Accusations that Natwar Gandhi, the District’s chief financial officer, failed to collect millions in uncollected commercial real estate taxes are a dispiriting reminder that the “Golden Hammer” has lost his glow. The Tax Clarity Act of 2001 — which Gandhi helped write — removed a tax exemption for commercial property owners, requiring them to pay taxes on the entire refinanced amount, not just new debt. Based on the large number of commercial refinancings done over the past decade, Washington attorneys Jeffrey Mitchell and James Stanton estimate that Gandhi’s Office of Tax and Revenue failed to collect more than $100 million that should have gone into the city’s coffers. The duo initially offered to search real estate records for free in return for a percentage of any unpaid taxes collected as a result. They later asked for a flat fee to audit relevant transactions.
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That was four months ago. Why did Gandhi not take up the pair on their initial offer? If they were right, the city could have collected a significant amount in unpaid taxes, and it would have cost taxpayers nothing if they were wrong. Gandhi’s spokesman argued that the attorneys did not provide “proof” that millions of dollars owed in real estate taxes went uncollected — proof that their proposed search would have uncovered.
Two OTR documents may explain why Gandhi didn’t give them the green light. An April 4, 2001, memo reminded property owners that the tax would be levied on “the entire amount of the new loan.” If that wasn’t clear enough, Gandhi’s office sent another memo the following October spelling it out: OTR “will fully assess the recordation tax on a refinance of commercial property if the tax was not paid on the existing debt.” (Emphasis added.) But even after the two warnings, OTR apparently just let the matter drop.
Instead of bringing in an outside auditing agency, Mayor Vincent Gray has ordered D.C. Attorney General Irvin Nathan to “review” the matter with Gandhi and come up with a “constructive solution.” This is unwise given Gandhi’s track record of mismanagement, waste and fraud — including a $50 million embezzlement by one of his employee and a $120 million computer system that couldn’t even generate updated property tax bills. At this point, it would be far more constructive to replace the city’s current bean counter with somebody who can actually keep track of the beans.
