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Washington, D.C.

By David PlotzPosted Sunday, Jan. 12, 1997, at 3:30 AM ET

Washington, D.C.
By David Plotz
(1,225 words; posted Saturday, Jan. 11; to be composted Saturday, Jan. 18)

For the better part of the 1980s, Washington, D.C., boomed. Property values and incomes soared in the District, filling the local treasury with tax revenues. A surge in downtown office construction and an increase in federal spending also fueled the rise. But in 1989, the real-estate market crashed and local federal spending began to decline. Over the next six years, the city's fiscal affairs steadily deteriorated. In 1995, Congress and the president seized direct control of the District and its finances by appointing a financial control board to oversee (and overrule) Mayor Marion Barry and the City Council.
What is the condition of the District today? How did it become so troubled? And can the control board--or anyone else--save it?
Washington's woes are similar to those of other East Coast cities: Its shrinking tax base can no longer support the costly bureaucracy and social-welfare programs its citizens take for granted.

The roots of the crisis can be traced to the 1980s boom, when Mayor Barry and the council spent the tax windfall on an immense bureaucracy. By 1990, the city employed 50,000 people, up from 39,000 in 1984. At its profligate extreme, the District had about 40 percent more people on the payroll per capita than comparable cities (even accounting for its "state" functions), employed more police officers per capita than any U.S. city, and spent more per pupil than any U.S. school district.
This lavish spending did not much improve the quality of life, especially for the city's large black underclass: School test scores were among the lowest in the nation; the murder rate was the highest; and the crack trade devastated District neighborhoods.

Tax revenues plunged after the 1989 economic bust, but neither Barry nor his successor, Mayor Sharon Pratt Kelly, cut the budget. Although candidate Kelly promised to fire 6,000 city employees, she added to the payroll after her 1990 election, and hid growing budget deficits with accounting tricks. The Democratic Congress indulged her book-cooking, as it had indulged Barry's lavish spending during the 1980s. (Congress granted the District limited home rule in 1974 but retains veto over every bill signed by the mayor, and the city still depends on the feds for $660 million of its $5 billion budget.)
Barry, who had left office in disgrace after his 1990 drug arrest, was re-elected mayor in 1994. By that time, the District government was on the brink of bankruptcy, its deficit topping $500 million, 10 percent of annual expenditures. Wall Street threatened to shut the District out of the municipal bond market. A public safety crisis loomed as its government nearly ran out of cash to pay cops, firefighters, garbage collectors, and other city employees. In the spring of 1995, the newly elected Republican Congress rescued the city from itself by establishing the financial control board.
President Clinton appointed the five board members, who serve five-year terms. More powerful than similar boards that supervised the economic restructuring of Philadelphia and New York City, the District control board can veto legislation, fire unsatisfactory employees, and mandate budget cuts.

The board has used that power to bring fiscal discipline to the District, paring its budget deficit to $75 million and trimming about 4,000 employees from the payroll. In late December 1996, the board ordered the city to cut another $85 million and sack 1,000 additional workers. The board has also chopped the subsidy to the city university, pressured the council to reduce welfare and unemployment benefits, and ousted several Barry cronies from high-level city jobs.
The board is trying to repair the city government as well as shrink it. It installed a powerful new chief financial officer to clean up the District's notoriously sloppy books. It shifted funds from social welfare to basic services such as garbage collection and road repair. In November 1996, it seized control of the public schools from the school board, fired the superintendent of schools, and hired a retired Army general as school CEO. The control board may even take over the police department. Meanwhile, it has asked the federal government to shoulder responsibility for the District's "state" functions, such as Medicaid, prisons, and road repair, at the cost of hundreds of millions of dollars to American taxpayers. President Clinton opposes this request.

The board's financial fixes have yet to improve the city's (low) quality of life. The District was virtually the only American city whose murder rate rose in 1996. (Its cops close only 30 percent of homicide cases, one of the lowest rates in the nation.) Its public schools remain among the United States' worst: A recent study found that the longer students attend District public schools, the lower their standardized test scores. Poverty, incarceration, and unemployment rates are still high. Judges have placed the mismanaged public-housing authority and foster-care system into receiverships. And the public infrastructure is decaying: For much of last summer, bacterial contamination of the District's water reached potentially unsafe levels.
Nor has the board reversed the District's worst long-term trend: population decline. The 1990 census counted 606,000 residents. Today there are only 543,000, a drop of 63,000. In 1996 alone, the District lost 11,000 residents--nearly 1,000 a month. The exodus is eroding its tax base. Most of these emigrants are working people--that is, taxpayers--and many belong to the black middle class, the backbone of the city's economic and political life.

Of the 63,000 District residents who left between 1990 and 1996, 59,000 were employed, according to a study by MBG Information Services, a business forecasting firm. To put it another way: In 1990, approximately 300,000 nonworking Washingtonians were supported by approximately 300,000 working Washingtonians. In 1996, there are still about 300,000 nonworking Washingtonians but only 244,000 working Washingtonians to support them. The private sector is shrinking, too. A study released this week found that the District lost nearly 1,000 businesses between 1990 and 1995, about 2.5 percent of the total.

The District now faces a chicken-and-egg paradox. To restore its tax base, it must reverse its depopulation. But it can't attract newcomers without spending money--money it doesn't have--on improving schools, public safety, and basic services. Still, some hope for a quick fix. District Delegate Eleanor Holmes Norton and Jack Kemp are pushing a bill that would exempt residents and businesses from federal income taxes. In theory, this exemption would lure businesses back to the city and attract a swarm of rich and middle-class folks seeking tax shelter and willing to fill District coffers. (Kemp says the bill would create a "Hong Kong on the Potomac.") Both Newt Gingrich and Trent Lott have expressed cautious support for the idea, but the legislation has little chance of passing. President Clinton, most Democrats in Congress, and representatives from districts adjoining Washington oppose it.
No matter how bleak its future seems, the District does hold a trump card: It's the nation's capital. Although Congress has scarcely increased its contribution to the city's budget since 1992, it will never let the District decay into a Detroit. The feds may not give the city a tax break, but the president is preparing a package of aid proposals for it, and Gingrich has vowed to help the city as much as he can. A modest amount of federal aid, a balanced budget, a leaner government--the District may not become Paris, but at least it will stop being a national embarrassment.

Links

On the Web, as in most things, the District lags. The control board maintains this modest site, where it posts its recent strategic plan for the city. The Washington, D.C., home page gives an overview of the beleaguered city, while you can read dozens of articles about the District's plight in the Washington Post. (The home-grown Earth Operations Central Washington, D.C., Page and D.C. Darkside overflow with gripes by Washingtonians. Mayor Barry's bio promises that he will "lead a troubled city into an era of rejuvenation." And to learn more about "Hong Kong on the Potomac," read Jodie T. Allen's article in SLATE about the proposed District tax cut.