The District’s economy is humming along, but not the way it used to.
New D.C. Chief Financial Officer Jeffrey DeWitt released his first revenue estimate Wednesday, projecting an additional $139.2 million for fiscal year 2015, $132.7 million for 2016, and $144.9 million for 2017.
Real property tax revenues are largely behind the boom — the result of a “significant rebound in property values.” Sales taxes also were revised up as were individual income taxes, albeit only slightly. Business income, deed taxes and non-tax revenues (also known as automated traffic enforcement) trended down in DeWitt’s projections.
The February estimate is probably the year’s most important, as it comes just before the mayor is scheduled to release his proposed budget plan for the next fiscal year.
Yet the most notable item in DeWitt’s estimate letter was not related to numbers, but rather, where the District’s economy is headed. This is not your father’s D.C., dominated by suburban residents rolling in for work in the morning and out for home in the evening. It’s becoming quite the opposite.
The OCFO maintains three advisory groups of regional economists and industry experts that meet at least once a year, one on business, one on real estate and the other on revenue. The highlights of the most recent advisory group discussions, DeWitt noted, include:
Changes occurring in the District’s economy favor the city becoming “more of a place to live than a place to work with D.C. residents gaining jobs in the District as well as in the suburbs.” This is important, as the District cannot tax non-resident income. The more people who live in the city and work elsewhere, the more tax revenue D.C. generates.
The population, at just about 650,000, will continue to rise “with natural increase (more births) now contributing to this phenomenon.” It’s not just new millenial move-ins anymore; it’s growing families.
The federal sector drives the District’s economy, but it “will no longer be a source of support for significant growth.” D.C. has lost roughly 6,000 federal employees in the last year.
Future success “depends not on federal government spending but on competing successfully in regional, national and even global markets.”
Overall demand for office space will remain fairly weak due to federal lease cutbacks and tenants seeking fewer square feet for employee. Demand outside downtown Washington is “particularly uncertain,” which is not what NoMa or Capitol Riverfront want to hear.
Of course, there’s a great deal of uncertainty — how the economy will be affected “in an unfolding era of federal austerity,” how a potential slowdown in the jobs market may affect population growth, how successful major development initiatives such as St. Elizabeths east and CityCenterDC will be.
Still, economic trends favor the District, according to its new CFO.