Last week, the DC Council held its first vote on the FY25 budget. This has been a challenging budget year as lawmakers grappled with slow economic growth and the expiration of Covid-era federal funding.
The current budget includes critical investments in the District’s commercial corridors, including downtown, as well as in improving public safety and our school system. We are concerned, however, that the budget also increases taxes in ways that undermine DC's ability to attract and retain residents and businesses – and the vital revenue they contribute to fund essential services.
INVESTMENTS TO APPLAUD
Downtown Revitalization:
$756 million is allocated for downtown revitalization, including the Gallery Place Revitalization fund, office-to-residential conversions, the Vitality Fund to attract and retain businesses in high-growth sectors, a new shelter for permanent supportive housing, and a new downtown arts hub. However, the Council’s Budget Support Act (BSA) removes nearly $31M from downtown investments, including eliminating the Downtown Arts Hub ($5M), eliminating Historic Green Triangle Improvements ($9.8M), removing $13M from other office conversion incentives, and reducing the Vitality Fund by 50% ($2.5M). These catalytic investments will help revitalize DC’s main commercial corridor, grow our economy, and provide essential revenue to fund DC’s social safety net. We encourage the Council to fully restore these cuts to key Downtown programs.
Public Safety:
Significant investments include $572 million for the Metropolitan Police Department, a 14% increase from FY24, to hire additional officers and fund crime-fighting. The budget also funds safety-promoting provisions of the Secure DC legislation passed in March, including the safe commercial corridors program, expanded pre-trial detention for violent crimes, and the prearrest diversion task force.
BEST Act Funding: The BSA fully restores implementation funding for the Business and Entrepreneurship Support to Thrive Amendment Act (BEST Act), which the Committee on Public Works and Operations cut by 75%. This legislation modernizes the process for starting and licensing businesses in DC and eliminates associated fees for District entrepreneurs. The BEST Act was a priority for Opportunity DC this budget season and we’re thrilled to see the funding restored for this important legislation.
Expenditure Evaluation:
In line with Opportunity DC's call for careful expenditure evaluation, Council Chairman Phil Mendelson has proposed funding a new position within the Council's budget office to ensure efficient use of tax dollars.
Higher Payroll Taxes:
The current budget significantly increases the maximum tax that employers pay to fund DC’s generous Paid Family Leave program – from 0.23% of employees’ gross wages to 0.75%. This additional tax hike will especially hurt labor-intensive organizations such as universities and hospitals. We are also concerned that two-thirds of the revenue collected won’t fund family leave but will instead perpetuate DC’s unsustainable government spending.
Higher Sales Tax: A percentage-point increase in sales tax over two years, starting in FY26, is expected to raise $338 million over the four-year financial plan.
Higher Property Taxes: The property tax rate would increase on single-family homes and condos valued at $2.5 million and more, from 85 cents to $1 per $1,000 in assessed value.
NOTABLE MOVES
Council Fully Restores the Pay Equity Fund:
The Council restored $70 million in annual funding for the program that subsidizes wages and health care costs for early childhood educators.
Shifting Funding from DCPS HQ to Schools:
The BSA reallocates $25.4 million from the school district’s central office to its campuses.
Cuts to Anti-Truancy Funding:
The Committee on Housing cut the Mayor’s DHS truancy program by $2.8 million, a 30% cut. We are concerned about this cut’s short-term impact on crime and longer-term impacts on DC students’ futures. The BSA restores $2.2M in truancy reduction through grant work under OSSE.
No Increase in Hotel Tax:
The Mayor had proposed increasing taxes on visitors by 80 cents per hotel night. The Council disagreed and removed that new tax.
Connecticut Avenue Bike Lane:
The current budget does not fund the controversial bike lane proposal, which the corridor’s business owners and many residents have opposed.
NEXT STEPS
The District’s budget is built through several pieces of legislation. On June 12th, the Council will vote on the Fiscal Year 2025 Local Budget Act of 2024 and the Fiscal Year 2025 Federal Portion Budget Request Act of 2024. The final vote on the Budget Support Act has yet to be scheduled but is expected to be in late June or early July.
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