District of Columbia Council OKs $5.7 Billion Budget for Fiscal 2009

WASHINGTON - The District of Columbia Council yesterday approved a $5.7 billion budget for fiscal 2009 that included a proposal to issue $721.4 million of municipal bonds. The budget plan also sought to raise taxes on cigarettes and property transfers to plug an estimated $35.4 million revenue shortfall.

The shortfall is expected to result from a drop in sales and use tax revenues.

The budget for fiscal 2009, which begins Oct. 1, is only $37.1 million more than the $5.62 billion that was approved for the previous year. By contrast, the fiscal 2008 budget was 9% larger than the $4.95 billion spending plan approved in fiscal 2007.

District chief financial officer Natwar Gandhi said the budget is balanced and that he supports it.

"I'm very pleased that the budget battle is over and I'm very impressed with the way the mayor and council resolved their issues with it," Gandhi said yesterday in an interview.

The $721.4 million of bond issuance proposed by the budget is less than the $909.6 million of bonds that were proposed for fiscal 2008.

Of the $721.4 million, $660.6 million would be general obligation debt and would be used for capital projects and general use. District budget documents showed the bonds would be used to finance at least four specific projects. About $75 million of bonds would be used for two government center buildings that would house the departments of transportation and employment services. Another $61.4 million of bonds would be issued for the East Washington Traffic initiative, which is a plan to rebuild the 11th Street and Sousa bridges. In addition, $75 million would be issued for a consolidated laboratory facility, according to budget documents.

Apart from the GO bonds, $60.8 million would be used for master equipment lease-purchase financing.

The spending plan includes $459.7 million of debt service payments for bonds that are outstanding.

The budget would increase the tax rate assessed for transferring property to 2.9% from 1%, which is expected to generate about $8 million in fiscal 2009.

It would also include a $1 per pack increase on the cigarette tax, which is expected to raise about $5 million per year.

The tax increases come after Gandhitold Mayor Adrian Fenty and council members in a May 7 letter that the district faced a $35.4 million revenue shortfall for fiscal 2009.

"By a number of indicators, the district's economy has been faring better than the national one, but the job market is beginning to show signs of slowing and some aspects of the tax base are weakening," Gandhi said in that letter.

The district's general sales tax revenues weakened by 5.7% in the first quarter of this year compared to 2007.

The city's unemployment rate of 6.3% is the highest it has been in almost three years, and hotel receipts were down 2.2% from last year, according to the letter. The district relies heavily on tourism for almost half of its sales tax collections, Gandhi said.

Single-family housing sales were down 26.6% from the same period in 2007.

Gandhi said in the letter he expects a "mild recession" for the district followed by a recovery that begins in fiscal 2009.

 

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