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DC is near the cliff, so grab the reins

It’s all coming together, portending real trouble for DC — its government and, consequently, its residents — regardless of the positive spin elected officials may want to put on things, asserting that compared to other state and local governments the District is in some kind of sweet spot. There is indisputable evidence, however, that the city is witnessing a deterioration of its once-robust fiscal and economic health.

That reality is exacerbated by Mayor Muriel Bowser’s and her minions’ mismanagement of resources; a legislature of spendthrifts who consistently fail to provide adequate oversight of the executive; and an independent chief financial officer, Glen Lee, who apparently has fallen asleep through it all or doesn’t quite understand the critical role assigned him by the U.S. Congress.

Consider that having already grown its fiscal year 2023 budget by 6.2%, DC exceeded even that, according to an analysis by the Office of the DC Auditor. The Bowser administration still overspent its approved budget by $400 million, “while FY 2023 was happening,” Auditor Kathy Patterson noted in an email to me.

That mismanagement was camouflaged by shifting money among agencies and swiping funds from established reserves.

Some of those reserve funds have been repaid. However, there is a shortfall in the Fiscal Stabilization Fund of $253.6 million and a shortfall in the Cash Flow Reserve of $68.9 million, according to a DC Council budget expert.

If officials were adhering to the spirit of the law, those funds would have been repaid almost immediately.

“The FY23 budget changed so much during the year that I question whether it was a real spending plan in the first place,” Patterson said.

Equally troubling is this fact: DC has borrowed so much money from third parties that the percentage of the budget used to cover long-term debt service is greater than the percentage going toward public safety. According to the newly released Annual Comprehensive Financial Report (ACFR) for FY 2023, the city last year spent $1.8 billion on debt service and $1.6 billion on public safety and justice-related programs and expenses — 14% and 13% of total expenditures, respectively.

“Overall, District expenses in all major functional areas increased during fiscal year 2023. However, revenues from taxes and other sources declined due to a recovering, yet slightly weakened economy.

“When combined, these factors led to the decreased net position of the District at the end of the fiscal year,” wrote auditors with McConnell & Jones LLP, the company hired by DC to conduct the audit and prepare the subsequent report. 

During a public hearing earlier this month on the ACFR, legislators grilled CFO Lee about the use of the reserve funds. This week, Council Chair Phil Mendelson told me that he thinks the “CFO is too generous in his interpretation of when the executive can access reserves.” He noted that the law says it is to be only for expenses that are “unexpected, nonrecurring and unforeseen.” The way the CFO is permitting the mayor to use reserves, said Mendelson, denies “the council its appropriation authority.”

A spokesperson for Lee sent me links to District codes governing the reserve funds. The law requires that the spending from dedicated accounts be conducted after consultation between the mayor and the CFO and after the CFO has prepared an analysis that states a rationale for the spending.

I asked the spokesperson via email for copies of those analyses. I have yet to receive them, however.

“I worry about [DC] making bad decisions. We don’t have any way of assessing what we’re getting for the money we’re spending,” Patterson told me during an interview earlier this week about the annual report and the city’s fiscal management. 

Patterson has written in the past week in her blog “Auditude” about the ACFR and its published findings. She noted that years ago a prior CFO established a financial review process that required agencies overspending their approved budget to submit a midyear, gap-closing plan. 

“But the CFO does not effectively enforce the FRP process today,” said Patterson — although the CFO’s office has thousands of full-time employees and a “budget or more than $200 million.”

This is a numbers column. Don’t let your eyes glaze over. How officials respond to DC’s fiscal woes will directly affect your family, your finances, your community, and the quality of life for the entire city.

I saw a version of this movie in the 1990s. Back then, Congress had given new mayor Sharon Pratt an additional $300 million to help cover her budget; representatives were happy to see a new face leading the nation’s capital and promising to clean up corruption and improve the delivery of services. 

However, by the second year, the city was in financial trouble that should have been apparent to any thinking person, especially after the creation of a fifth fiscal quarter, designed to cover up the abysmal situation. The rest is history.

Marion Barry returned to the mayoral suite. A bipartisan presidential and congressional effort led to the establishment of a financial control board and the diminution of the authority of DC’s elected leaders. It took years to emerge from that mess.

The Bowser administration would not provide an on-the-record comment about its overspending or about how and when it will reimburse the reserve accounts.

Patterson said the upshot of all of this is that DC is facing a “tough budget” season. There seems to be agreement on that point: In his testimony at this month’s hearing, City Administrator Kevin Donahue likened the upcoming budget situation to the Great Recession of 2008 and 2009.

