- The Washington Times - Tuesday, May 11, 2010

The D.C. government is headed down a dangerous financial path and it must curb spending now, the lawmaker who heads the finance and revenue committee said Monday.

The tax and spending proposals now before the D.C. Council also could threaten the city’s bond ratings by drawing down its reserve funds, said Jack Evans, who was serving on the council in the mid-1990s when Congress instituted a financial control board to oversee the city’s finances.

The city had a reserve fund balance of $920 million coming into this fiscal year, but Mayor Adrian M. Fenty proposes spending that down to $822 million in 2011 and $607 million by 2012. As recently as 2008, the fund balance stood at $1.5 billion.

“Under that scenario,” Mr. Evans said in an interview Monday, “you’re going to run out of money.”

That kind of drawing down of emergency funds makes Wall Street nervous, said Mr. Evans, who is chairman of the finance and revenue panel.

“When we met with the bond rating agencies in March, the first thing all three asked about was the fund balance. They asked where is this [spending] going?” he said. Also, “they are very concerned about raising taxes.”

Mr. Evans’ remarks came as the council begins marking up Mr. Fenty’s 2011 spending plan, which includes new and increased taxes and fees.

Two of Mr. Evans’ Democratic colleagues also have proposed tax increases.

Mary Cheh, who represents the city’s wealthiest neighborhoods, wants to institute a new tax on soda and other sugary drinks. Jim Graham, who represents historic ethnic neighborhoods, has resurrected his “millionaires tax” proposal. Meanwhile, independent lawmaker Michael Brown wants to increase taxes, too.

Mr. Evans said it’s unclear whether his three colleagues have the minimum seven votes to get any of the measures passed by the 13-member body, but he’s certain of his own position on raising income taxes: “I will not support” that.

Mr. Graham is a “typical tax-and-spend” liberal, a council staffer said.

But Graham spokesman Brian DeBose, defended the three-term lawmaker, saying that even in this “declining revenue and election-year climate,” Mr. Graham’s priorities are making sure that the city’s safety net is strengthened and that transportation and public works programs are not shortchanged in any neighborhood.

“The entire council has to really figure out what to save and cut,” Mr. DeBose said.

Revenue in the District, like other urban hubs, declined during the recession. But instead of making substantial cuts, the mayor and some council members want to raise fees and taxes to plug deficits in the 2010 and 2011 spending plan. In addition to the soda and income taxes, the mayor and the council are being urged to embrace new and higher levies, including on parking, 911 calls, diaper services and taxidermy.

At a daylong hearing Friday, Mr. Evans cautioned several times that the control board is only dormant, not dead, and that the city cannot tax its way out of overspending without jeopardizing its financial status.

The District currently has good bond credit ratings with all three principal agencies — Fitch (A+), Moody’s (A1) and Standard & Poors (A+). But Mr. Evans said there was an audible gasp during the city’s spring meeting when Wall Street representatives learned the mayor wants to continue spending reserve funds.



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