- Associated Press - Tuesday, January 29, 2013

The District of Columbia ended fiscal 2012 with a $417 million budget surplus, a windfall that illustrates how the fiscal climate in the nation’s capital differs from much of the nation.

Higher-than-expected tax revenue — some of it new income taxes from the 1,100 new residents moving to the District each month — accounted for a big chunk of the surplus, city officials said Tuesday.

“We are one of the nation’s most financially sound jurisdictions, if not the most,” Mayor Vincent C. Gray, a Democrat, said.

Most of the money — $327 million — already has been placed in the District’s reserve fund, which now carries a balance of $1.5 billion. Three years ago, the reserve fund balance was $900 million. The mayor has made increasing the city’s savings a major priority of his administration.

The remaining $90 million came from dedicated revenue streams, including the 5-cent surcharge on plastic bags that is used to clean up the Anacostia River.

Chief Financial Officer Natwar M. Gandhi said the surplus continues a remarkable turnaround since Congress put the bankrupt city in receivership in the mid-1990s. At one point during the financial control board era, the city had a negative balance of $500 million in its reserve fund. Since then, $2 billion has poured in.

“We are in exceptionally good condition,” Mr. Gandhi said. “We are viewed very favorably on Wall Street.”

Next month, Mr. Gray, Mr. Gandhi and council member Jack Evans, Ward 2 Democrat, will take their annual trip to New York to make their pitch that the District’s bond ratings should be upgraded. Although the city enjoys favorable bond ratings, Moody’s Investors Service put the District on watch in September 2011 because of looming federal budget cuts. The city would take a hit if the automatic federal spending cuts scheduled for March 1 go into effect.

Still, Mr. Gray said he expects revenue to continue to increase in fiscal 2013, and he hopes to be able to propose new spending.

But advocates for the city’s poor and homeless residents say the mayor and the D.C. Council should spend some of the surplus on safety-net programs.

“It’s disappointing that we’re not being given access to the money for smart, one-time investment opportunities that would support human needs,” said Janelle Treibitz of the D.C. Fair Budget Coalition. The group argues that spending on the District’s 15,000 homeless residents has actually decreased, despite the city’s robust finances.

Council member Jim Graham, Ward 1 Democrat who said 25 percent of the residents in his ward live in poverty, said the failure to invest in social services would ultimately cost the city.

“We’re going to pay for all of this in human misery and crime and drug trade. That’s how we pay the piper,” Mr. Graham said.

City leaders were also cool to the prospect of reducing some of the nation’s highest personal income tax rates.

“I’m not in a position where we think we should be reducing taxes at this stage,” Mr. Gray said, noting that the reserve fund still doesn’t have enough money to cover the city’s spending needs for two months. The District has an annual budget of roughly $10 billion, with $6 billion coming from local revenues.

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