group in the city. New York Mayor Michael Bloomberg will likely ask New York Gov. Andrew Cuomo (D) for assistance in dealing with its pension funds, which is believed to cost the city $8 billion.
Washington is in much better shape than Baltimore, which has had to furlough and lay-off employees in recent years as well as institute draconian cuts to city services. Mayor Stephanie Rawlings-Blake said in published reports that she will look at cuts in pensions and other benefits of city employees to close an estimated $52 million deficit.
Atlanta is getting along better than its northern neighbors mentioned above, with Mayor Kasim Reed and the City Council balancing a $547 million budget in July 2011 without raising property taxes.
Gandhi said that Gray and the D.C. Council deserve praise for its fiscal prudence.
"We were able to increase the Fund Balance to $1.1 billion because of the careful spending and diligent oversight of the mayor and the D.C. Council," Gandhi said. "They are to be commended for keeping the city in such a strong financial condition while other states and municipalities are struggling."
Gandhi said that the city should be able to get stronger bond ratings on Wall Street "because we have a structural balance. We will put whatever surplus that we have into the reserves," he said.
Gandhi cautioned residents that the city's financial health does not mean that the D.C. Council will have a free-for-all on the new city money.
"The $1.1 billion cannot be spent," he said. "Some of that money is obligated to bond escrow, the congressionally mandated emergency contingency fund, the required reserves, external matters such Workman's Compensation and the priorities of the mayor and the D.C. Council. We have no discretionary funds to spend and will not have to go into short-term borrowing."
The fact that KPMG gave the city an unqualified "clean" opinion for 15 consecutive years pleased Brown.
"We need to thank the residents and the business owners in the District for its financial success," Brown, 41, said. "It is the residents and the businesses that attributed the additional revenue in sales, parking and the bag tax that is helping the city."
Evans, the chairman of the powerful Committee on Finance and Revenue, said that the District is considered a financial model for other major cities.
"With all of the development that is taking place in the District, many cities are envious of the District," Evans said. "These developments when they come to fruition will only add to our coffers."
Elissa Silverman, a policy analyst with the D.C. Fiscal Policy Institute, said that the city leaders should be happy with the audit.
"It is a good thing, definitely," Silverman said. "The question is how do we move forward? We [the Policy Institute] have had a sense that there would be a surplus and obviously some people are doing well in the city."
Silverman said that "while the surplus is a good thing, showing that the city's income and commercial property taxes are performing well."
Gray, Gandhi and other city leaders will travel to New York this week to argue for an upgrade to the city's bond rating. Evans said that the trip to Wall Street is more pleasurable than in the past.
"When I first got on the Council, in 1991, our bond rating [generally] was B-minus and now we are going to ask for an AA rating across the board," he said.
Gray said D.C. residents will benefit from the city's financial health. "This news means that our residents will have a better quality of life and we will be able to diversify the local economy and continue to bring in new businesses that will provide jobs for people."