D.C. Mayor Muriel E. Bowser (D) on Wednesday proposed a 2020 budget that would pump additional dollars into affordable housing by raising taxes on commercial property owners, setting up a showdown with a city council that wanted to cut those taxes.
The mayor is proposing a $15.5 billion overall spending plan for the fiscal year that starts Oct. 1. As part of that, she is proposing to increase the discretionary operating budget to $8.6 billion, a 9 percent increase from the current $7.85 billion budget.
The D.C. Council must pass a budget by the end of May.
Many of the major changes are meant to shore up affordable housing in an increasingly expensive city, which had the highest intensity of gentrification in the nation, according to a study released this week.
“We are very focused on housing,” Bowser told the council during a budget presentation. “What we heard from residents across the city is that is the most significant pinch point.”
As she announced in her State of the District address Monday, Bowser wants to spend an additional $55 million in programs to create or preserve affordable housing.
To pay for this and other priorities, the mayor wants to increase the deed recordation and transfer taxes from 1.45 percent to 2.5 percent on commercial property worth more than $2 million. Officials estimate a gain of $79 million next year. Taxes on residential real estate would not be affected. Bowser’s budget also declines to implement a $25 million commercial property tax cut authorized last year by the council.
Council Chairman Phil Mendelson (D) said he was “very disappointed” by the mayor’s plan to increase commercial property taxes.
“It’s a too-easy way to fund popular programs,” Mendelson said in an interview. “The reason why the District is booming is our revenues from commercial property have increased phenomenally, and that’s because of the stability in our tax structure.”
The council voted 8 to 4 late last year to reduce the commercial property tax rate for properties valued at more than $10 million, making up for those cuts with revenue from an online sales tax. Council member Brianne K. Nadeau (D-Ward 1) tried to redirect the funds to services for the homeless but lost on a 6-to-6 vote.
“I would rather see the money go literally anywhere else than to a tax cut for wealthy property owners,” Nadeau said Wednesday.
The commercial property tax cut was championed by council member Jack Evans (D-Ward 2), who is embroiled in an ethics scandal over his business activities and is also facing a federal criminal probe.
Housing advocates want the city to increase rental subsidies for the poor and to make more than $300 million in needed repairs to deteriorating public housing that the federal government manages.
“We can continue on a path of looking the other way and let public housing wither and disappear, or we can step up as a city and say we want to take responsibility for preserving an important part of our housing stock,” said Ed Lazere, executive director of the left-leaning DC Fiscal Policy Institute.
Although the D.C. budget has grown, revenue is lower than expected, in part because of a cooling economy and the 35-day partial shutdown of the federal government, which hurt retail, hotels, restaurants and other businesses across the city.
The mayor’s budget includes about $129 million in spending cuts, but officials said they are spread across the budget and do not require mass layoffs or elimination of major programs.
“We think this is a responsible and prudent budget, given the revenue circumstances,” said City Administrator Rashad M. Young, citing a $47 million revenue loss from the federal shutdown that ended in January.
Education remains the city’s biggest area of spending — and the budget for schools would grow under Bowser’s proposal. The mayor wants a 2.2 percent increase in per-pupil funding across the city, which would translate into an increase of nearly $60 million for the traditional public school system and charter sector, bringing the education budget to $1.8 billion.
Despite the increase, schools that serve low-income children and expect declining enrollment say they are bracing for cuts. The budget highlights the complexities of trying to create equitable spending plans in a city where many schools in low-income neighborhoods — particularly middle and high schools — have lost enrollment while campuses in wealthier neighborhoods are at or above capacity.
Mendelson said he would examine whether the additional money the mayor is proposing for housing would be better spent on schools.
“Public education is the long-term solution that helps everyone by closing the wage gap, the achievement gap and changing the dynamics with regards to social justice,” Mendelson said.
Danica Petroshius of the Ward 6 Public Schools Parent Organization said many parents are disappointed with the mayor’s proposed education spending.
She said the proposed 2.2 percent increase in funding per pupil was not keeping up with rising costs.
“The math doesn’t add up,” Petroshius said. “This is a time when we’re trying to close improvement gaps, invest in school improvement and make sure that all our schools succeed. Parents are very upset and worried.”
Bowser is also calling for funding to hire more law enforcement personnel as the city grapples with a surge in homicides. The budget includes increases of $3.5 million to hire 45 paramedics and others to staff new ambulances, $3 million to hire 70 police officers and $2.5 million in grants for violence prevention programs.
New transportation projects include $122 million for the K Street Transit Way project with dedicated lanes for bus rapid transit and $10 million for 18 new Capital Bike Share stations. As part of her “Vision Zero” plan to reduce pedestrian deaths, Bowser has included $2.8 million to hire 40 traffic enforcement officers, and half would be devoted to enforcing bike-lane laws.
The mayor wants to eliminate the $1 fare on all Circulator bus routes, at a cost to taxpayers of $3.1 million, officials said.
The budget also includes $13 million to expand the Circulator bus into Ward 7 in Southeast Washington for the first time.
Other highlights include:
●A cut from $7 million to $4 million for the fund to provide relief from rising water bills. This was a major source of contention last year, with some religious leaders complaining that churches were buckling under fees assessed on all water customers to help pay for a federally mandated project to clean up the Potomac and Anacostia rivers.
●$35 million to overhaul a wedge of land bordered by First Street NE and Florida and New York avenues, dubbed “Dave Thomas Circle” by locals because of the Wendy’s restaurant marooned on the slice of land. It is perhaps the most hated intersection in the nation’s capital. The money would be used to acquire and design a replacement for the perplexing traffic circle.
●$26 million for the city’s plan to end homelessness, which would fund 260 new units for families, 345 new units for single adults and 68 new units for youths.
●$25 million to implement a sweeping climate change law passed last year to shift the city to entirely renewable energy sources.
●$3.2 million for a public campaign financing program that is supposed to be launched for the 2020 election cycle.
Perry Stein and Peter Jamison contributed to this report.