One-Two Punch For D.C. Budget

Officials Report On Current Deficit And a Gap in 2010

District officials announced yesterday that the city faces a $340 million shortfall over two years because of the recession, which has caused unemployment to skyrocket, the housing market to stall and property tax delinquencies to spike.

In revised revenue projections released yesterday by Chief Financial Officer Natwar M. Gandhi, the District faces a $190 million deficit in the fiscal year ending Sept. 30. The city also has a $150 million gap in the 2010 budget proposal that the D.C. Council approved last month.

As a result, Mayor Adrian M. Fenty (D) and the council might have to tap the city's reserve fund as well as reopen 2010 budget deliberations, raising the prospect of additional budget cuts.

"The recession we have is the deepest, widest, in 70 years," Gandhi said. "It's an economic tsunami out there, and it has caught up with us."

Although economists say the Washington region remains better positioned than others to weather the recession, the District joins Maryland and Virginia in announcing repeated, successive budget reductions.

District officials already have been forced to close an $800 million shortfall this year, but city leaders say the District's fiscal challenges pale when compared to those in the mid-1990s, when Congress appointed a federal oversight board to monitor the city's finances.

"The administration is currently examining all of its options and will soon present the council with recommendations that not only balance the budget but also protect critical services for District residents," said Mafara Hobson, spokeswoman for the mayor.

The bulk of the latest shortfall comes from a $123 million reduction in property taxes collected this year. Gandhi said that nearly one in five property owners are delinquent on their taxes.

City officials, who attribute the problem to the city's unemployment rate of 10.7 percent, say they do not expect the trend to reverse itself until homeowners receive official warnings that their properties could be sold off.

In addition, there has been a significant decline in sales tax and revenue related to tourism, such as the hotel tax. Income tax collection also is lower than had been projected.

Gandhi, predicting that the economy will not rebound until at least 2012, said Fenty and the council will have to make tough choices in coming weeks.

The most immediate concern is the $190 million shortfall in this year's budget. That shortfall is in addition to $87 million Gandhi identified as unfunded obligations in the 2009 budget.