DC’s FY 2018 local revenue has increased by close to $80 million according to the June 2018 revenue estimate (PDF) prepared by the Office of the Chief Financial Officer. Out years 2019 through 2022 are also slated to increase, from $41 million in FY 2019 (starting October 1, 2018) to $77 million in FY 2022 (starting October 1, 2021).
Where did the money come from?
CFO Jeffrey DeWitt explained the reasons for the increase:
The local fund forecast for FY 2018 was revised upward by $77.5 million largely due to one-time increases in deed and estate taxes and strong income tax collections in April. The forecast is revised higher in FY 2019 by $41.0 million, which increases to $76.9 million by FY 2022. The increased revenue over the period of the financial plan reflects increased sales and income tax revenue from an improved outlook in wages and income.
Deed and recordation taxes are charged at the time a property's deed is transferred and recorded.
Estate taxes are "imposed on the estate of every decedent who died while still a resident of the District, and on the estate of every nonresident decedent owning property having a taxable situs in the District at the time of his or her death." (2017 DC Tax Facts)
Individual income taxes are "imposed on every resident, defined as any individual who is domiciled in the District at any time during the tax year, or who maintains an abode in the District for 183 or more days during the year." (2017 DC Tax Facts)
Revenue from taxes on homes
Increased revenue from real estate taxes is good news for some and bad news for others. Real estate taxes go up when one, there are more residential and commercial properties owned by parties that pay taxes (not abandoned or owned by the government, schools, or other exempt owners) or two, tax assessments reflect that properties are worth more. DeWitt writes, “Assessments for 2019, mailed in February, suggest continued strength in real property values and revenue is projected to grow 3.5 percent for the remainder of the financial plan.”
And while DeWitt explains that the residential market is stronger than the commercial market, “higher interest rates and federal tax changes, which diminish the financial benefits of home mortgage interest, may dampen home sales going forward.” This could be an additional blow to residents looking to buy in Wards 7 or 8, often considered the last affordable part of the city—and heating up for just this reason. Increased real estate taxes can also be difficult for longtime homeowners and owners of inherited homes, which were purchased at a time when the District was a much less popular place to live. While there are some assistance programs, low-income homeowners with low or no mortgages can have trouble paying higher taxes and fall behind on payments or put off needed maintenance. Homeowners who are planning to stay in their homes for several years and have the ability to pay increased taxes can benefit from higher assessments if they sell in the future.
How will this additional revenue be used?
Mayor Muriel Bowser gives no indication in her acknowledgement of the June 2018 revenue estimates how her administration would like to spend the additional revenue now or in the future. A press release has her saying,
“Washington, DC is growing and so are our revenues. We have worked years to get the District to a place where we are consistently revising our revenue estimates upward, and for good reason—stronger revenues mean stronger services, stronger neighborhoods, and more pathways to the middle class. As our city continues to prosper, we remain committed to running a government that Washingtonians can be proud of and using our prosperity to better the lives of our most vulnerable residents.”
How could this additional revenue be used?
New spending is unlikely in FY 2018 (which ends September 30, 2018). There are myriad ways the additional local funds can be used, from grants to infrastructure investments. But since the council is on recess from July 15 to September 15, new spending through September 30, 2018 is not likely. Thus in FY 2018, neither the Anacostia River environment and communities, nor any District residents or assets, will benefit from the increased local revenue.
When will this additional revenue be used?
FY 2019, which begins October 1, 2018, is a different story. In September and December, the CFO will produce new revenue estimate reports. The mayor will use one or more of these to prepare a supplemental budget that will add to the FY 2019 budget that was just approved by the DC Council. Given the lengthy process for developing supplemental budgets, any additional spending will likely take place in the second half of the fiscal year—July to December—versus in the first half.
How can people get involved?
Much like with the regular budget, a supplemental budget starts with the mayor. If the mayor decides to propose a supplemental budget, she can propose less than the total funds available. Anyone who plans to advocate for a particular use for additional revenue should be ready to meet with the administration as soon as possible, and with council offices in fall.