D.C. Council agrees to scrap per-gallon gas tax in favor of levy on wholesale fuel

The D.C. Council approved a record $12.1 billion budget Wednesday that includes tens of millions for affordable housing, additional resources for libraries and parks, an expansion of Circulator bus routes, money to combat homelessness and a new funding source for the arts.

The 2014 spending plan was largely shaped by Mayor Vincent C. Gray (D), but the 13-member council made changes over the past two months that were approved Wednesday.

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“This budget will forward the progress of our great city,” Gray said after the council vote.

Although it raises fines related to street-sweeping from $30 to $45 and includes higher Circulator fares, the budget largely avoids higher taxes and fees.

The spending plan scraps a controversial tax on out-of-state municipal bonds and expands a property tax rebate for low-income residents. And it eliminates the city’s 23.5-cents-a-gallon gas tax and replaces it with an 8.3 percent tax on wholesale gasoline and diesel purchases.

Chairman Phil Mendelson (D) said the council worked with the mayor to prepare a budget that enhances residents’ quality of life and that helps the poor and middle class continue to afford to live in the city.

“I think between the mayor and the council, we’ve made significant progress in regard to affordability,” Mendelson said. “I don’t mean to say we’ve solved it, but we’ve made significant progress.”

Gray’s budget includes about $60 million for affordable housing, part of his overall $100 million commitment. The council added about $1.75 million for the Local Rent Supplement Program, which pays for permanent housing for low-income residents; approved an additional $6 million for the homeless, including $1 million to seniors and gay teenagers; and endorsed Gray’s plan to spend $15 million on grants to nonprofit groups.

The city spending, including an additional $3.5 million for the office that handles seniors’ matters and expanded hours at libraries, underscores surging revenue associated with the commercial and residential real estate markets. The city has logged back-to-back budget surpluses totaling more than $500 million.

The 2014 budget, about $6.3 billion of which comes from local funds, is slated to be about $800 million higher than this year’s spending. The ability to spend liberally kept dissension among council members to a minimum this year.

Still, some criticized Gray’s priorities. Council member David A. Catania (I-At Large), chairman of the Education Committee, questioned the less than 1 percent increase in public school spending when the overall budget grew by about 6 percent.

“The mayor is assigning the children of our city, especially the poor ones, to a continued diminished future,” said Catania, who successfully pushed to expand summer school and limit budget cuts at schools with falling enrollment.

Other council members questioned last-minute changes Mendelson made to the budget. Members Mary M. Cheh (D-Ward 3) and Jim Graham (D-Ward 1) were unnerved that the chairman concluded that the city should use revenue from a potential future tax on Internet sales, which is not yet authorized under federal law, for Metro repairs. Graham and Cheh had hoped to use that revenue, as much as $40 million annually, toward their plan to end homelessness within 10 years.

Graham also criticized Mendelson for not funding an exemption that would have excluded women with children younger than 1 from the city’s new five-year limit on welfare benefits. Instead, Mendelson wants to exempt recipients who care for a disabled or elderly relative, or who are enrolled in a GED or job training program. Mendelson said he didn’t want to encourage having other children while on public assistance.

Mendelson also pushed to scrap the city’s 23.5-cents-a-gallon gas tax, replacing it with a levy on wholesale fuel and diesel purchases. Under the new system, the 8.3 percent tax will be assessed on wholesale fuel purchases. Those businesses and retailers that buy fuel in bulk will then be expected to pass those costs onto consumers.

Mendelson said the change was needed to better insulate the city’s highway funds from market volatility associated with fuel-efficient vehicles and lower demand when fuel prices spike. Mendelson said he crafted his proposal to be “revenue neutral,” which he said should guarantee that gasoline prices do not spike at the pumps.

The Office of the Chief Financial Officer is analyzing the legislation to determine its impact. Council member Jack Evans (D-Ward 2), chairman of the Finance and Revenue Committee, said he had preferred that the council had more time to examine Mendelson’s measure.

Still, Evans said he was pleased with the outcome of the budget, which includes using some sales tax revenue for the Commission on Arts and Humanities ($22 million a year), a new park in the NoMa neighborhood ($50 million), and $400 million over six years to continue building the city’s streetcar routes.

“When you have tons of money, it’s easy,” Evans said.

 
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