It’s real estate revenues, stupid.
That’s the essence of chief bean counter Natwar Gandhi’s latest review of D.C.’s money flow. In a letter to politicians Monday, Gandhi reported he expects tax revenues to remain unchanged from his last review in February.
“Real property collections are much stronger than expected,” Gandhi reported, and later:
“A simple calculation of real property using historic ratios of first half to total collections suggests that first half billing is strong enough to completely offset weakness in income and sales collections.”
No surprise here for those of us who travel the neighborhoods of the nation’s capital. The housing market is hot again. It never really became as frigid as the markets in Maryland and Virginia, but it did cool off. Now, from Chevy Chase to Capitol Hill, and Columbia Heights to Anacostia, buyers are scooping up houses.
Mark my words: The commercial real estate market will follow suit; a year from now — once the credit markets truly thaw — downtown office buildings will start to change hands, and the revenues from deed taxes will again fatten our coffers.
Gandhi hints: “The steep decline in the deed taxes since the collapse in the housing market is tapering off.”
What does Gandhi’s missive mean?
— In the parlance of current fiscal realities: Flat is the new up, and “unchanged” revenues is great news. While neighboring jurisdictions are facing budget cuts into the future, D.C. is beginning to pull out of the abyss.
— Obamacare has been good for our economy. The president’s success in passing health care reform and now financial reform means more jobs for regulators and lobbyists, lawyers and contractors. Gandhi reports: “Withholding remains strong.” D.C. has lost jobs at the lower end of the pay scale, but “higher income District residents are keeping or gaining jobs.”
— D.C. politicians will not have to make more cuts to pet programs in the midst of the current campaign season. Both Mayor Adrian Fenty and his challenger, Council Chairman Vincent Gray, can continue to make promises about future programs and forgo the unpleasantness of cutting the budget further.
Herein lies the problem. Having resorted to “funny money” tactics to balance the budget thus far — as in shifting funds rather than making cuts, mortgaging the future with debt, and drawing down reserve funds — the city’s politicians can continue to skate without facing facts that revenues, even if they rise, will not support the big government they have built.
“The new estimates are better than if they had come in lower,’ says Jack Evans, chairman of the council’s finance committee and the only legislator to vote against the current budget, “but we still have to make some serious cuts to the budget.”
Will either Fenty or Gray — or candidates for council chairman Kwame Brown and Vincent Orange — have the courage to call for budget cuts?
Doubtful.
Harry Jaffe’s column appears on Tuesday and Friday. He can be contacted at mailto:[email protected] “>[email protected].
