I 108th CONGRESS 2d Session H. R. 4269 IN THE HOUSE OF REPRESENTATIVES May 4, 2004 Ms. Norton (for herself, Mr. Tom Davis of Virginia, Mr. Wolf, Mr. Hoyer, Mr. Moran of Virginia, Mr. Wynn, Mr. Cummings, and Mr. Van Hollen) introduced the following bill; which was referred to the Committee on Government Reform A BILL To establish an annual Federal infrastructure support contribution for the District of Columbia, and for other purposes.

1.

Short title

This Act may be cited as the &short-title1;.

2.

Findings; Purpose

(a)

Findings

Congress finds as follows: (1)A General Accounting Office (GAO) report of May 2003 found that the District of Columbia has a substantial structural imbalance, ranging from $470,000,000 to $1,100,000,000 annually, and that this imbalance is beyond the direct control of local officials because it is caused by mandates, legislation, and other requirements imposed by the Federal Government. (2)The GAO report was preceded by 2 reports by distinguished groups who also concluded that the District had a structural imbalance: A 2002 McKenzie study commissioned by the Federal City Council (an organization of regional and local business leaders), and a 2002 study by the Brookings Institute, led by Alice Rivlin, the former director of the Congressional Budget Office and former chair of the District of Columbia Financial Responsibility and Management Assistance Authority. (3)The components of the structural deficit are all Federal in origin and consist of the following: Locally provided services to the Federal Government; a Federal statute which exempts from taxation 66 percent of the income earned in the District; the exemption from taxation of 42 percent of the real property owned by the Federal Government; and the requirement to provide State services, such as special education and mental health, although the District is not a State. (4)The District’s tax burden is among the highest in the Nation because of the Federal requirements documented in the 2003 GAO report. However, the funding provided by these taxes is still insufficient to meet the obligations of the District, especially the long-term obligations to carry out critical capital projects to maintain and improve the District’s infrastructure, projects that are not only typically funded by a State but that the District must carry out because of its mandate to support the infrastructure needs of the Federal Government and the entire Washington region. As a result, the District must obtain the funds needed to meet these obligations through a continuous series of borrowings, incurring more and more debt service payments each year, and causing the District’s per capita rate of general obligation debt to be the highest in the Nation. (5)The GAO concluded that greater management efficiency by the District government is necessary, but that management improvement will not offset the underlying structural imbalance because it is caused by factors beyond the direct control of District officials. (6)The GAO recommended against the only 2 alternatives available to the District. Raising taxes would worsen D.C.’s competitive advantage in attracting new businesses and residents and cutting services for residents and visitors would have undesirable consequences for the District’s economy. (7)According to the GAO, the options are to change Federal procedures to expand the District’s tax base or provide additional financial support and a greater role by the Federal Government to help the District maintain fiscal balance. (8)The District of Columbia, through prudent budgeting and improved management, has had a balanced budget with surpluses for 7 years; however, the District’s Chief Financial Officer (whose position was created by a Federal statute) has found that severe fiscal problems are inevitable as the District works to close spending pressures and find remedies to its inherent structural imbalance. (9)Maintaining financial stability in the District, just as in other cities, requires a stable, predictable source of revenue that increases modestly but regularly over time. (b)

Purpose

It is the purpose of this Act to provide an efficient mechanism and formula for the transfer of revenue from the Federal Government to the District government, and to dedicate this revenue for the sole purpose of rectifying an annual structural imbalance which is due to— (1)Federal requirements and limitations on the ability of the District of Columbia to generate revenue; (2)the use of District of Columbia real property by the Federal Government for Federal facilities and other Federal purposes; and (3)the District's status as a Federal city which is not part of a State but incurs many of the same expenses as a State that would otherwise be responsible for these expenses.