District of Columbia Mayor Adrian M. Fenty Thursday proposed a $5.66 billion budget for fiscal 2009, a 0.7% increase from fiscal 2008, as the city prepares to tighten its spending in light of the national economic downturn.

The budget includes of $721.4 million of new bond proposals, $449.2 million of which would be general obligation debt.

The $721.4 million figure is less than the $909.6 million in the enacted fiscal 2008 budget. The district's fiscal year begins Oct. 1.

The mayor's proposed fiscal 2009 $5.66 billion spending plan is $37.1 million more than the $5.62 billion fiscal 2008 budget. The fiscal 2008 budget was 9% larger than the $4.95 billion in fiscal 2007.

"This is the first time, in a long time, that we practice what we preach in actually living within our means," Fenty said Thursday at a press conference announcing his administration's budget proposal.

District of Columbia chief financial officer Natwar Gandhi applauded the budget, calling it fiscally conservative.

"The budget is indeed a very solid budget, a budget that is very practical," Gandhi said at the conference. "We are sending an excellent message to Wall Street."

But he warned that the city will face the challenge of dealing with declining sales and income tax revenues as a result of the economic slowdown affecting the district. "The days of milk and honey are over," he said.

As the economy slows, it is less likely that tourists will visit the district, and tourism accounts for one quarter of the city's total sales tax receipts, Gandhi said.

In February, Gandhi predicted a $96 million budget shortfall for the current year, which Fenty addressed in reconfiguring a District Council-approved commercial real estate tax cut, which would have lightened businesses taxes by $96 million in one year.

The mayor proposed yesterday to alter the commercial property tax cut, phasing it in over three years.

Fenty's plan would give businesses $104 million of tax relief in those three years, compared with the council's plan of $96 million in one year.

Council member Jack Evans said he "liked" the mayor's approach to the tax.

The budget includes specific debt proposals of $449.2 million of GOs for capital projects and general use, $75 million for two government center buildings that will house the departments of transportation and employment services, selling $61.4 million for the East Washington Traffic initiative, a plan to rebuild the 11th Street and Sousa bridges, as well as $75 million for a consolidated laboratory facility, according to budget documents.

Gandhi said Friday he expects the city to have a general fund balance of about $823 million in fiscal 2009, that would stay in the $800 million to $1 billion range over the next five years, with a $4.5 million budget surplus ending fiscal 2008. Gandhi said he expects $325 million in reserves in fiscal 2009, increasing to $375 million in fiscal 2010, and remaining at that level for the next five years.

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