The Jack Evans Report

Jack Evans • June 27, 2012

I was pleased by the Mayor Gray’s decision to reappoint Natwar Gandhi to another term as the District’s Chief Financial Officer. I have said many times I would not trade the District’s financial position with that of any other city, county or state in the country. The District had a $1.1 billion cumulative general fund balance in fiscal 2011, an increase of $215 million over the previous year. This is $1.6 billion above the District’s lowest fund balance level, which was minus $518 million during the control board period in 1996. Our audit last year was the District’s 15th consecutive clean audit, and our recently passed fiscal 2013 budget is the District’s 16th consecutive balanced budget.

Much of our success in maintaining fiscal discipline can be attributed to Gandhi. While the mayor and members of the District Council have at times criticized Gandhi’s conservative revenue forecasts, I believe having a surplus at the end of the year is better than finding ourselves with a deficit and the potential reintroduction of a control board. Particularly during this time of instability in our government, it is critical to have an independent CFO with a demonstrated commitment to maintaining integrity in financial projections, regardless of political pressure.

I have seen firsthand how difficult it is to bring efficiency into a government bureaucracy. This makes it all the more impressive that our Office of Tax and Revenue has modernized its systems and can issue income tax refunds in three to five days for electronically filed returns, and just ten days even for paper filings.

Perhaps most important to me is the District’s bond rating. The District must issue bonds to finance important infrastructure improvements, such as schools, libraries and parks. I cannot emphasize enough how adept Gandhi and his team are at communicating with the credit-rating agencies at our annual meeting in New York. These rating agencies determine how expensive it will be for us to borrow money. Meetings such as these help us to secure our Income Tax bond rating of “AAA” by S&P and “Aa1/AA+” by Moody’s and Fitch. Our general obligation bond ratings, which were considered “junk bonds” in the control board period, are now in the A+ and double-A range. The District has been recognized for its new highly-rated Income Tax Secured Revenue Bonds that help to ensure ongoing access to the financial markets with low interest rates. The initial issuance of these bonds gained recognition as one of the Bond Buyer newspaper’s “Deals of the Year” in 2010.

The credit-rating agencies now have a very positive view of the District’s financial position, and our bond issues are routinely oversubscribed and pay among the lowest interest rates among major cities. So I’m not just talking about a general sense I have as to Gandhi’s value – Gandhi’s work has led to tangible savings for the District. For example, the use of variable rate bonds has saved us more than $100 million. Finally, Dr. Gandhi has earned the respect of Capitol Hill. Members of Congress, which in many ways control the District’s finances, have great respect for him.

I am chairing a hearing of the Finance and Revenue Committee on Gandhi’s nomination on June 28 at 10 a.m. in room 500 of the Wilson building. I welcome any of you to testify or to submit written comments for the record. ?

Georgetowner • May 30, 2012

This month, I passed a personal milestone. On April 30, it was the 21st anniversary of my being elected to the City Council as the representative for Ward 2. May 13 was the 21st anniversary of my being sworn in as the Ward 2 Councilmember. I became the longest serving current Councilmember a year ago, and when I finish my current term, I will be the longest serving Councilmember in our history. I find this annual milestone to be a good time to stop and reflect on both our past achievements and our future goals.

The first Ward 2 Councilmember was John Wilson, who took office in January 1975 and served until December 31, 1990. He was sworn in January 2, 1991, as Chairman of the Council, which created a vacancy in the Ward 2 post. The special election to fill the Ward 2 Council seat had 15 candidates. I won the election with 2,926 votes, 360 more than Jim Zais. Bill Cochran and Clarene Martin each received 1,050 votes.

I came on the Council at a different time. Sharon Pratt Kelly had just been elected mayor and had taken office in January 1991. The finances of the city were not good. Two weeks before my swearing-in were the riots by the Latino community in Mt. Pleasant.

Things in the District went from bad to worse. Mayor Kelly did not have a good working relationship with Chairman Wilson and the Council. Then, in 1993, Chairman Wilson died. By 1994, the District’s finances had further deteriorated and Mayor Kelly had become very unpopular. The mayoral election in 1994 saw the return of Marion Barry as mayor. By the end of 1995, Congress had imposed a control board.

As you can see, my early days were quite turbulent. However, beginning in 1996, we saw a resurgence in our city. With Mayor Tony Williams’s election in 1998, he joined Chairman Linda Cropp, me, as Finance and Revenue Chairman, and Chief Financial Officer Natwar Gandhi to lead our city’s comeback. As I look back, I remember great challenges and great progress. Our city stands today as one of the most dynamic in the country with strong finances and a AAA-bond rating.

