D.C.'s Projected Tax Revenue Drops By $212M As Slow Reopening Continues
The coronavirus pandemic has put a strain on D.C.'s tax revenues, making it more difficult for the city to invest in affordable housing and other priorities, and new forecasts show it could have to tighten its belt even further.
D.C. Chief Financial Officer Jeffrey DeWitt released revised forecasts Wednesday that lowered the projected revenue for Fiscal Year 2021, which begins Thursday, by $212M from his April estimates.
DeWitt increased his FY2020 revenue estimate by $222M from his April forecast, attributing the bump to the effects of federal economic programs like the Paycheck Protection Program and the expanded unemployment benefits.
But the prolonged restrictions on businesses and large gatherings are leading to decreasing economic activity that DeWitt expects to hurt the city's revenues for years to come. He decreased the projections for FY2022, FY2023 and FY2024 by $210M, $190M and $170M, respectively.
The revenue projections are falling further because DeWitt revised the assumptions on D.C.'s reopening timeline, indicating that retail and hospitality businesses will continue to struggle.
In April, he had expected restrictions on bars and indoor dining to end in late summer, but he now expects these restrictions will continue through the end of the year. April's forecast had expected convention business to return to normal in January, but it now projects major conventions will be canceled through 2021.
Revenue is also shrinking in part because of the weak market for commercial property sales. DeWitt decreased the projected revenue from deed taxes by $93M for FY2021.
"Multifamily and commercial property transactions are primarily for investment purposes and have been affected by the pandemic's impact on incomes earned by owners of these properties (through increased vacancy rates and reduced rents), thus having a negative effect on investments and transactions," DeWitt wrote in his letter to the mayor and council chairman. "This impact will last longer, and the recovery will come later than assumed in April."
Council Member Kenyan McDuffie, chair of the Committee on Business and Economic Development, said the forecasts show the path to recovery will be much longer than originally anticipated.
"COVID-19 has had a devastating economic impact," McDuffie said in a statement. "As we look to maintain the District’s financial strength we must balance increasing revenues to care for our most vulnerable and austerity measures to make our budget and operations effective and efficient.”