I expected to find a confident, intelligent financial manager with a through grasp of DC finannces in DC CFO Natwar Gandhi when he spoke at the Dupont Circle Citizens’ Association meeting on Monday. What I discovered was a confident, intelligent financial manager who dodged almost every question and didn’t seem to know quite as much about DC’s financial situation as most of the audience had hoped.
Councilmember Jack Evans led off the discussion, framing DC’s $131 million budget shortfall as peanuts compared to our much more troubled neighbor states - Maryland with a $2 billion deficit even with slot money, and a $3 billion hole in Virginia. DC’s budget problems come from two main taxes: the capital gains tax, which will bring in $70 million less than projected (since most people won’t have any capital gains next year) and the deed and recordation tax ($50 million under projection), since real estate sales will slow.
As Gandhi added when he arrived, DC’s role as a “state, city, county and school district” with a variety of taxes (income, sales, property) give more stability than governments at various levels elsewhere whose revenues depend on a single tax. And some taxes are projected to increase, like the sales tax, thanks to an inauguration that may bring 1-2 million people to DC (look for a huge record Metro ridership day!)
Gandhi spent a lot of time talking about DC’s financial reserves (strong) and bond rating (great). But audience members wanted to dig more into these projections. The ones Gandhi handed out were prepared in September, and since then, the economic crisis has only deepened. Other cities, said ANC Commissioner Mike Silverstein, track their sales tax receipts much more frequently than quarterly. Is DC doing the same?
Gandhi replied that it’s best not to scare the Council about a budget shortfall until the administration knows for sure it’s real. After all, why put the city through the burden of cutting the budget for what turns out to be a short-term blip? But I suspect most members of the Council would rather decide that for themselves. They’ve hotly debated whether it’s better to make cuts that might turn out to be unnecessary, or to avoid them but potentially be forced to cut deeper in the future.
Besides, that wasn’t Silverstein’s question, and Commissioner Jack Jacobson asked it again another way: how often does Gandhi himself get reports on tax receipts? Daily, said Gandhi, describing a dashboard that tells each department head how much they’ve spent up to the day. But Jacobson wasn’t asking about spending either. Plus, as Commissioner Bob Meehan quickly noted, wouldn’t this great dashboard have stopped the summer jobs program fiasco?
Gandhi closed with a discussion of some of the many disadvantages DC suffers in taxation policy. Not only is an enormous amount of property untaxable (government facilities, nonprofits) but DC’s universities don’t pay PILOTs (Payments In Lieu Of Taxes), as other universities in other cities do. (Anyone know why, in exchange for zoning variances to expand their campuses, we don’t ask our schools to contribute PILOTs commensurate with their counterparts in other cities?)
Another questioner brought up the commuter tax issue, saying “When I lived in Maryland and worked in DC, I paid tax to Maryland. Now, I live in DC and work in Maryland, and still pay tax to Maryland!” It’s worse than this, Jacobson explained after the meeting: Congressional employees who live in DC even have the right to pay taxes to their home states instead of DC, at home state rates, while depending on DC city services.
Of course, it’s not all bad. The feds do give us a lot of money, paid for our subway, and care for our parks (though often poorly). Given the current political reality of taxation, we should at least know how much money we are going to get, to the greatest accuracy possible. And most everyone in the room walked out more than a little bit nervous that our Chief Financial Officer has nothing better than two month old financial projections.