With controversies swirling around the DC Public Schools system, including Chancellor Antwan Wilson's daughter being able to bypass the lottery system to transfer schools, what is next for education in the District?
Last year’s passage of an Internet gambling law in DC hit headlines as “the first of its kind in America.” Now, just months before gaming was to start, the contentious law was repealed. But both supporters & detractors know it isn’t going away for good. We ask what comes next? And how much revenue might be raised by when?
- Jack Evans D.C. Council member (D-Ward 2); Chairman of the Committee on Finance and Revenue
MR. KOJO NNAMDIFrom WAMU 88.5 at American University in Washington welcome to "The Kojo Nnamdi Show," connecting your neighborhood with the world. Later in the broadcast, we'll be looking at the controversial role credit ratings agencies play in the health of the economy and in our investments, but first, yesterday the D.C. Council struck down the city's internet gambling law.
MR. KOJO NNAMDIIt was the first of its kind in the nation, but the way it was passed ultimately doomed its success. D.C. council members cried foul after internet gambling was quietly added to the city's lottery contract after it had passed. Supporters said the process was transparent. Some estimates show that the repeal will cost the city more than $13 million in revenue over the next three years, but with a burgeoning surplus in the city's coffers, how badly would gambling revenue be missed?
MR. KOJO NNAMDIJoining us by telephone is Jack Evans. He's a member of the D.C. Council. He's a Democrat from Ward 2. He chairs the Committee on Finance and Revenue. Council member Evans, thank you for joining us.
COUNCIL MEMBER JACK EVANSKojo, thanks for having me here. How come I'm not in the studio where I can hang around all day?
NNAMDII don't, well, that's why you're not in the studio because we don't want you hanging around all day. Jack, now that internet gambling has been repealed in the District, do you see the Council starting the debate from scratch as some of your colleagues have said they would like to do?
EVANSI could see that happening again. Council member Michael Brown was a big proponent of this and I think he's indicated he may re-introduce the legislation. And I would welcome that and we can have a chance to take another look at it and see if it's something we want to do here.
NNAMDIA big criticism of the online gambling law was that it was improperly slipped past the public without proper vetting. You said, according to the Washington Post today, that you'd like to get the best deal for the city. How do you see restarting the process with transparency in mind?
EVANSWell, what happened before, just a quick capsul-ization...
EVANS...we re-bid the underlying lottery contract and it came before the Council and was passed by the Council. There was a provision in that contract that was blank that alluded to having other options so the Council never passed internet gambling. And then, in December of 2010, the provision that legalized internet gambling in the city, again, was inserted in a budget amendment and there was no chance for hearings or public input, which is why we have gone back and started the process over again.
EVANSSo what I would envision is someone introducing a new piece of legislation coming to the Council, my committee having hearings on it and then deciding whether we want to move forward and then having a competitive bid process to run the internet gambling, not simply giving it to the current lottery contract person. And I think, in that regard, the city will get a better deal in the sense we will get more money if we choose to go down that path.
NNAMDIAllow me to invite our listeners to join the conversation by calling 800-433-8850. Do you agree with the D.C. Council's repeal of internet gambling? How should online gambling be administered? 800-433-8850 or send email to firstname.lastname@example.org a tweet at kojoshow or go to our website, kojoshow.org, and join the conversation there. Jack Evans, what are you hearing from your constituents on this issue?
EVANSMy constituents and we had two or three ANCs with unanimous resolutions against going forward with the internet gambling under the circumstances by which it was put in place. And so you have to differentiate, most people, I don't think, have an opinion one way or another whether they want it. Some actually favor it, others, who are opposed to gambling in general, are against it.
EVANSBut there would seem to be a widespread, and I say this, widespread opposition to putting it in place without public hearings and without going through the proper process. I personally believe that internet gambling is going to happen nationwide and so we in the District certainly want to be a part of that if it does happen. And that's why going through the proper process makes sense.
NNAMDIHelp us to understand the technical difference between it happening nationwide and it happening here first. Council member Michael Brown has said there's an urgency to get gambling passed before it is federalized, but even if the gambling law was revisited in a more transparent process in the District, would the Congress, especially if it is in Republican control, ultimately squash it anyway?
EVANSWell, you have to give them, they allowed it to go through one time when it was part of our Budget Support Act and they've focused on the fact that internet gambling was in the Budget Support Act and didn't declare it illegal. And in Congress now, there's a bill in Congress to make internet gambling legal. I believe it is actually now illegal nationwide and so what my contention is, though, internet gambling the way it is currently set up, you have to be in a certain jurisdiction in order to do it.