Mendelson seemed to concur during my interview with him, noting as well that most of his colleagues don’t have direct experience dealing with such dire constraints. “My concern is that most members have never been through a deficit, let alone flat revenue growth.

“They may still be in a ‘we can spend’ mode,” he said.

He acknowledged there has been “talk of a tax” increase. “One problem with a tax increase is that members see how easy it is without focusing on adverse outcomes.”

It appears there is already consensus on at least one increase: a tax hike of some sort for the sake of the Washington Metropolitan Area Transit Authority, which is said to be facing a $750 million fiscal cliff that in the outyears goes up to $1 billion.

But can the city afford to spare $200 million for Metro, while its schools, police force and other areas may need additional funding?

If done correctly and responsibly, the District’s budget process should involve a sober assessment of policies and programs, how each affects the other, and how they might be strategically consolidated to enhance efficacy and efficiency. 

That means seeing the city as a whole entity.

From my vantage, DC’s political and administrative leaders seem unprepared for that task. They are perpetually stuck in silos, unable to appreciate the integrative nature of the city’s ailments. Further, they are moving at a 20th-century bureaucratic speed when others around them, especially surrounding jurisdictions with which the District competes for businesses and residents, are jumping at rhythms suitable for the forthcoming second quarter of the 21st century.

That reality hit me recently on at least two occasions. One was during a mayor and council breakfast held on Jan. 30. Bowser’s team, including Deputy Mayor for Planning and Economic Development Nina Albert, presented the administration’s plans for the Gallery Place/Chinatown neighborhood, or more particularly the Capital One Arena site. December’s announcement by Ted Leonsis, president of Monumental Sports and Entertainment, that he intends to relocate the Washington Wizards and the Capitals to Northern Virginia has intensified economic concerns about the city’s downtown commercial corridors and neighborhoods.

In the session, Albert and the co-chairs of the newly created Gallery Place/Chinatown Task Force indicated that they would not complete their work until September. 

Seriously? DC officials claim revitalizing downtown is their top priority, and yet it will take them six months to present their ultimate plan? 

Meanwhile, the Gallery Place/Chinatown neighborhood is slowly dying. In fact, the owners of Clyde’s, the restaurant where the mayor and council were holding their meeting, had written that they might close because of the conditions around their business.

Are DC officials assisting in the death of a community? Are they doing much at all to resuscitate it? Who knows?

My second epiphany arrived during the legislative session earlier this week where the council voted on the Secure DC Omnibus Amendment Act of 2024. Amazingly, most of the changes sought by some councilmembers and advocates essentially protected criminals — not victims. Legislators chipped away at important elements of the legislation, including pretrial detention and early collection of DNA, a change that Ward 2 Councilmember Brooke Pinto, chair of the Committee on the Judiciary and Public Safety, said could help solve hundreds of rape and homicide cases.

At one point during the debate, at-large Councilmember Robert White suggested that parts of the measure, especially related to drug-free zones, are more a “messaging thing.” 

No one should shy away from passage of a tough crime-fighting bill because it sends a message to residents about the council’s concerns for the safety of DC residents. Further, helping them feel safe overlaps with reviving the city’s economy and downtown. 

If people feel safer, they go to restaurants; they shop in retail outlets; they attend concerts; they walk and bike on the streets; they embrace the city.

Unfortunately, given the amendments legislators approved during their first vote on the measure, the public may be left wondering whether elected officials genuinely care about their safety. That unease comes at a time when local — and federal — officials are trying to coax workers to return to their offices, to take their lunch at one of the nearby restaurants, to stay and join in happy hour. 

That is made harder when people read media coverage about Mike Gill. A former member of the DC Board of Elections, he recently went downtown to pick up his wife from work. As he waited in his Jeep for her to come downstairs, he was shot in an apparent carjacking. He subsequently died from his injury.

Who wants to risk such a fate, especially in a city where elected officials are perceived as coddling criminals?

All the dots really are connected. Does anyone in charge understand that fact? Probably not.

Next month, when fiscal year 2025 budget deliberations begin, council committees will work as independent fiefdoms. Members will trade the public money around as if it were their own, seeking greater political leverage in the process. I can confidently predict there will be very little, if any, effort to develop an integrated budget that is efficient, effective and realistic for the financial times in which the city finds itself.

In other words, it will be business as usual — except this time, DC may find itself falling over the proverbial fiscal cliff, without an acceptable rescue.

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