The District could collect as much as $130 million more in tax revenue than expected over the next two years as the local economy continues to feed off of the earlier economic boom, Chief Financial Officer Natwar Gandhi said Thursday. But an “increasingly pessimistic” economic outlook nationally threatens to dramatically slow that growth in the future, Gandhi warned in a letter to Mayor Adrian Fenty and D.C. Council Chair Vincent Gray.
Thanks to stronger than expected growth in property and income tax collections, Gandhi revised his revenue projections upward — by $99.5 million for fiscal 2007 and by $30.2 million for 2008. That would add almost 2 percent to the total local revenues collected from taxes and fees this year. The city’s total intake for the year is now projected to be just under $5 billion.
The District continues to benefit from the thriving real estate market of two years ago, which sent commercial and residential prices and tax revenues soaring. In a statement, Fenty made no mention of savings or tax relief. He pledged to use the additional revenue for one-time projects rather than recurring expenses.
“The projected surplus in revenue announced by the chief financial officer today is proof that the economy of the District of Columbia continues to be strong,” Fenty said. “We look forward to using this revenue to continue to grow and support our economy by investing in one-time costs associated with reforming our schools, creating jobs for youth and ex-offenders, and infrastructure.”
D.C. Council Member Kwame Brown said the extra revenue should be put into the schools, public safety and vocational education.
“We’ll do what we do every year,” Brown said. “We’ll sit down, look at it, listento the residents of the District of Columbia and make the best decision.”
Gandhi called the economic outlook “increasingly pessimistic,” citing “recent turmoil” in the credit markets that could “seriously threaten an already slowing national economy.” Going forward, he said, the benefits of high priced real estate and the associated tax revenue are likely to “moderate.”
A sluggish national economy might also effect tourism, the CFO said, which “would reduce sales tax receipts as almost 50 percent of the District’s sales tax revenues are derived from visitor spending.”
Economic indicators:
» D.C. jobs up by 11,400 since June 2006
» 3.7 percent wage growth in first quarter 2007
» July Condo sales climbed 5.2 percent over 2006; single family home sales fell 4.6 percent
» Commercial vacancies up to 7.5 percent in the second quarter