EVANSSo for instance, if it was legal in the District, you have to be in the District, you can't do it from other jurisdictions. I don't know that the revenue that we would gain would be any more or any less from being first in the nation, maybe a little more, but it's unlikely that would continue. So I am not focused as much on the revenue side as on the process side to make sure that if we want to do this, everyone's voice is heard.
NNAMDIWe're talking with Jack Evans. He's a member of the D.C. Council, a Democrat from Ward 2 who chairs the Committee on Finance and Revenue. We're talking about internet gambling, ultimately about credit ratings and about Donald Trump coming to town.
NNAMDIIf you'd like to join the conversation, call us at 800-433-8850. What are your thoughts on Donald Trump's entry into D.C. historic skyline? By some estimates, the repeal of online gambling will cost the city over $13 million in revenue over the next three years and would have generated more than $100 million for the city over 15 years. But D.C.'s finances are looking a lot brighter lately. The city now carries a $240 million surplus and its savings account carries more than a billion dollars. Will this repeal, in your view, hurt the District's bottom line or are we doing okay without it?
EVANSIt actually won't hurt the District's bottom line. The number is actually $13 million over the next five years and so it was $7,500, just a minimal amount this year and then about $2 million next year and $4 and $6 million after that. Any amount of money is important, but the amount that we're talking about from internet gambling in the scheme of a $10 billion budget was actually quite small.
EVANSSo by not going forward at this time, it really doesn't hurt our finances at all because as you rightly pointed out, the city just recognized a $240 million surplus for our fiscal year that ended on September 30, 2011. Adding to our already accumulated surplus of $700 million, we now have $1.1 billion in the bank, which is a really good amount for our city because if you remember, Kojo, for the last couple of years, we had been drawing down our savings...
EVANS...in order to finance our government and we have now reversed that trend. So our finances are good. They remain strong. Always fragile, but they remain strong. And with the Trump announcement, I'm very excited about that. It has fueled the Post Office Pavilion and, you know, having been here a long time, that building is just a dead building.
EVANSWhat the federal government tried, it never worked, and what the Trump organization is going to do, according to their press release, and I had a conversation with them this morning, is make it the finest hotel in their chain, which would be a five-star, luxury hotel right anchored on Pennsylvania Avenue.
EVANSFirst of all, we get no tax dollars from that building today, which will be completely changed and secondly, it will bring a lot of life to that part of Pennsylvania Avenue that is struggling right now.
EVANSIt's a very exciting opportunity.
NNAMDI...how about the kind of life it will build and what will the life look like? The Donald is known for his flamboyance, sometimes over-the-top architecture. How do you work to mesh Trump's vision with the more, well, conservative style that this city is known for?
EVANSWell, keep in mind, they have to keep the outside structure of that building in place, it is historically designated.
EVANSSo the building will always look like the building. What I envision, though, is the inside will be quite a luxury hotel up along the lines of the Plaza up in New York, which he used to own, and some of the other Trump buildings that he has. And then, my understanding is, they're going to put some really high-end retail in the building as well so I think you're just going to see a real showplace. And keep in mind now, that if you get that one there and you have The Willard across the street and down a block, you're really starting to get a concentration of hotels in this area.
EVANSThe Marriott, J.W. is over here as well, that will really, again, change the dynamic of Pennsylvania Avenue, more toward what John Kennedy wanted was a living avenue and not a dead avenue and that is what's going to...
NNAMDIHow will that affect the financial dynamic? What would this property mean, do you think, for city coffers?
EVANSWell, depending on how much it's valued at, but we could be looking at getting another $5-$10 million in property taxes a year that we're not now getting from that property, when it's completed and its assessed value comes out.
NNAMDIGot to go to the telephones. Here is Charles in Washington, D.C. Charles, you are on the air. Go ahead, please.
CHARLESAh, good morning, or good afternoon, Kojo, thanks for taking my call. Yeah, I wanted to call and talk briefly with Mr. Evans about the surplus he just mentioned. The city just announced a $240 million surplus and I think over a billion dollars now that's added, too, and yet, in spite of that, the city raised income and sales taxes last fall. My letter to the editor of The Post last week made mention of the fact that my industry, which is the investigative and security services industry, has just had a 6 percent sales tax imposed on it.