I hope we continue to build on these past achievements. Our financial picture is good, but we must continue to aggressively restrain our spending and practice fiscal discipline, as we are always just one bad budget away from the possible return of a control board. A balanced Budget Request Act passed the Council earlier this month, and I plan to provide a full budget update after passage of the Budget Support Act in early June.

It has been quite a journey and one I wouldn’t trade for anything. There is still much work to be done, however, and I look forward to a great future representing the residents of Ward 2.

Jack Evans • May 17, 2012

Beginning on May 9, the council members got together around one table to discuss our budget priorities and contrast those with the items included in the Mayor Gray’s budget. First, a note on the process: this type of discussion has historically been very helpful, as it is a rare opportunity for the full council to get together and speak more candidly than they often feel they are able to in a more formal meeting setting. In the interest of open government, we have now brought television cameras and microphones into the room. While it is great that members of the public can now witness these discussions, I have found unfortunately that the addition of the public eye leads to political posturing and grandstanding, which can reduce the quantity of productive dialogue.

One of the high points of Wednesday’s discussion was regarding the restoration of funding for the Housing Production Trust Fund, which is a program I created the legislative authority for with then-council member Adrian Fenty. I am a big supporter of this program because it actually works to create affordable housing for those who need it. When I created the program, I also instituted a dedicated funding source from the deed and recordation tax revenue so that it would always have the resources it needed. Unfortunately, my colleagues have raided this money repeatedly, using it instead for the Rent Supplement Program. This program is supposed to help working families make rent payments by supplementing the amount of rent they are able to pay. Its predecessor program was eventually done away with when it was discovered that landlords would simply raise rents by the amount of the government supplement payment, thus resulting in a windfall for landlords who could have afforded the lower rents they had in place prior to the supplement, while providing no additional benefit to the working families. If my colleagues want to fund the Rent Supplement Program, they should look for strategic cuts within the social services and education budgets, which have grown without accountability, rather than taking money from programs that work.

Another topic of discussion was the proliferation of traffic enforcement cameras contemplated in the mayor’s budget. I have been skeptical of the idea of attempting to balance the budget on the basis of increased fees charged to residents, and it sounds like we may consider lowering the fees associated with certain moving violations to compensate for the idea of the extra enforcement, under the principal that a lower ticket value is needed to deter traffic violations if the certainty of enforcement is higher. We also discussed the proper allocation of new revenues from parking pilot areas. I think these funds should remain within our local neighborhoods where they are generated, as the mayor proposed. Councilmember Cheh has subsequently recommended, in contrast, that the funds be taken and spent in other parts of the city.

I am not yet sure what the final budget proposal by the council chairman will look like, but I am hopeful that we will fund priorities of mine, such as libraries and parks, arts and humanities as well as the repeal of the confusing tax on out-of-state municipal bonds. I would appreciate your support and ask that you contact me and my colleagues over the next week with your views.

Jack Evans • May 3, 2012

On Feb. 2, District of Columbia officials made their annual trip to Wall Street.  Every February, the mayor, the D.C. chairman, myself as head of the Committee on Finance and Revenue and chief financial officer Nat Ghandi visit the three bond rating agencies – Standard and Poor’s, Moody’s and Fitch Ratings.  The purpose of the meeting is to present the District’s financial situation, which helps the rating agencies determine our bond rating.  Our bond rating is important for two reasons: it determines the amount of interest the District pays when borrowing money, and it acts as a report card on our overall financial health.

At the beginning of our fiscal year on Oct. 1, the District is authorized to borrow a large sum of money, typically several hundred of millions of dollars, for cash-flow purposes.  Over the course of the year, as our collections come in, the money is repaid.  Our big collection dates are January 15 (fourth quarter payments), March 15 (first half of property taxes), April 15 (income taxes), and September 15 (second half of property taxes).

Our bond rating determines the interest we pay on the money that we borrow – the higher the rating, the lower the interest.  For example, in the early- to mid-1990s, as the District’s finances     deteriorated, the bond rating fell to a “B,” greatly increasing the interest we paid.  By 1995, our finances were so bad that we couldn’t borrow money at all, which was the primary reason for the Control Board — which did what it sounds like: controlled D.C.’s finances. It was only when the Control Board came into existence in April 1995 that the District could once again borrow money.   

