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Posted at 05:22 PM ET, 03/09/2012

Gandhi responds to Gray's questioning of city revenue


Gandhi, at an April 2011 budget hearing (Sarah L. Voisin - WASHINGTON POST)
In a polite but firm Friday missive, Chief Financial Officer Natwar M. Gandhi responded to Mayor Vincent C. Gray’s unusual letter sent last week challenging the veracity of his “unrealistically low” revenue estimates.

Put simply, Gandhi says in the letter Gray’s objections are unfounded. He showed no indication he would revise his latest figures ahead of schedule.

The modest revenue growth his office forecasted, Gandhi writes, is “in line with forecasts by nationally recognized forecasters for key economic indicators” and is consistent with recent growth trends.

As for that $240 million surplus, he said half is due to Gray administration agencies underspending their budgets, as is normal. The other half, he writes, is due to the “most volatile components” of the city fisc — taxes on capital gains, estates and large real estate transactions — that can “fluctuate wildly from one year to the next.”

“Given the many risks in the current economic environment,” he writes, “it would not be fiscally prudent for the revenue estimate to bet that these revenue sources will continue to perform as well as they did last year.”

Gandhi also notes the inherent issues in projecting revenue 20 months before the end of a given fiscal year: “In that time frame, the economic environment can and has changed drastically.”

He closes the letter by gently chiding Gray (D) for playing politics with the revenue estimates, writing that the forecasts must be based on data, not “governmental spending needs and priorities.”

Writes Gandhi, “To inject these factors into the process would undermine the reliability of the estimate, the integrity of the overall budget process, and could damage our credibility in the financial markets.”

Gray spokesman Pedro Ribeiro said Gray was not seeking a revision but making a “factual request.”

”All we asked for in the letter is that he explain how he got to his number in a transparent manner,” Ribeiro said. “We need to explain to the residents of the District of Columbia why we need to make $115 million in cuts.”

Ribeiro said administration officials are reviewing the letter. Gandhi’s next revision is due in June, after Gray offers his budget plan and the council is scheduled to revise and pass it.

The letter:

By  |  05:22 PM ET, 03/09/2012

 
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