- The Washington Times - Tuesday, September 25, 2001

D.C. officials projected yesterday that the city may be unable to balance its budget next year because of a decline in tax revenues from the hospitality industry and local income taxes following the attack on the Pentagon two weeks ago.
At an informal meeting about the future of the District following the sunset of the financial control board, members of the D.C. Council, the control board and a congressional oversight subcommittee said that lost revenue from restaurants, hotels and other businesses that depend on tourism will jeopardize the District's ability to serve its residents.
To counter deficits that could reinstate a control board, the city will have to make severe cuts, raise taxes or impose a type of commuter tax on Virginia and Maryland residents who work in the city.
"We are faced with a precarious situation," said Ward 2 council member Jack Evans, a Democrat who heads the council's committee on finance and revenue. "There is a possibility of going into a deficit situation at the end of [fiscal] 2002. Our local congressmen have to do something, or we will certainly be in a deficit situation by [fiscal] 2003."
Congressional leaders so far have been cool to the idea of a commuter tax.
Mr. Evans said city leaders would ask for money to alleviate short- and long-term losses after they are determined. Already $16 million of federal money earmarked to alleviate the costs of the postponed World Bank/IMF meetings will be used to shore up emergency plans and deal with the costs of the attack. City leaders are also pressing for the reopening of Ronald Reagan Washington National Airport.
Mr. Evans estimates that the District will lose 5 percent of its tax revenue in fiscal 2002. The fiscal 2002 budget is $5.3 billion.
In the wake of the Sept. 11 attack on the Pentagon, a number of conventions, business travelers and tourists have canceled their trips to Washington, leaving hotels, restaurants and shops empty.
Mayor Anthony A. Williams said last week that the closure of Reagan Airport and the canceled trips could cost the city tens of millions in declining tax revenues from businesses and from employees who have been laid off.
Washington receives about 20 million visitors annually, and the hospitality sector is one of the engines of the D.C. economy, contributing almost $5 billion annually.
Russell Smith, staff director to the House of Representatives' District of Columbia subcommittee, said yesterday that Congress would have to look carefully at requests for more funds from the federal government.
"We don't want to write a blank check," he said. "The District has to make their case."
Mr. Smith said that a recent $80 million budget overrun in the school system's budget is "on people's radar."
He added that congressional leaders are considering instituting additional safeguards when the congressionally mandated control board dissolves on Sunday. He declined to elaborate on what form that might take but indicated it would mean more than a strengthened chief financial officer, a measure being considered in Congress.
Control board member Robert Watkins said any additional structure to safeguard the District's financial system is unnecessary but didn't dismiss the idea of someone "looking over things" in light of the budget overrun. D.C. Chief Financial Officer Natwar Gandhi told D.C. Council members yesterday that while the situation is serious, the overrun will not prevent the city from balancing its books or hurt its fiscal health as it enters fiscal 2002 on Oct. 1.
Michigan Republican Rep. Joe Knollenberg, head of the House subcommittee on D.C. appropriations, said through a spokesman that while the District's future is "bright," the city needs help moving in the right direction.
What structure might be put in place to safeguard the District "is still yet to be determined," he said.

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