CHARLESThe city said that they did it to bring us in accordance with Maryland, which also had a sales tax, but what they did is that Virginia has no such sales tax so it's placing our industry at a competitive disadvantage with (word?) from Virginia. I mean, I had to point out, Mr. Evans voted against the tax increase, but he was quoted as saying in The Post that we never should have raised taxes. So my question is, is the city going to repeal the new taxes?
NNAMDIYou just gave Jack Evans what's known in the business as, well, a softball. He loves this.
EVANSNo, and I thank the caller for raising this issue because it is critically important. And as he mentioned, I did vote against all these tax increases because I think it does make us very non-competitive with the surrounding jurisdictions. Actually, on the sales tax, it was not raised so that we could be the same as Maryland. It was raised for the money and was due to sunset this year back to the 5.75 percent and, again, the administration did not do the sunset', and the Council agreed not to do it, something that I oppose.
EVANSBecause Virginia, as you rightly point out, is at 4.5 percent and it's very hard to compete. If you're going to buy a big-ticket item, you just wouldn't buy it in the District, you'd go over to Virginia to buy it and save all that money. And we have to be cognizant of that. I am going to, yes, myself and the chairman are looking at sun-setting that tax increase, taking our income tax back down to the 8.5 percent.
EVANSThe revenue estimate, not the 240, but the revenue estimate for the first quarter of the fiscal year we're currently in, was an additional $42 million, which could easily offset the $20 million that we got from the income tax increase. And in addition, I just introduced a bill yesterday to take our municipal bond structure back to the way it was. Prior to last year, we didn't tax out-of-State municipal bonds that were held by our residents. By doing so, we have caused enormous confusion in that market and so I'm looking to reverse a lot of the things we did last year.
NNAMDICharles, thank you very much for your call.
NNAMDIAnd later in the broadcast, we'll be talking about the nation or the credit ratings agencies and the effect that they have on countries and the like. The city's good financial news prompted a visit to New York last week by you, Mayor Vincent Gray and some of your colleagues. You met with officials at one of those agencies, well, at two, Standard and Poor's. You met at all three, Standard and Poor's, Fitch and Moody's...
NNAMDI...to try to convince them to upgrade the city's credit ratings. How did that go?
EVANSI thought it went very well. The city clearly had a great story to tell this year. Again, our $240 million surplus, balanced budget, and if you look around our city, what we have that no other city in America has, is widespread development. We have 30 projects worth over $2 billion in the ground as we speak. When you go up 7th Street, you know, city center, the Convention Center Hotels, 0 Street Market, Kelsey Gardens, United Negro College Fund, just a whole host of things. So it's a great story to tell.
EVANSAnd what I see with the agencies, we met with all three of them. Right now, on our Income Tax Bonds, I don't want to glaze everybody over on this, but we are AAA-rated, which is the highest rating you can get. We're trying to get our GO Bonds upgraded with a AA in Moody's and Fitch and a single A in Standard and Poor's and we made the case.
EVANSNow the problem we run into, obviously, is the nation as a whole is not doing as well as we are. You saw the downgrade or the negative watch that was put on the U.S. Treasury.
NNAMDIWe'll be talking about that in the...
EVANSYeah, and so it makes it a little bit harder for them to upgrade us while the rest of the country isn't doing quite as good.
NNAMDIBut how would an upgrade affect D.C. taxpayers?
EVANSWhat it does is it enables the city to borrow money at a lower interest rate. That's the whole purpose of a bond rating. The city borrows -- this year we borrowed $900 million in cash flow, which we pay back at the end of the year. And if we have an upgrade we can borrow that money at a smaller interest rate. And leaves more money for the district to spend on its residents.
EVANSAnd in addition by building up our fund balance above $1.1 billion we can use our own money, borrow from ourselves so to speak, without having to go into the private -- into the public markets to borrow. So all of it is aimed at saving money for the district so that we can then spend it on our schools, human services and our public safety.
NNAMDIWhen can we expect to hear a verdict from the agencies?
EVANSThey generally went up in February. By April 1 we should have an idea of whether they're going to upgrade us or not.
NNAMDIJack Evans, thank you for joining us.
EVANSWell, thank you. You know, if I was in the studio, it'd be harder to get rid of me.
NNAMDIJack Evans who keeps asking to come into the studio and never leaving, which is why we have him on the phone. He's a member of the D.C. Council. He's a Democrat from Ward 2 who chairs the Committee on Finance and Revenue. Once again, Jack, thank you for joining us. We're going to take a short break. When we come back, we'll be looking at the role that credit ratings agencies play in the health of the economy and in our investments. I'm Kojo Nnamdi.
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