The Washington PostDemocracy Dies in Darkness

Opinion Here’s why D.C.’s CFO is wrong on the budget

Woodland Terrace, a public housing complex in Southeast Washington. (Evelyn Hockstein/For The Washington Post)

Phil Mendelson, a Democrat, is chairman of the D.C. Council. Charles Allen, a Democrat, represents Ward 6 on the D.C. Council.

News broke this week that the District’s chief financial officer is refusing to certify the budget passed by the D.C. Council, set to take effect on Oct. 1. The key hang-up is whether the council can redirect millions of tax dollars that are sitting unspent in Events DC’s accounts to repair hundreds of deeply affordable public housing units that have lapsed into horrible conditions.

We believe D.C. residents deserve an explanation of what’s really going on.

Let’s begin with Events DC. The council created Events DC, formally the Washington Sports and Convention Authority, in 1994 to build the new Convention Center and gave Events DC the authority to issue bonds to pay for it. Today it manages the convention center, Nationals Park and many other entertainment, cultural and sports projects and generates a little less than $30 million per year in revenue — not nearly enough to run the organization. About 70 percent of its budget comes from dedicated hotel and restaurant taxes, close to $150 million per year — emphasis on tax dollars.

When Events DC sold bonds to build the convention center, it made a number of legally binding commitments to the investors and banks who bought those bonds. That includes maintaining sufficient reserves to ensure that if times get hard money will be available to make payments. So far, we’re all on the same page.

Here’s where our disagreement with the CFO starts. Two independent government oversight bodies, the Council’s D.C. auditor and the inspector general, estimate Events DC has somewhere between $49 and $180 million in excess reserves — that is, money left over after meeting all of its obligations, including maintaining a sufficient rainy day savings fund. We say estimate because Events DC does not provide the council with a detailed record of what it is doing with your tax dollars, unlike most agencies. But when we, along with the attorney general and outside legal counsel, examined Events DC’s finances as best we could, we found the most conservative estimate was at least $49 million in excess reserves are sitting in a bank account gathering dust.

What is concerning is that the CFO’s legal argument against redirecting excess funding continues to change. For weeks, the CFO insisted every dollar of reserves Events DC holds must be kept to repay bonds, which didn’t make sense considering there are far more taxes channeled to Events DC than necessary.

After the council approved a budget that includes an additional $49 million taken from those reserves, the CFO admitted an “accounting error” in which Events DC incorrectly held a total of around $47 million in excess reserves that should have been transferred by law.

Keep in mind the CFO is a member of the board of directors for Events DC and chairs its finance committee. How was this discovered only in the past two weeks? Who is paying attention over at Events DC? Would anyone have noticed if the council’s auditor and IG had not done their oversight?

Now, let’s talk about public housing. It’s no secret the District has experienced enormous growth and a widening of the wealth gap and displacement of families who can no longer afford to live in the city. Some homes are in such bad shape they are literally making their tenants sick. Other units are in too poor of condition to be occupied.

Federally owned and managed public housing provides a home for the very lowest-income households in the District, including critical multi-bedroom homes for families. For many years, the federal government paid for repairs and operations of these homes. It was never enough money, but it did ensure thousands of District families had a home they could afford.

However, in recent years, the federal government has severely cut its payments and left cities scrambling to come up with millions of dollars. The head of the District’s Housing Authority testified that the backlog in maintenance likely totals more than $2 billion.

That’s a lot of money for any city or state to come up with, given we must pass a balanced budget (unlike the federal government). The District makes considerable investments in affordable housing. In this year’s budget is an increase in public housing vouchers and a continuation of recent years steady increase in the Housing Production Trust Fund, set at $120 million. Still, these families and seniors need help now.

So that brings us back to the budget the council approved. The $24.5 million we put in the budget for public housing repairs is a drop in the bucket, but that was as far as we were able to go legally. The District’s Housing Authority estimates that funding would help repair 400 homes this year.

But the CFO did not certify the budget. The fact that the CFO’s reasoning for refusing to certify the budget and his assertions about whether Events DC held excess revenue has changed raises questions about just how closely Events DC’s finances are being monitored by its own board.

This is how you end up with headlines that give District residents concerns about the stability of their local government, despite all evidence to the contrary. It is how thousands of D.C. residents continue to live in awful living conditions while millions of dollars in tax revenue sit in a bank account. We felt it was important D.C. residents understood what this disagreement was really about. Our most vulnerable residents are counting on us remaining committed to securing these funds.