Yippee! Wall Street is weeping, banks are failing — good times are here again for Washingtonians.
Keep reading and let me try to convince you how the current pre-depression money crisis could be a bonanza for the nation’s capital.
But first, let’s review last week’s Sunday column, in which I quoted a D.C. financial official about the central city’s fiscal health.
Senior policy analyst Marcy Edwards told me: “We’re not projecting a deficit.” Four days later, the District projects a $130 million shortfall in its estimated 2009 revenue.
Was I hoodwinked?
Not in the least, Edwards says. Her boss, Natwar Gandhi, calls to say “We never hoodwink anyone.”
Edwards said: “I stand by my comment. There will not be a deficit. A DEFICIT occurs when you spend more than you have. The revenue re-estimate would only result in a deficit if no action were taken by the District.”
To see what action might be taken by the mayor and the city council to reduce spending and avoid any red ink, I consulted with Jack Evans, veteran chairman of the council’s finance committee.
“We can manage the shortage quarter by quarter without making any cuts,” he tells me. “It’s just an anticipated shortfall, and it could shrink if the market improves.”
Job cuts? “Nope.” Program cuts? “Nope.” Higher taxes? “Nope.”
Evans points to the expected $17 million surplus from the last fiscal year. “Could grow even more,” he says. Besides, Gandhi’s bean counters anticipate a $77 million increase in commercial real estate property tax revenues, which softens the expected loss of capital gains taxes next fiscal year, and could grow.
So hoodwinked? I think not. The District, by law, must have a balanced budget; therefore, no deficit. On my larger point, that D.C. is in better shape than its neighbors to weather any financial disasters on Wall Street, I hold firm.
“We have a small problem,” says Gandhi, “but look around us. We are surrounded by a sea of red ink in Maryland and Virginia.”
The island of fiscal calm that is D.C. could actually benefit from Wall Street’s woes. We are a government town, and this crisis calls for more regulation, more bureaucrats, more offices to house them. We are a town of lobbyists and lawyers and accountants. Handling this crisis will require all of the above.
“More work for Washington,” Evans says.
What could shake D.C.’s fiscal foundation is a shock to its tourist trade. Income from sales tax revenue supports about a third of the city’s budget. We are one terrorist attack away from losing some of that, Evans says.
For now, Gandhi points out the District has yet to touch its rainy day fund that stands at more than $300 million.
Rather than suffering money woes like Maryland and Virginia, D.C. could become Wall Street on the Potomac.
