The D.C. City Council set aside money yesterday to provide a pay increase for city workers next year by agreeing, in effect, to increase property taxes and by diverting $20 million that Mayor Marion Barry planned to use to help bail the city out of its financial crisis.
The Council's actions struck down key elements of the long-range financial rescue plan on which Barry has staked his administration, reflecting growing skepticism about whether it can be implemented.
Barry immediately announced he would veto the largest single element of the council's amendments to his proposed 1982 budget, which had contained no funds for salary increases.
That amendment transferred $20 million Barry had wanted to set aside to pay off interest on $215 million he planned to borrow through the Treasury Department to help pay off the city's accumulated budget deficit, now estimated to be $409 million.
Shortly after the Council's action, Barry said the amendment's sponsor, John A. Wilson (D-Ward 2), chairman of the Committee on Finance and Revenue, was "trying to be more popular than responsible."
In fact, yesterday's complex series of Council actions, which affected every aspect of the city's financial program from labor negotiations to cash management, amounted to a tour de force for Wilson in his developing power struggle with the mayor.
Wilson has been saying that Barry's financial plans are based on false hopes and wishful thinking while his own reflect reality. Yesterday, Wilson's outlook prevailed among his council colleagues.
"Are we, by doing this, saying that the mayor's plan for refinancing the deficit is not feasible? Yes. My colleagues need to realize that," Council member John Ray (D-At Large) said during the debate.
In particular, Wilson has been saying that if the city needs more money to finance its programs or pay its debts, it ought to recognize the need to raise taxes. That runs counter to Barry's plans to avoid any more tax increases through the 1982 fiscal year.
The Wilson-sponsored amendment approved yesterday would effectively raise city property taxes next year by overriding a provision in the law requiring the rates to drop as assessments rise, but Finance and Revenue Director Carolyn L. Smith said there was no way to calculate the impact of this move on the individual property owner.
In each of the past three years, the city's residential property tax rate has been lowered to lessen the impact on home owners of rising assessments. Three years ago the tax rate was $1.84 per $100 of assessed evaluation. Now it is $1.22. The Council's action yesterday forecasts that when it sets the property rates next July, it will keep the $1.22 rate.
The Council made only minor adjustments to most components of the mayor's proposed $1.6 billion operating budget for the fiscal year beginning next Oct. 1.
The amendments and fund transfers within the total made a shambles of the long-range program porposed by Barry last July to pay off the city's cumulative deficit. In the aggregate, they amounted to a vote of no confidence in Barry's plans, which rely heavily on Congressional assistance.
One of the key components of Barry's plan calls for the city to borrow the $215 million during the current year "to meet the District's immediate cash need." That borrowing would require both the approval of congress and a federal repayment guarantee, which in Wilson's view makes it a "highly uncertain" revenue source.
Wilson said yesterday that before Thanksgiving he would submit a package of tax increases that would raise $217 million from the city's own resources and "rid the city of its debt." He said his colleagues would "digest" it over the holidays.
Accepting Wilson's argument that that loan was unlikely to be made, the Council then took away the $20 million Barry earmarked to begin to repay it. On Wilson's motion, the council earmarked that $20 million, plus the $5.5 million in additional property tax revenue, plus $1 million raised in another Wilson amendment to give city workers a cost-of-living salary increase next year.
The only dissenting vote was cast by David Clarke (D-Ward 1), who said he was not ready to vote for a proposal that effectively committed the city to substantial tax increases -- which it would do by eliminating the mayor's ability to borrow the funds he says are needed for the repayment of urgent debts.
Barry's proposed budget contained no money for any pay increase. Unions representing the city workers are bargaining with the city over their salary package, and Barry has acknowledged that those negotiations will result in cumulative outlays of at least $50 million.
Rather than putting the money in his budget and proposing tax increaes to pay for it, he proposed to ask congress for a substantial increase in the annual U.S. payment, now limited to a maximum of $300 million, and use that to give pay increases.
Urging his colleagues to recognize that congress would view with disfavor a subsequent city request for money that it knows now surely will be needed, Wilson said, "come on, people, give me a break."
He said the $26.8 million would not cover the total amount that will be needed when the labor negotiations are finished, but he argued that it was better to have at least some funds available -- especially since "I feel the $20 million won't be used to repay the debt, anyway, if we leave it lying around."
Wilson also scored over the mayor with another key amendment. The city has traditionally borrowed short-term cash from the U.S. Treasury each year to tide the government over periods of shortage. Those loans are interest free.
Barry, recognizing that the city's home-rule status implies an end to that privilege, has proposed to do such borrowing on the commercial market, where interest would be charged. The proposed budget contained $2 million to repay such loans.
Wilson, arguing that "no mitigating circumstances" justified spending $2 million when it was not clearly necessary, moved to cut out that repayment fund. His motion carried 9 to 4. Of the $2 million thus saved, $1 million went into the pay-raise kitty and the other $1 million went to keep all 50 city fire companies operating instead of eliminating any of them.
Wilson's only defeat came on his attempt to take $78 million out of the proposed capital improvements budget. His council colleagues, seeing a threat to individual projects important to them such as public housing renovation, improvements at D.C. General Hospital and public works projects in their wards, could not be persuaded to go along with that change.
Barry said afterward, "I am going to be unrelenting in my efforts to save this city from fiscal bankruptcy." He said it was essential to borrow the $215 million to meet cash needs -- including the obligation to repay $41 million collected from an illegal tax on suburban professionals -- and that it was "fiscally irresponsible" to take out of his budget the money to repay that loan. He said he hoped he would be able to get the six council votes he needs to sustain his veto.