After the District met several criteria, the Control Board went dormant on Sept. 30, 2001.  But what many people don’t know is that it can be reactivated if any one of the following seven events occurs:

– Requisitioning by the mayor of advances from the Treasury
– Failure to provide sufficient revenue to the debt service reserve fund
– Default on borrowing
– Failure to meet payroll
– Existence of a cash deficit at the end of any quarter
– Failure to make required payments to pensions
– Failure to make required payments to entity under interstate compact

The Mayor and the council must remain focused to ensure that none of these seven “deadly sins” occur.

Over the years, our bond rating has increased from “junk bond” status to an “A+” on our General Obligation bonds and the highest rating of “AAA” on our income tax bonds.  The District’s finances remain strong, and we had a good story to tell when we visited the rating agencies on Wall Street. 

Jack Evans •

This week, the D.C. Council met at its annual retreat to review legislative priorities, receive briefings from various officials and make plans for the coming year. We also recently received the audit of the fiscal 2011 budget – known as the Comprehensive Annual Financial Report (“CAFR”), an event of particular interest to me as Chair of the Council’s Committee on Finance and Revenue. 

First, the good news from the fiscal 2011 CAFR: the District sustained its 15th annual balanced budget and unqualified “clean” audit. In short, our finances today are a far cry from the desperate straits we faced in the mid-1990s. The audit also confirmed we have no “material weaknesses” (we had two in fiscal 2008) and reduced our “significant deficiencies” from five to two. I am glad we have made meaningful progress on our internal control systems. Every year, the District spends millions of dollars on various audit functions – not only the CAFR, but also the operations of the D.C. Auditor and the Office of the Inspector General. A few years ago, we decided to pool all this information more systematically and bring in under-performing agencies to submit remediation plans to correct the deficiencies. This new approach has begun to pay off.

We finished fiscal 2011 with a surplus of nearly $240 million, which now resides in our savings accounts. While I am glad that our financial position remains so strong, this surplus has caused a lot of anger among the hundreds of thousands of District residents who were asked to pay a number of new taxes and fees in last year’s budget, which I voted against. Before we rush to spend this money on an ever-expanding government, I think we need to take a hard look at making more sustainable spending choices. We have already received briefings on the status of the current fiscal 2012 budget by Mayor Gray and are expecting the upcoming fiscal 2013 budget submission from the mayor in late March. While we have a windfall now, indications are that the mayor will seek to spend all of this money and more to address potential gaps in the budget if he does not begin to spend within his budget. 

Every year, seemingly, we face “spending pressures” in the middle of the fiscal year. As it is February, the mayor has the opportunity to review these problems and take corrective action so that we end fiscal 2012 with a balanced budget. A more difficult challenge will be the work of the mayor and the council to balance the fiscal 2013 budget. Unfortunately, the government has built in cost increases every year, so that we pass the biggest budget in our history each year in spite of the difficult economic climate. No other state goes through recessions without making tough spending choices as a result. Clearly, this spring we will have some very serious challenges facing us and many tough decisions to make. I hope that with your help we can convince the mayor and my colleagues to find efficiencies within existing agency budgets by making tough choices rather than simply increasing taxes every year.

Before the budget is released, we first go through the performance oversight process. Over the past two weeks, I have sent a number of questions to the agencies under my purview to collect data on agency structure and recent spending. After I review what has worked and what has not, I will be in a better position to make recommendations on adjustments to the agency budgets for next year. Thanks for your support during this process, and please feel free to contact my office as well as to my colleagues to share your views.

Jack Evans • April 4, 2012

Last week, Mayor Vincent Gray submitted his Fiscal Year 2013 budget proposal to the Council. The total proposed budget for the District is $11.3 billion, the largest in our city’s history. Of that amount, our proposed local funds budget for FY 2013 is $5.9 billion, which is $237 million more than the FY 2012 approved budget of $5.6 billion, an increase of 4.2%. Once you add in certain dedicated revenues, the entire general fund revenue proposal is $6.6 billion. While we also receive federal money in our budget, it is in the same proportional ballpark as that received by any other state. There is a common misconception that the federal government makes a separate contribution to the District, however, this type of payment was eliminated in 1996.

Over the past ten years, our local funds budget has gone from $3.7 billion to $6.1 billion, an increase of 64%. Much of this increase has been in the social services and education budgets. Today, almost 80% of our budget is used for social services, education, and public safety. In light of this extraordinary spending growth, I simply cannot understand the position of some of my colleagues and policy advocates who say we are not providing adequate funding for social services programs. An argument can perhaps be made that spending choices should be made more wisely, but we are not in need of any new revenue.

