A stable real property market will protect the District from falling off the cliff in the case of a recession, D.C. Chief Financial Officer Natwar Gandhi said Wednesday, but the city’s economy is not immune to a slide.
Despite the highest debt per capita in the nation — at $9,000 for every man, woman and child — and an inability to tax the federal government, nonprofit-owned properties or the income of nonresidents, the District’s economy will remain sound, Gandhi said confidently.
“We are not going to go into a major slowdown,” Gandhi said. “There is some softening, but there will not be a major slowdown. After all, it’s the nation’s capital — people do come here.”
Tax revenues, specifically income and sales taxes, are especially susceptible to an economic downturn, Gandhi said, but the District’s real property base is exceptionally strong and virtually recession-proof.
Sales of single-family homes fell by 20 percent in 2006 and condo sales dropped by 11 percent. Commercial real estate fared better, however, with a regional-low 2006 vacancy rate of 5.4 percent.
Gandhi’s outlook for 2007 includes a softening housing market, growing investments by the federal government and an increased housing stock. The hospitality sector will continue to add jobs, according to the CFO’s presentation, “but the number of visitors is below 2006 and prospects for growth are uncertain.”
As he has for years, Gandhi warned of the so-called “structural imbalance,” the difference between what the District is able to collect in tax revenues and what it is required to spend for services and capital projects. The imbalance, according to the federal government, is between $470 million and $1.1 billion.
It would be wise, Gandhi told the mayor and council, to begin a discussion of what capital projects the city can “prudently afford.”
