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Councilmember Calls on CFO to Produce Revised Revenue Estimate
Washington, D.C. – Today, Councilmember David Catania (At-Large) called on the District’s Chief Financial Officer (CFO) to revise his September revenue estimate, which showed a $131 million shortfall, in the coming weeks. Catania disputed several of the assumptions used by the CFO to make his latest revenue projection. These assumptions include low unemployment, gains in individual incomes, only slight declines in the stock market, and skyrocketing property tax revenues for the current year. Catania said that the fallibility of these assumptions combined with the timing of the revenue projection, which occurred before the recent Wall Street crisis, will result in further declines in District revenues this year.
“The Council’s job will be much more difficult in December if we postpone addressing a problem that we all know exists today. Revenues are going to fall further and the demand for city services is going to increase,” said Catania. “Spending cuts will become more painful for many of our residents the longer we wait.”
During the last significant economic downturn in the aftermath of the September 11, 2001 attacks, revenues from the District’s individual income tax fell 13.6 percent and 2.1 percent in 2002 and 2003, respectively. Fortunately, the city’s roaring real estate market during this period helped offset these declines. Together, income and property taxes account for nearly 40 percent of District revenues. The current real estate climate is significantly different from the situation in 2001-2003.
“We cannot pretend that we have robust real estate market to bail us out again,” noted Catania. “Instead, we are witnessing declines in real estate values that are compounded by stagnating wages, increasing unemployment, a damaged stock market, and a jittery municipal bond market. Altogether, we could find ourselves facing a major fiscal catastrophe.”
To that end, Catania asked the CFO to produce another revenue estimate in the coming weeks so that the Council can take further action before its Christmas recess. He also argued that additional cuts would have to be meaningful in order to be effective. Fixing this problem, he said, is going to require city leaders to recognize the potential severity of it.
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