WASHINGTON - The District of Columbia's fiscal 2009 revenues will be $127 million less than were projected in September and will continue to deteriorate in each of the next three fiscal years, chief financial officer Natwar Gandhi said Friday.
The downwardly revised revenue projections are on top of a $131 million shortfall reported in September, which already forced district officials to cut spending to plug it.
Tax revenues are expected to be $304 million less than projected in fiscal 2010, $330 million less in fiscal 2011, and $327.5 million less in fiscal 2012, Gandhi said.
"We see a deeper and longer recession .... We know this is the worst financial crisis since the Great Depression and we expect it to continue through fiscal year 2009 to the middle of 2010," Gandhi said. "The problem is so enormous that it's caught up with us. But we will be able to manage the problem in 2009."
The lower revenue estimates in fiscal 2010 and going forward will be a greater challenge, he warned.
The CFO attributed the new projection to a drop in real estate transactions in addition to an expected drop in income tax revenues due to weakening of the capital gains tax.
Because the credit markets have remained relatively frozen, commercial real estate transactions, and the taxes and fees that the district collects from them, have been "obliterated," he said. Revenues from those transactions are expected to be $44 million less than anticipated, Gandhi said.
Business tax collections also are expected to take a hit, dropping by $61 million, and income tax revenues are expected to be $15.5 million less than expected. That $15.5 million drop is in addition to a reduction of $123 million that Gandhi had predicted in September.
In response to the earlier estimates, the District Council in mid-November approved a $46 million spending freeze on top of $131 million of cuts to close the initial gap. Gandhi said the $46 million that the council had set aside will help to close the new gap.
Any surplus from fiscal 2008 will be officially released on Feb. 1. Gandhi said the district can expect that surplus to be sufficient to cover the remainder of the shortfall.