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Late on Monday afternoon, well into a long, all-hands session aimed at closing the biggest budget hole the District of Columbia has seen in 15 years, Ward 2 Councilmember Jack Evans told his colleagues a fiscal ghost story.
“We can nickel and dime this thing,” the longtime finance committee chair said in a John A. Wilson Building conference room. “Back in the ’90s…we nickeled and dimed it until we ran out of nickels and dimes. Threw up out hands and that was the end of the day. We did the fifth quarter!”
That prompted a round of belly laughs. The “fifth quarter” was one early-’90s budget gambit that indeed seems risible all these years later: The idea back in 1993 was that the city would book an extra three months’ worth of property taxes, thus balancing the budget. So what if that left a huge gap in 1994?
It was all the funnier because this ghost story’s bogeyman—Marion Barry—was in the room. He could laugh because it was Sharon Pratt’s gimmick, but it was Barry-era bloat that made it necessary. And this coming from the guy who submitted the “miracle budget”—the 1995 plan that basically dared Congress to take over the city, a dare it gladly took a month later.
“It didn’t work, right?” Barry joked. “It didn’t work?”
More belly laughs.
One guy in the room didn’t manage much more than a smirk, though. That would be Council Chairman Vincent C. Gray.
Besides Evans, Gray was the only other person at the table who had been in government at the time, as Pratt’s human services director. He served in an administration pocked by its inability to make hard decisions, refusing tough medicine at a time when the early ’90s recession hit the District’s bottom line. And a glance at Gray’s history—as a department head, as an advocate for the mentally retarded, and as head of Covenant House Washington, the nonprofit serving homeless youth—would not indicate a particular inclination to make the first major cuts in city services since the control board packed up shop.
But here we are. “For me, it’s important that we demonstrate that we’re on top of this, that we take the steps necessary,” Gray tells LL.
Those steps come right off Evans’s dance card: forgo “rainy day” funds, which, by congressional fiat, have to be paid back within two years; avoid budget gimmicks that fix problems this year only to push them into the following years; maintain a healthy balance in the city bank accounts; and keep your hands off the “crown jewel” taxes—sales, income, and property—that account for 80 percent of city revenue.
Gray, with Evans as his wingman, has emerged as the Wilson Building’s most unlikely fiscal hardass. With a budget crisis at hand, he’s aiming to do no less than banish the ghosts of the congressionally imposed control board from the city government—a specter that has haunted city officials for 15 years.
“I liken it to people who lived through the [Great] Depression,” says Gray. “They have a very anxious attitude toward money.”
One thing that seems to have heightened Gray’s personal anxiety is his trip earlier this month to visit with Wall Street bond raters. The three rating houses—Standard & Poor’s, Moody’s, and Fitch—have the power to save or cost the District tens of millions per year in debt costs, and once a year city honchos trudge up to Gotham to pay tribute to the Masters of the Universe.
Their interest is in making sure investors in city debt get paid in full and on time. As such, their message is simple: Keep the budget balanced, don’t raise taxes, don’t take on too much debt.
Gray, along with Evans, Mayor Adrian M. Fenty, City Administrator Neil O. Albert, and Chief Financial Officer Natwar Gandhi, made the rounds on July 17. According to sources with knowledge of the talks, the chats generally went well, with the money men particularly happy to see the District adopt a self-imposed debt cap.
Just prior to their first meeting that day, with S&P, Fenty and Albert dropped a bombshell on the rest of the party: They would be asking Congress to extend the period where emergency rainy day funds would have to be repaid. It’s reasonable enough, on one level: Virtually no other jurisdiction has such an onerous requirement—with a two-year repayment schedule, chances are good it will still be raining by the time the balance has to be paid.
But there are a couple of problems with that: Congress would never go for the change, and even if it would, the time to make it isn’t in the middle of the first sizable economic hiccup since the control era. When the going gets tough, the District changes the rules: Is that the message such a move would send to Hill overseers?
Or to Wall Street? According to Gray, “It was not responded to well at all.” By the time the officials made it to Moody’s, he says, the idea was “off the table.” (Albert declined to discuss the meetings: “I don’t kiss and tell.”)
It’s a story, too, that plays into Gray’s pet political narrative: the chairman as a mature, sober, consensus-seeking Washington lifer who’s been around the block a time or two, up against the young, brash, impulsive mayor, whose get-it-done style leaves no room for debate, compromise, or oversight.
The gap-closing plan that Fenty sent to the council earlier this month certainly helps paint that picture. Fenty did institute a freeze on city spending on July 1, saving $14 million, but much of the rest of the $666 million revenue shortfall through October 2010 was covered in the Fenty plan through borrowings from the rainy-day fund and nearly $100 million in one-time accounting moves—both of which push tough budgeting decisions into the coming years.
Gray has been telling his colleagues those tough decisions need to be made this year. How tough?
Said Evans to his colleagues: “We’re going to get to a point where we’ll have to make decisions that are almost intolerable. Now I’ll use the school system as an example: If you cut $10 million out of the school system, you’re going to catch hell. You might as well cut 50. You might as well cut 100. Because you’re going to catch the same kind of hell no matter how much you cut. So at some point all of us are going to have to collectively make a decision that we’re going to make some big-chunk cuts.”
