D.C. Mayor Muriel Bowser calls for tax hikes, social cuts in fiscal 2025 budget

D.C. Mayor Muriel Bowser is calling for tax increases and deep cuts to social programs to offset downtown revenue losses in the budget she presented Wednesday to the D.C. Council.

Her fiscal 2025 proposal calls for $21 billion in operating funds, up from $19.8 billion in fiscal 2024 and a new high for the nation’s capital. Ms. Bowser also is seeking $11.8 billion in capital improvement funds.

The 400-page plan focuses on shoring up public safety, downtown business development and public education while trimming funds for affordable housing and other social programs. Key spending items include $217 million to support the struggling Metro system and a substantial investment in Capital One Arena, home of the NBA’s Wizards and the NHL’s Capitals.

“It’s smart, it’s responsible, but most important, this is a budget that will keep D.C. the best city in the world,” said Ms. Bowser, a Democrat in her third term.

The mayor said she would offset $500 million in revenue losses by eliminating 407 city government positions and trimming several programs. Cuts would include administrative spending, the Early Childhood Development Fund, a job training program, a truancy program, and eliminating the Circulator bus service.

She proposed canceling $300 million of the District’s budget deficit through tax hikes. That includes boosting the general sales tax from 6% to 6.5% in fiscal 2026 and to 7% in fiscal 2027, which would net the city a projected $100 million a year.

It also includes adding a 1%-3% tax on electric vehicles based on size, an 80-cent-per-night hotel room fee to pay for 911 worker training and increases in required employer contributions to paid family leave.

Ms. Bowser pointed to the impact of remote work on downtown businesses and Metro ridership as a reason for prioritizing economic investment.

“No one wants to be a city where people are leaving, businesses are failing,” she said.

City officials have chalked up the District’s funding crisis to fewer people shopping, dining or working downtown on weekdays since the outbreak of COVID-19.

Other problems include pandemic relief funding drying up this year, crime-plagued retailers pulling out of depopulated streets, mass transit ridership declining and struggling restaurants closing.

The District used $4.7 billion in federal pandemic relief money to expand its budget from $15.1 billion in fiscal 2020 to $19.8 billion in fiscal 2024. That money runs out on Sept. 30, the end of fiscal 2024.

The council must adopt a new budget by June 12 after a series of scheduled meetings and votes, said Chairman Phil Mendelson, at-large Democrat. He noted that fiscal 2025 begins Oct. 1.

In brief remarks before the mayor’s presentation, Chief Financial Officer Glen Lee said that inflation is projected to outpace annual revenue growth over the next few years. He attributed that to pandemic-era remote work driving down commercial property values, Metro ridership numbers and sales tax revenue0.

“After careful review, I certify that the … proposed budget plan is balanced,” said Mr. Lee, who is required under federal law to ensure the District’s financial stability.

Most council members said they needed time to digest the budget proposal before responding.

However, several vowed to raise concerns in upcoming budget meetings about the impact of the mayor’s proposed cuts on minorities and low-income residents.

“Shared sacrifices cannot disproportionately be shouldered by lower-income residents or smaller businesses,” said council member Kenyan R. McDuffie, at-large independent and chairperson of the council’s Committee on Business and Economic Development.

Council member Christina Henderson, at-large independent, said proposed cuts to child care subsidies and the pay equity fund for early childhood educators could balance the budget “on the backs of Black and brown women” by pressuring them to stay home.

“It is an economic issue, it is a workforce issue,” said Ms. Henderson, her voice breaking with emotion.

Council member Charles Allen, Ward 6 Democrat, said he was “deeply concerned” about proposed cuts to the city’s environmental programs while recognizing a need to fund Metro and downtown businesses.

“To everybody, there aren’t easy decisions, and let’s not pretend that there are,” Mr. Allen said.

Others offered mixed perspectives. Council member Anita Bonds, at-large Democrat, said she supported the reasons for increasing tax revenue.

“This is about our hometown, where we are and what we have to do to stay afloat, because without our government, we probably would not have a town,” Ms. Bonds said.

But council member Brianne Nadeau, Ward 1 Democrat, said the mayor’s tax increases would not go far enough in tapping the District’s highest earners.

She criticized the proposal for making “slow, half-percent increases to the sales tax” rather than “bold changes” to the city’s revenue system.

Council member Robert White, at-large Democrat, called for “budget accountability reforms,” including a comprehensive spending review across city agencies.

“I’m looking at how much money we’re spending, and how much the government has grown, and I just don’t see what problems we’ve solved with all of that,” said Mr. White, who unsuccessfully challenged Ms. Bowser for the Democratic nomination in the 2022 mayoral election. “This begs the question: where is the breakdown occurring? The problem clearly is not a lack of money.”

He noted that the city budget has grown by 55%, or $7 billion, and added 10,000 employees since Ms. Bowser took office.

D.C. Auditor Kathy Patterson, a former member of the city council, said she could not comment on the budget proposal. In February, her office flagged the District for mischaracterizing the D.C. Housing Authority in annual comprehensive financial reports.

“We are working on budget briefs we will share with [the] council in a couple of weeks to follow up on issues we have issued audits on and will share those when completed,” Ms. Patterson told The Washington Times.

In a recent interview with The Times, the city’s CFO Mr. Lee said occupancy in downtown offices has flatlined at 50% of pre-pandemic rates for the past 18 months as many employees continue working remotely from Maryland and Virginia for part of the week.

Mr. Lee said the resulting drop in commercial real estate values will create a projected loss of $260 million to $300 million in annual tax revenue through 2028 as commercial real estate values plunge, with the problem worsening after that as more employers reduce their commercial footprints or let leases expire.

In a paper published Tuesday, the nonpartisan D.C. Policy Center called on lawmakers to “make difficult decisions now” so that future years don’t get harder.

“When resources are limited, there is a greater need for a government that operates efficiently and predictably,” wrote Yesim Sayin, the center’s executive director. “This can be achieved through rigorous evaluation of program design and execution to determine what investments work the best, meet the highest needs, and with the greatest success.”

Correction: An earlier version of this article misreported the amount of funding the mayor has proposed for Metro.