The District’s chief financial officer, Natwar Gandhi, morphed last week into Pollyanna. A man who riles elected officials with his conservative estimates presented news of a projected $131 million shortfall and a slide in value of District assets as if those events were nothing to worry about.
“I think it can be managed,” he said. “The market will stabilize after massive federal investments.”
It’s true the shortfall is minor in an overall $5.5 billion budget. But, when contextualized within the national reality — failure of more than a dozen banks, decline in value of personal and municipal investments, the rise in unemployment, and tightening of overall credit — it’s safe to predict significant challenges are ahead. Gandhi knows this, which makes his Pollyanna-esque declarations incomprehensible.
Many in the city are using the economic downturn following the attacks of Sept. 11, 2001, as the gauge for what may come. That’s a mistake, says at-large D.C. Council Member David Catania.
Then, the problems weren’t systemic, the rate of inflation was low, and the fiscal plan presented by Mayor Anthony Williams was so bloated it could’ve qualified for an appearance on “The Biggest Loser.” Today, the entire financial market is in trouble. While Mayor Adrian M. Fenty’s 2009 budget has only a 1.7 percent growth rate, overall inflation is near 6 percent.
“We have insane inflation,” Catania says. That element alone would’ve forced the city to shrink its budget. Add the Wall Street crisis, and “we’re behind the eight ball.”
There’s more: The value of the District’s pension funds last week was down by 6 to 7 percent. If that continues, the government will have to kick in more money, including the retirement board’s generous cost-of-living increases. And because some banks own property in the District, they may be forced to sell such assets to square their accounts.
“If there is no liquidity, then no one can buy those buildings. That forces down the value of commercial real estate,” Catania explains. That could lead to a drop in property taxes across the city.
“Then, we are screwed,” he says. The District’s commercial real estate market has been a prime source for revenue surpluses over the past five years. “I want Dr. Gandhi to get serious and give us the worst-case scenario and multiple that by two.”
Catania isn’t going through a Henny Penny moment. Economists are predicting that even with a bailout, the country is in for a long recession.
Yet, Gandhi is painting rosy pictures. He’s placed the budget-cutting burden on elected officials while offering his favorite mantra: “I’m just a bean counter.”
Considering what’s happened in his sphere of influence — massive embezzlement and critical audits — Gandhi may want to bury that phrase. His reputation is at risk if the city fails to respond adequately to current and future budget problems including those caused, in part, by Wall Street.