Easy for Evans to say. He not only represents a fiscally conservative ward, he doesn’t have to stand for re-election until 2012. Cutting $100 million from the schools budget will be a harder thing for colleagues like Ward 1’s Jim Graham, Ward 5’s Harry Thomas Jr., and Ward 6’s Tommy Wells, all of whom will appear on ballots next year.
Meanwhile, councilmembers are getting the hard sell from all sides. Gray sat through 10-plus hours of testimony Friday, mostly from groups set to receive earmark grants. And on Monday afternoon, as members and staff headed to the conference room for budget talks, they had to run past Ed Lazere and his gantlet of wonks from the liberal D.C. Fiscal Policy Institute, doing some last-minute lobbying for fee and tax hikes as an alternative to deep cuts to welfare and other safety-net programs.
Then there’s the resident bleeding hearts of the council. Barry, of course, is one—happy to chop Fenty’s pet summer jobs program to prop up the “last, least, and lost.” There’s Graham, who has been pushing an income tax hike on top earners for months and tried to funnel a hefty parking-meter hike to welfare and housing-assistance programs, only to see it tapped by Fenty to close the budget hole. (“He’s the white Marion Barry,” says top finance committee staffer Jeff Coudriet.)
Then there’s freshman-at-large member Michael Brown, a finance committee member who advocates dipping into the city’s cash reserve and who calls himself a “huge advocate for revenue enhancement” (read: tax hikes).
Brown says it’s all about context: “Everybody’s raising taxes!” he says. “You have to!”
And Brown thinks there’s no sense bowing down to the gods of high finance when, according to city hall source, a better bond rating would have “no immediate impact.” Brown says he called his own “friends on Wall Street” and got a second opinion. According to those unnamed sources, he says, jurisdictions that dipped into contingency funds didn’t see any slide in their bond ratings.
He draws a comparison between the Big Three raters and Congress—just “more people imposing their will on us,” he says.
During the ’90s, when the Hill was sharpening its teeth on District finances, Brown was cutting his teeth as a lobbyist. His perspective is that fears of congressional meddling in this day and age are overblown. “They’re scared and I don’t think they should be,” he says of his council colleagues. “It’s a different kind of Capitol Hill; it’s a different kind of White House,” Brown says. “I don’t buy into that kind of fear-mongering.”
Where the District’s fiscal imbalances “stuck out like a sore thumb” during the booming ’90s, Brown says, these days there’s no need to become a paragon of fiscal rectitude when states across the land are in even worse straits.
Cue the fear-mongering from Gray: “One unbalanced budget, and the control board could be back.”
The Other Mayor Speaks
A heretofore mystery man in the fishy firetruck affair has spoken: Vladimir Céspedes, mayor of the Dominican Republic city of Sosúa, told reporters about the caper that has generated a great deal of political heat in this town.
Turns out it’s not just this town. Céspedes, through a translator, tells LL that he has his own political problems: His own city council wants to know what happened to the $11,000 in city money he paid expecting a fire truck and ambulance in return—not a small amount in a city of 50,000 that has a municipal budget totaling $100,000 per month. There was no written contract, he says, just a receipt from the shipper.
“Not only they but I want the money back,” Céspedes says.
That money, he says, was paid in cash to Sinclair Skinner, friend and political associate of Mayor Adrian M. Fenty, in the expectation that the funds would finance transport of the rigs to Sosúa. Skinner, Céspedes explained, has presented himself as being very close to Fenty.
Skinner and David Jannarone, the mayoral director of development, Céspedes says, visited him in Sosúa “three or four times.” He’d welcome them at city hall, he says.
The trucks made it as far as Miami before political pressure led the Fenty administration to halt the transfer. Céspedes said he felt “very bad” when he heard that the deal blew up. “We need that equipment to save lives in our poor country,” he said.
What Céspedes explains jibes with testimony from Ronald Moten of Peaceoholics, the group serving as a middle man between D.C. and Sosúa. Moten testified in June that Skinner had handed him an $11,000 check drawn on Liberty Industries, a concern owned by Skinner, then had turned around and used those funds to pay for the trucks’ transport. But it was not clear from Moten’s testimony whether the funds were paid by the Dominicans or by the D.C. folks.
His account also aligns with that of William Walker, head of a local nonprofit who has presented himself as the mastermind of the donation. He appeared at the press conference, saying that he remained hopeful that the transfer could be completed and that cultural exchange between the cities could continue.
On Monday evening, Céspedes told his story to D.C. councilmembers investigating the equipment transfer. He was scheduled to speak to an investigator from the Office of the Inspector General Tuesday afternoon. On Monday, Céspedes and Walker visited the city’s Northeast property yard to view the trucks.
The revelations came after a press conference in the lobby of the Westin hotel off Thomas Circle, which had been organized by good-government advocate Dorothy Brizill. Brizill says she arranged the trip for Céspedes and his translator and counsel, Jorge Espaillat, going so far as working with Eleanor Holmes Norton’s office to secure visas and soliciting donations for hotel and airfare. Brizill says she paid for their lodging but hopes to be reimbursed from D.C. Council funds meant for witness expenses.
Céspedes wasn’t the only player in this saga to be deposed by councilmembers yesterday. Jannarone sat for questioning, as did Walker.
Skinner has yet to be questioned. Council staff are still negotiating with his attorney, A. Scott Bolden, to set a date and terms.
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