D.C. Schools Might Snare Tax Windfall
Fenty Wants to Fund Construction, Buyouts

By David Nakamura
Washington Post Staff Writer
Friday, September 7, 2007

The District government expects to collect $100 million in additional tax revenue this year, and Mayor Adrian M. Fenty wants to spend much of the windfall on the city's schools, paying for upgrades to school buildings and buying out hundreds of employees in a purge of the central office.

The additional revenue is the result of continued good news in the District's real property market during fiscal 2007, Chief Financial Officer Natwar M. Gandhi said in a letter yesterday to Fenty (D).

Property markets nationwide and in the Washington region have cooled significantly in the past two years as interest rates have risen and some suburban jurisdictions, such as Fairfax County, are dealing with massive revenue shortfalls.

But as the fiscal year comes to an end Sept. 30, the District is still reaping the rewards of the hot market that drove assessments up during the first half of this decade. Tax revenue collections usually take a year or two to catch up to market trends, Gandhi wrote.

The latest surplus gives Fenty an opportunity to fund initiatives not included in the fiscal 2008 budget, and the mayor is prepared to take advantage.

Fenty plans to ask the D.C. Council to invest about $29 million of the money in the 50,000-student school system, including spending $7 million to offer severance packages to hundreds of central office employees in a massive restructuring being planned by Chancellor Michelle A. Rhee, administration officials said.

Fenty also wants to spend $14 million to expand job programs for youths and for ex-criminal offenders and $12 million to repave streets and alleys, officials said.

"The projected surplus in revenue announced by the Chief Financial Officer today is proof that the economy of the District of Columbia continues to be strong," Fenty said in a statement. "We look forward to using this revenue to continue to grow and support our economy by investing in one-time costs associated with reforming our schools, creating jobs for youth and ex-offenders, and infrastructure."

City Administrator Dan Tangherlini stressed that the administration is still developing its proposal and that none of the financial figures is final.

"We are focusing on one-time costs that provide a very high return on investment," Tangherlini said.

Paving streets will reduce infrastructure costs in the long run, he said, and creating jobs will help the economy. Streamlining the school system's central office could save millions of dollars that could be redirected to the classroom, Tangherlini said, possibly freeing up money for other administration priorities, including enhancing art, music and language programs.

Fenty would need the council's approval to spend the surplus revenue. Council members said yesterday that they were not aware of the proposals he is developing, and some said the surplus should be used to help reduce the District's growing capital debt. In the spring, Gandhi warned Fenty and the council that the city's debt burden was growing alarmingly high.

"It's unlikely that this kind of scenario will continue," Jack Evans (D-Ward 2), chairman of the council's Finance and Revenue Committee, said of the surplus. "Clearly, paying down our debt is the number one [use] that our finance advisers recommend."

Phil Mendelson (D-At Large) agreed.

"I pray to God we don't spend it all," he said. "We need to reduce our borrowing. These windfalls from revenues should be used for capital investment."

Fenty is under pressure to deliver on his pledge to improve the struggling school system, his top priority. He took direct control of the schools away from the Board of Education in June, fired Superintendent Clifford B. Janey and appointed Rhee as chancellor.

During his campaign for office last year, Fenty said the school system, which has a budget of almost $1 billion, did not need more money. Rather, he said, the system must eliminate waste and spend its budget more wisely. Despite lobbying by Janey in the spring, Fenty declined to increase the schools budget for fiscal 2008.

Fenty wants $12 million of the surplus to upgrade school facilities, part of a $120 million "school stabilization" program announced last month by school construction chief Allen Y. Lew. (The remainder of the stabilization funds have been earmarked through existing resources, administration officials said.)

Also, the mayor's proposal would use about $17 million for the central office restructuring plan -- $7 million for severance packages and $10 million for back pay owed to some employees.

In the next few weeks, Fenty and Rhee plan to ask the council to suspend personnel laws so Rhee has the legal authority for her restructuring effort.

Staff writer Nikita Stewart contributed to this report.

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