Fortunately, the Mayor seems to agree at least partially with those sentiments. I am pleased with certain aspects of the budget, such as the absence of any tax increases. I am also pleased to see at least a token increase in the homestead deduction, standard income tax deduction, and personal income tax exemption. I would go even further, however. Due to our large surplus from the past fiscal year and an increase in our quarterly revenue estimate, an argument could be made that we should return these tax dollars to taxpayers, and return the furlough money to our government employees.

I also have concerns that certain revenue raising proposals in the Mayor’s budget may not generate the projected levels of funds. Of particular concern is a proposal to expand the hours during which alcohol can be sold, from 2:00am to 3:00am on weekdays and from 3:00am to 4:00 am on weekends and holidays, for the apparent purpose of generating $1.3 million in increased sales tax revenue annually starting in FY 2013, and approximately $5.32 million in the four-year financial plan period. I believe many residents of Ward 2 will object to this type of change. Therefore, this will require that we find funding elsewhere. The Mayor also proposes to raise $24.8 million in new revenue from increased speed and red light ticket cameras. I disagree philosophically with this nickel-and-dime approach to balancing the budget.

Last year I expressed concerns about inadequate police funding in the budget. While I am encouraged by the Mayor’s commitment to fund additional officer positions, I disagree that a staff of 3,900 officers would constitute a “fully funded” police force. I believe we should increase our force to a minimum of 4,000 sworn officers at all times to protect us from rapid changes, such as when we reach a “retirement bubble.” I also believe we should provide at least $10 million in funding for the Commission on Arts & Humanities as well as additional funds for libraries and parks.

I will be working with my colleagues on the Council to make improvements to the Mayor’s proposal and hope to have your support. Last year, I voted “no” on the budget.  I am hopeful that I will be able to support it this year.

Georgetowner • March 7, 2012

This week, I chaired a meeting of the Committee on Finance and Revenue to consider a bill to require mobile vendors, including food trucks, to pay sales taxes. The bill amends a section of the District?s tax law that currently exempts sidewalk and mobile street vendors from sales tax requirements.

Currently, sidewalk and mobile street vendors, including food trucks, pay a quarterly fee of $375 to the District in lieu of having to pay sales taxes the way other food service businesses must. Members of the public and other stakeholders have pointed out that this is not a fair system, and the evolution of the mobile vendor market requires a modernization of our tax laws. A writer for the Washington Blade recently called the current quarterly fee ?a token alternative annual payment initiated several decades ago? and advocated for ?sales tax parity? as found in the bill I am sponsoring.

Legitimate concerns have been raised by the food truck industry about the need for comprehensive regulatory reform that more accurately takes into account their true corporate structure and business activities. At my hearing last year, for example, the executive director of the D.C. Food Truck Association testified that, like storefront restaurants, mobile vendors should be licensed and taxed as businesses rather than as sole proprietors. However, requiring individual street vendors to have a vending license, she says, makes about as much sense as requiring an individual waitress in a restaurant to have a business license. I tend to concur.
Regardless of the merits of that argument, though, the subject matter of corporate form is not within the purview of my committee, but rather is being addressed by regulations from the District?s Department of Consumer and Regulatory Affairs (DCRA). Comments on the proposed rules were due March 1 and are posted at [dcra.dc.gov](http://dcra.dc.gov).

The bill I moved this week has been subject to debate and public comment since at least March of 2011 and would not propose to implement the tax until October 1, giving plenty of notice to the industry while also allowing a reasonable amount of time for the regulations to become effective prior to implementation of the sales tax. As noted by the writer quoted above, however, ?there is scant evidence of public support for continuing to exempt the[se] businesses from the standard sales tax levy? or allowing the sales tax issue to remain unresolved while the regulatory process is completed.

Also this week, I chaired a hearing on my proposed bill to repeal the out-of-state municipal bond tax. I have heard from many constituents about the hardship and unfairness of changing a law that impacts so many seniors after they have already relied on the tax break in good faith when making their retirement plans. While the hearing has already taken place, the record will remain open until March 9. If you have time to send a letter to my staff [kstogner@dccouncil.us](mailto:kstogner@dccouncil.us) in support of the bill by next Friday, we will include it in our official record to help demonstrate the support we need to convince the Mayor and the couple of swing votes on the Council we need to repeal this tax.

