Amid a pivotal moment for D.C., the mayor is slicing some cornerstone initiatives to bridge a funding gap, but her newly proposed budget is also reallocating some of its funding to one of the city's main challenges at the moment: reviving downtown.

Mayor Muriel Bowser unveiled her fiscal year 2025 budget proposal Wednesday, calling for $21B for operations and $11.8B in capital improvement funds.

“Through strategic investments and shared sacrifice, this budget invests not only in a safer, stronger D.C. right now, but it looks ahead three, four, and five years and includes investments that will accelerate our comeback and increase our capacity to make big investments in the outyears of our financial plan,” Bowser said in her testimony to the D.C. Council Wednesday.

Among the budget’s new investments is a conversion fund that allocates $50M in tax incentives to convert vacant or unused office space into residential and another $13M for turning them into alternative uses.

The budget also proposes $68M for three streetscape projects: the I Street Greenway, Pennsylvania Avenue West and Dupont Park.

Other downtown initiatives include $64M for another permanent supportive housing and shelter space at the Federal City Shelter site, $32M for tourism and grants and marketing, and $5M to attract and retain businesses in high-growth sectors.

The city is also making a major investment over the next three years to renovate Capital One Arena, with the council on Tuesday approving a $515M agreement with Monumental Sports & Entertainment to keep D.C.'s NBA and NHL teams downtown.

The budget also proposes investments for development projects the District is partnering on, including $61M for the Bruce Monroe project, $31M for Barry Farm, $50M for Hill East and $10M for Poplar Point.

The District faces a $4B budget gap over the next four years, including a $700M shortfall this year due in part to rapidly declining office property values, which led the mayor to make cuts in some areas.

The budget reduces the amount of money allocated to the city's key affordable housing vehicle, the Housing Production Trust Fund.

Bowser designated $60M to the fund, which has received at least $100M every year since its inception, with larger allocations earlier in the pandemic.

The fund has provided financing for dozens of projects in the city, from NHP Foundation’s 272-unit Ridgecrest apartments in Ward 8 to the forthcoming 179-unit redevelopment of the Carl F. West Estates senior affordable housing complex in Columbia Heights.

“Adding only $60M to HPTF means that some very worthy programs may not have funding,” Bowser said.

“But we also know that it allows us to invest in other programs that you, in your letters and comments, have shared are a high priority to you, including more funding [for] the Emergency Rental Assistance Program at $20M,” she added.

The budget slices $500M off city programs, eliminating all Circulator bus services and a stipend for early childhood educators and caregivers.

The budget also proposes a phased sales tax hike, raising the city’s 6% tax to 6.5% beginning in October 2025, then 7% for the following two years. The tax increases are expected to net $100M, The Washington Post reported.

In the letter to the council, the mayor said the city was able to balance the budget without increasing property or income taxes.