D.C. revenues are expected to come in $17 million short of projections this fiscal year and $600 million shy over the next four years, Chief Financial Officer Natwar Gandhi said Tuesday in new projections that paint a dour picture of the District’s economic recovery.
Gandhi said his latest revenue estimate is a “restrained one” based on preliminary fiscal year 2009 tax collections, which came in 6.5 percent lower overall than the year before. He predicts unemployment will peak at 12.4 percent early next year, and weakness in the commercial property sector will last “at least into FY 2011.”
“When it appears that the national recovery is gaining momentum, the District’s economy should gain momentum as well,” the CFO said in his quarterly letter to Mayor Adrian Fenty and D.C. Council Chairman Vincent Gray.
In the current fiscal year, Gandhi said, the District faces a $17.1 million shortfall — less than one-third of 1 percent of the city’s $5.4 billion budget. Revenues will run $104 million short of earlier projections in 2011, $186.5 million less in 2012 and $277.3 million less in 2013.
Ward 2 Councilman Jack Evans, chairman of the finance and revenue committee, said the projections “aren’t great but they’re not bad, either.”
“A $17 million shortfall, to be honest, is insignificant,” he said. “It is all manageable.”
But there are challenges ahead, Evans said. District agencies anticipate at least $80 million in “spending pressures” in 2010, meaning their expenses are far outpacing their budgets. And because there is less revenue available, Evans said, D.C. leaders may have to reduce 2011 capital spending from $650 million to $350 million — putting numerous projects at risk.
The District’s 2009 revenue skid was led by double-digit percentage declines in three areas. The non-withholding portion of the income tax fell by 69.6 percent, deed tax collections fell by 33 percent, and corporate income taxes by 23.9 percent.
Economic indicators present a mixed picture of the District’s economic recovery. Gandhi said. While government employment and housing sales show strength, unemployment and commercial real estate “indicate continued weakening” and real property collections “will be a drag on the District’s overall revenue performance.”
