The District government, like most state and local governments, has spent the past four years in some degree of fiscal austerity — an environment of program cuts, tax increases, employee furloughs and hiring freezes.
Now, boom times are undeniably back, and Mayor Vincent C. Gray (D) is set in his third State of the District address Tuesday night to lay out how he plans to use what could be an extraordinary surfeit of tax revenue to address a long list of deferred priorities.
“The city is doing exceedingly well,” Gray’s spokesman, Pedro Ribeiro, said. “Now it’s time to make investments we need to make.”
The District’s economy, by most standards, has been humming for a year or more, with unemployment falling, tax collections increasing and the population growing. But the effect on the city government’s bottom line has been limited: Chief Financial Officer Natwar M. Gandhi has held off on certifying major revenue upgrades, citing the prospect of draconian federal spending cuts that could have an outsize impact on city tax revenues.
With “sequestration” set to take effect in March unless Congress intervenes, the threat of drastic federal cuts remains serious. But city officials said they think it will be difficult for Gandhi to avoid adding tens of millions of dollars, at the very least, to current-year revenue projections.
Last week, Gray and Gandhi announced a $417 million prior-year budget surplus — a sum the mayor has committed to keeping in reserves. And the picture is even more rosy for the current year.
If 2013 revenue simply remains at 2012 levels, the District would be on track for a surplus of $240 million. But the District already is hauling in significantly more than last year — $160 million more in the first quarter alone, according to city financial data — raising the prospect that, if the trend continues, the city could be on track for a record windfall that could dwarf the 2012 surplus.
Should Gandhi deliver revenue upgrades later this month, Gray would — two years into his term — have significant resources to make progress on his stated priorities.
At the top of the mayor’s list, according to officials familiar with his plans for Tuesday’s address, is affordable housing.
The rapidly rising cost of living in the District was by far the most pressing issue identified by participants in a “citizen summit” held by the administration last year. Gray then appointed a task force to make recommendations on affordable housing policy, but budget pressures have sharply limited his efforts in that area.
By law, a portion of deed taxes is reserved for a trust fund devoted to financing affordable housing production and preservation. Recent budgets, however, have diverted that money to rent supplements — a program that keeps low-income residents in their homes but does not create new affordable units for a growing population.
Gray’s task force is not expected to issue its final report until later this month, but housing advocates agree on the need to restore at least $20 million to the housing production trust fund.
Robert Pohlman, a former top D.C. finance official who leads the Coalition for Nonprofit Housing and Economic Development, said bolstering the trust fund is “central to any effort to increase the affordable housing stock.”
Developing more affordable units is crucial, he added. “Not everybody who moves in can afford the new apartment or condo in NoMa. The need is going to grow exponentially.”
Should Gandhi certify new revenue in the coming weeks, Gray would send a supplemental spending request to the D.C. Council, which would be free to modify it.
There appears to be broad support on the council for using additional revenue for affordable housing. It topped a “wish list” passed by lawmakers last spring in anticipation of revenue upgrades that have yet to materialize.
D.C. Council Chairman Phil Mendelson (D) said he thought it remains a good use of taxpayer money. “We should look at the kind of spending that is more of an investment than a one-time shot,” he said.
Gray is set to deliver his address at 7 p.m. at the Sixth and I Historic Synagogue.