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Richard Monteilh, President, District of Columbia Chamber of Commerce
Testimony to the Subcommittee on the District of Columbia, Committee on Appropriations, House of Representatives
April 26, 2001

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Public Hearing
"District of Columbia Economic Development Opportunities"
House Appropriations District Subcommittee

Testimony on behalf of
the District of Columbia Chamber of Commerce
by Richard Monteilh, President

April 26, 2001, 9:30 a.m.

Chairman Knollenberg, members of the Committee, good morning: I am Richard Monteilh, President of the District of Columbia Chamber of Commerce, representing more than 1200 District businesses. I am pleased to have the opportunity to testify before you today on the economic development issues of primary concern to our local business community.

The District of Columbia has made great forward strides in the last two years. Eighty-eight percent of the 300 CEOs interviewed to date through the D.C. Business Connections project are "somewhat-to-very" positive about doing business in the District today, and 79% say that the District's business climate is "somewhat-to-much" better than it was five years ago. These attitudes show that the concerted efforts of a determined Mayor, an energized Council, and an attentive federal partner can be successful in making Washington, D.C. the city we want it to be, that local problems are not intractable, that conditions here do respond to smart policy and consistent administration. In that regard, let me take a moment, Mr. Chairman, to say that your -efforts to reach out to a variety of District constituencies and to familiarize yourself with local conditions have been widely noticed and are much appreciated.

The Chamber views the good news on local business attitudes with a sense of urgency. We have in place the conditions required to make rapid progress in D.C. economic development - including a favorable regional economy - and we must seize the day. If we can address problems now in a couple key areas we will do much toward securing the District's long-term economic health. As a former businessperson yourself, Mr. Chairman, the identity of these key areas will come as no surprise to you: we need to talk about workforce, transportation, and taxes. I will also say a few words about opportunities in the areas of improved land use policy and regionalism.

Workforce

The ability to hold on to its jobs base is a critical element in the economic success of any jurisdiction. To this end, the Chamber asks that this Committee keep a close eye on the federal commitment to keep federal agencies in urban areas, and particularly in the District. Because we are still vote-less, the District is especially vulnerable to cherry-picking by surrounding jurisdictions; we ask your help in this matter.
Let me focus this morning, however, on the need to put District residents into jobs. Because of the prohibition imposed by Congress on city taxation of income generated in the District, a job located in the city is of far less revenue value to us than an employed resident. In addition, District business growth is constrained by lack of an adequate workforce: of the firms included in the D.C. Business Connections survey, 68% reported difficulty finding the employees they need.

I'd like to direct the Committee's attention to two opportunities in this area: first, expansion of college opportunities for District residents through the tuition assistance program; and second, efforts to implement an adequate facilities program for public education.

Tuition Assistance Unlike residents of all other states, District citizens don't have access to a state university system. The D.C. College Access Act, passed by Congress with the leadership of Congresswoman Eleanor Holmes Norton, has successfully addressed this inequity. The Chamber works with Washington's Consortium of Universities on this issue; together we support the current effort to expand this program, and to better tailor it to the city's workforce development needs. Specifically, we support

lifting restrictions which limit eligibility to persons who graduated high school in 1998 or after, and to persons applying for assistance within three years of high school graduation. Removing these restrictions incentivizes the many District residents who did not go straight to college from high school to pick up the advanced training they need now, and is in line with the national policy encouraging "life long learning."
Increasing the dollars provided by the program to our state school, the University of the District of Columbia. The program currently provides no assistance to students wishing to attend UDC, and in fact makes it cheaper for our residents to attend community colleges in Maryland and Virginia than to stay in the city. Because of the importance of building an adequate city university for the District, this inequity should be addressed by increasing the payment made through the program - currently $1.5 million - to UDC.
Ensuring full funding of the program in the 2002 budget. We ask that the Committee make special efforts to ensure that this program is fully funded in the 2002 budget, at $17 million.

School facilities Our public school system is not preparing our kids for the workforce. This is reflected in our 40 percent adult functional illiteracy rate. A central contributing factor in this failure is the physical condition of the schools. Many of our public school students spend their days in dilapidated and prison-like environments - the kind of conditions the Brown vs. The Board of Education desegregation suits attempted to address nearly 50 years ago. Sadly, the state of our school buildings must be taken to be an accurate reflection of the priority assigned to public education by the leadership of this city - Congress included. It is time that we change those conditions.

On this issue, the Chamber asks that this Committee engage itself in three areas: first, restructuring the way the District implements its schools construction and rehabilitation program; second, addressing facilities financing needs; and third, attention-to the special situation of the city's public charter schools.

