The District faces a $95.8 million budget gap in fiscal 2009, as the national economic slowdown finally catches up to a city that reaped and quickly spent bountiful surpluses in recent years.
Revenue estimates prepared by D.C. Chief Financial Officer Natwar Gandhi show a crash in property transfer fees, income tax revenues and sales tax collections. Property tax collections remain strong, Gandhi told Mayor Adrian Fenty and the D.C. Council, but that growth will be offset by a reduction in the commercial real estate tax rate.
The District has accumulated massive debt and laid out millions more for major projects in recent years, from the Nationals’ new ballpark to the bailout of Greater Southeast Community Hospital.
The shortfall remains much less than those faced by surrounding jurisdictions, Gandhi told a D.C. Council committee. But the city must take care not to overspend and rack up debt, Gandhi warned.
“The current revenue forecast is cautious, but not a recession forecast and by no means the worst case,” Gandhi wrote.
The government has been quick to spend its surpluses. Fiscal 2007 ended with $248 million more than anticipated, of which $100 million is already gone. The city is expected to end fiscal 2008 with an extra $80 million, of which the council has already committed to spending $73.8 million.
Fenty said Wednesday that his March 20 budget proposal will be balanced. Sources in his administration, however, said the blame for the reduced revenues rests squarely on the council for approving the commercial tax rate reduction, which will return $95.7 million to Class II property owners next year. There are “serious questions to be asked as to whether the District can afford that amount of tax relief right now,” one source said.
A source in D.C. Council Chairman Vincent Gray’s camp, meanwhile, said the reduction in sales and income taxes is clearly responsible for the shortfall. Property taxes are still expected to increase by $69.3 million next year, he said.
Ward 2 Councilman Jack Evans said the revised estimates will force the District to “really take a hard look at how this spending is occurring.” At-large Councilman David Catania, on the other hand, said the shortfall was “expected” and “manageable.”
By the numbers
Fiscal 2009 revenue estimates
» Property: $1.85 billion
» Income: $1.799 billion
» Sales: $883 million
» Gross receipts: $246.1 million
» Other taxes: $251.7
» Non-taxes: $307 million
» Total revenue: $5.41 billion