Georgetowner • January 11, 2012

In my last newsletter, I took some time to reflect on our accomplishments from the past year. This week, I want to discuss a few of my New Year?s Resolutions. As Chairman of the Council?s Committee on Finance & Revenue, my central goals for the year relate to the District?s finances.

First, it is important to me to lower the top personal income tax rate in the District to our prior rate of 8.5 percent. As a government, we continue to shoot ourselves in the foot when it comes to attracting and retaining new residents and small businesses. We can raise money in the short term by perpetually increasing taxes and fees, as my colleagues prefer to do. But when we create disincentives for new businesses to locate here, we do more harm than good down the road.

Second, it is important to me to reduce the expenditures of the District government. I am the first member to champion programs that actually work, such as the Housing Production Trust Fund. Unfortunately, many of our District dollars are not spent so wisely, and we have to make strategic cuts in order to balance our budget going forward.

Third, after we make those cuts, I want to make sure that the savings we achieve are put into the District?s savings account rather than doled right back out in earmarks and other new, wasteful spending. Despite all the complaints I heard from my colleagues about all the supposed budget cuts we made last year, the simple fact is that we passed the largest budget in the District?s history. In addition to saving for a rainy day, our reserve account also supports our bond rating, which is critical for allowing the government to borrow for needed capital improvements to schools and other important projects at affordable rates.

Fourth, I want to move forward quickly with the mayor to constitute the Tax Revision Commission and the Real Property Tax Appeals Commission. The Tax Revision Commission will give a thoughtful look at the District?s tax structure. Unfortunately, the only time tax policy typically comes up in the legislative setting is when a member is looking for a way to raise money for a pet project he or she wants funded. The goal of the Tax Revision Commission will be to make more principled recommendations based on sound tax policy rather than pragmatic spending priorities.

The Real Property Tax Appeals Commission, in contrast, focuses more on the mechanics of collecting taxes. A substantial portion of the District?s revenue comes from real property tax collections, and there have been a number of complaints with regard to inconsistency in the administrative appeals process. The Real Property Tax Appeals Commission was established with the goal of professionalizing the appeals process and ensuring greater fairness and transparency.

In closing, I hope you had a wonderful holiday season and are making progress on your resolutions for 2012. The holidays always seem to go by a little too quickly, but I am excited about the year ahead and all we will accomplish together.

Georgetowner • December 14, 2011

At our last legislative meeting, I introduced a bill called the “Reimbursable Detail Expansion and Promoter Regulation Act of 2011.” This bill is designed to bring to the forefront of the Council’s legislative agenda the issue of violence associated with certain late night entertainment venues, particularly when so-called “promoters” are involved. 

The bill I introduced would direct the Alcoholic Beverage Regulation Administration to create regulations covering promoters, which has been the subject of discussion even prior to recent events. Promoters don’t have accountability to the government or the community the way an ABRA license-holder does, and creating a licensing process for them will help with this problem. My bill creates a framework for defining promoters, looking at items such as fee-sharing arrangements based on admission head counts, for example, while creating reasonable exemptions for performers and off-premises ticket sellers like Ticketmaster.

The other substantive section of the bill would impact participation in the reimbursable detail program, which provides for additional Metropolitan Police Department officers on the streets, with costs being shared by bars and the city. The intent of my bill is to shift the presumption to require certain establishments to pay for adequate security unless they apply for and are granted an exemption. If, for example, an establishment is a restaurant by day but then has a second life as a kind of club a couple of nights a month, then that establishment would have to participate in the reimbursable detail program on entertainment nights unless ABRA grants them an exemption. On nights where promoters are involved, the extra security would always be required. 

The introduction of this bill starts a conversation on the issue, and there will be an opportunity for residents and stakeholders to share views for how to refine the proposal going forward. I have heard a number of good ideas already, such as increasing the role of advisory neighborhood commissions in the process or involving the commander of the relevant police district in these decisions. There may also be a way to incorporate “special police” officers into the security requirements, who are not members of MPD but are licensed by MPD. In contrast with MPD reimbursable detail officers who patrol the streets outside identified establishments, “special police” officers work inside an establishment and have arrest authority on the premises.

I look forward to other ideas being presented during the hearing process. I was joined by four of my colleagues in the introduction of my bill, Councilmembers Michael Brown, Phil Mendelson, Muriel Bowser and Marion Barry, which I hope demonstrates the support necessary to ensure that the relevant committee chair, Councilmember Jim Graham, quickly schedules a hearing to move the bill forward.