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.
âWe can nickel and dime this thing,â the longtime finance committee chair said in a John A. Wilson Building conference room. âBack in the â90sâŠwe 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!â
That prompted a round of belly laughs. The âfifth quarterâ was one early-â90s budget gambit that indeed seems risible all these years later: The idea back in 1993 was that the city would book an extra three monthsâ 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 storyâs bogeymanâMarion Barryâwas in the room. He could laugh because it was Sharon Prattâs gimmick, but it was Barry-era bloat that made it necessary. And this coming from the guy who submitted the âmiracle budgetââthe 1995 plan that basically dared Congress to take over the city, a dare it gladly took a month later.
âIt didnât work, right?â Barry joked. âIt didnât work?â
More belly laughs.
One guy in the room didnât 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 Prattâs 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 â90s recession hit the Districtâs bottom line. And a glance at Grayâs historyâas a department head, as an advocate for the mentally retarded, and as head of Covenant House Washington, the nonprofit serving homeless youthâwould 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. âFor me, itâs important that we demonstrate that weâre on top of this, that we take the steps necessary,â Gray tells LL.
Those steps come right off Evansâs dance card: forgo ârainy dayâ 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 âcrown jewelâ taxesâsales, income, and propertyâthat account for 80 percent of city revenue.
Gray, with Evans as his wingman, has emerged as the Wilson Buildingâs most unlikely fiscal hardass. With a budget crisis at hand, heâs aiming to do no less than banish the ghosts of the congressionally imposed control board from the city governmentâa specter that has haunted city officials for 15 years.
âI liken it to people who lived through the [Great] Depression,â says Gray. âThey have a very anxious attitude toward money.â
One thing that seems to have heightened Grayâs personal anxiety is his trip earlier this month to visit with Wall Street bond raters. The three rating housesâStandard & Poorâs, Moodyâs, and Fitchâhave 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, donât raise taxes, donât 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. Itâs reasonable enough, on one level: Virtually no other jurisdiction has such an onerous requirementâwith 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 isnât 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, âIt was not responded to well at all.â By the time the officials made it to Moodyâs, he says, the idea was âoff the table.â (Albert declined to discuss the meetings: âI donât kiss and tell.â)
Itâs a story, too, that plays into Grayâs pet political narrative: the chairman as a mature, sober, consensus-seeking Washington lifer whoâs 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 movesâboth 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: âWeâre going to get to a point where weâll have to make decisions that are almost intolerable. Now Iâll use the school system as an example: If you cut $10 million out of the school system, youâre going to catch hell. You might as well cut 50. You might as well cut 100. Because youâre 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 weâre going to make some big-chunk cuts.â
Easy for Evans to say. He not only represents a fiscally conservative ward, he doesnât have to stand for re-election until 2012. Cutting $100 million from the schools budget will be a harder thing for colleagues like Ward 1âs Jim Graham, Ward 5âs Harry Thomas Jr., and Ward 6âs 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 thereâs the resident bleeding hearts of the council. Barry, of course, is oneâhappy to chop Fentyâs pet summer jobs program to prop up the âlast, least, and lost.â Thereâs 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. (âHeâs the white Marion Barry,â says top finance committee staffer Jeff Coudriet.)
Then thereâs freshman-at-large member Michael Brown, a finance committee member who advocates dipping into the cityâs cash reserve and who calls himself a âhuge advocate for revenue enhancementâ (read: tax hikes).
Brown says itâs all about context: âEverybodyâs raising taxes!â he says. âYou have to!â
And Brown thinks thereâs no sense bowing down to the gods of high finance when, according to city hall source, a better bond rating would have âno immediate impact.â Brown says he called his own âfriends on Wall Streetâ and got a second opinion. According to those unnamed sources, he says, jurisdictions that dipped into contingency funds didnât see any slide in their bond ratings.
He draws a comparison between the Big Three raters and Congressâjust âmore people imposing their will on us,â he says.
During the â90s, 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. âTheyâre scared and I donât think they should be,â he says of his council colleagues. âItâs a different kind of Capitol Hill; itâs a different kind of White House,â Brown says. âI donât buy into that kind of fear-mongering.â
Where the Districtâs fiscal imbalances âstuck out like a sore thumbâ during the booming â90s, Brown says, these days thereâs 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: âOne unbalanced budget, and the control board could be back.â
The Other Mayor Speaks
A heretofore mystery man in the fishy firetruck affair has spoken: Vladimir CĂ©spedes, mayor of the Dominican Republic city of SosĂșa, told reporters about the caper that has generated a great deal of political heat in this town.
Turns out itâs not just this town. CĂ©spedes, 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 returnânot 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.
âNot only they but I want the money back,â CĂ©spedes 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 SosĂșa. Skinner, CĂ©spedes explained, has presented himself as being very close to Fenty.
Skinner and David Jannarone, the mayoral director of development, CĂ©spedes says, visited him in SosĂșa âthree or four times.â Heâd 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. CĂ©spedes said he felt âvery badâ when he heard that the deal blew up. âWe need that equipment to save lives in our poor country,â he said.
What CĂ©spedes explains jibes with testimony from Ronald Moten of Peaceoholics, the group serving as a middle man between D.C. and SosĂșa. 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 trucksâ transport. But it was not clear from Motenâs 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, CĂ©spedes 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, CĂ©spedes and Walker visited the cityâs 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 CĂ©spedes and his translator and counsel, Jorge Espaillat, going so far as working with Eleanor Holmes Nortonâs 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.
CĂ©spedes wasnât 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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