School Construction & Rehabilitation Management of school construction and rehabilitation is an old and deep problem in the District, as reflected yet again in Monday's newspapers. Responding to a crisis situation, the District has for some years used the U.S. Army Corps of Engineers and large corporations to perform facilities maintenance tasks. We are not getting the quick, high-quality, reasonably priced work the system needs. Nor are we spending the local tax dollars which pay for this work with local companies. District school construction work should be done by District companies who not only would keep these dollars circulating within the local economy, but also would act with an enhanced sense of accountability to the local community in completing the job. As the Corps of Engineers phases out its District activities, the schools facilities procedures must be restructured. Use of program managers and the creation of a school development authority are options which should be reviewed. Happily, there are people with expertise in these areas both within the school system and on the school board itself who can provide leadership on this issue. We ask that the Committee follow this process closely.

Financing City schools were in bad shape when the federal government handed them over to our home rule government in 1975. They are in bad shape today. The job of putting them back into shape is a major public works project on the order of $2 billion over the next ten to 20 years. Such a project requires federal participation. In this regard, the Chamber asks that this Committee support the 2 percent non-resident tax credit proposed by Congresswoman Norton. Proceeds generated by this credit could be invested in part in school infrastructure. Improved schools mean more new residents attracted to the District which in turn increases District financial self-sufficiency.

Public Charter Schools Congress enabled District charter schools in the D.C. School Reform Act of 1996. It is important that Congress stay involved to see that these schools are adequately resourced. A top issue currently faced by our charters is that of finding and financing appropriate school sites. The District currently has 33 charter schools, operating on 38 campuses. Most are seeking new - more adequate or larger - quarters. The Chamber works with the D.C. Public Charter School Resource Center on this issue, and together with the Center we ask the-Committee first, to enhance charters' financing options by increasing the $5 million currently available to the Washington, D.C. pilot credit enhancement program established under the Federal Facilities Demonstration Program. Second, we ask that the Committee support District efforts to make surplus school facilities available for charter use. Although the federal legislation give charter schools preference in assignment of surplus school sites, at present many of these sites are used by local government for police, fire, and mental health functions or as facilities for homeless people under contract with HUD. Resources should be sought to permit District government to make these facilities available for school use. In addition, a review should be made to determine whether low-occupancy public schools can be consolidated to make additional sites available for charter use.

Transportation

Our Metro system is an asset to the region as well as to the city and must be maintained and expanded. Responding to gridlocked highways by building more highways which rapidly become gridlocked themselves doesn't work. We've known that since Robert Moses was bulldozing neighborhoods for highways in New York City in 1950, and we are proving it all over again today in jammed-up Northern Virginia and suburban Maryland. The waste in workers' time, in pollution cost, and in land eaten up by suburban sprawl is enormous.
The intelligent trends which are bringing workers and residents back to the District must be supported by regional transportation policies. To that end, the Chamber asks that this Committee weigh in on the issues of planning for Metro system and expansion, and of adequately funding maintenance of the existing system.

Planning for Metro Expansion The region is in the early phases of planning for expansion of the Metrorail system beyond its original 103 miles. Any funding of suburban connectors must be at least matched by funding to support additional circulation among communities within the District. This can be accomplished by construction of Metrorail connectors, by creation of light rail links, or by use of buses as in the downtown circulator system proposed by the D.C. Downtown Business Improvement District.

Funding should also be directed to supporting additional reverse commute routes. Metro bus Route 5A, running from L'Enfant Plaza out the Dulles corridor was kicked-off under the leadership of Councilmember at-Large David Catania in December. Predictions were that the route would be serving 200-250 persons daily within six months of the start of operations. Today, at the five month mark, it is serving 550-600 District workers a day. At present, this operation is entirely District-funded. Clearly, it is a benefit both to District workers and to the Dulles-area enterprises which seek to employ them.

Funding Metro Maintenance Over the next 25 years, $9.8 billion will be required to maintain the region's existing Metro system. Of this amount, $1.2 billion has yet to be identified. In addition, Metro faces $2.5 billion in costs for currently-planned access and capacity increases (such as additional parking lots and escalators). None of this amount has yet been identified, leaving a total of $3.7 billion needed over the next 25 years to adequately maintain this key regional asset. Federal participation is important: the 2001 Metro maintenance bill was $200 million; annual maintenance costs shared by the three localities are increasing at a rate of $25 million per year. The Chamber asks that this Committee pay special attention to funding of the region's public transit systems. We suggest that potential funding from the budgets of other agencies, such as the Department of Interior, be examined.

Taxation

The District operates under a structural deficit. The city's federal partner has chosen to constrain city revenue sources -- prohibiting tax on significant percentages of local real property and locally-generated income - to such an extent that the city cannot be financially self-sustaining. In the past, Congress has been disinclined to provide additional funds to the District due to lack of confidence in local management capabilities. Effective leadership over the past two years by the Williams Administration and D.C. Council have changed this picture. It is now time for our federal partner to work with District government to establish a reasoned and equitable financial framework for the District. The Nation's Capital deserves no less.

The Chamber asks this Committee to support tax and incentive proposals which will be introduced this year by Congresswoman Norton, including

The District of Columbia Non-Resident Tax Credit Act Under the Act, the federal government would credit 2 percent of the income tax paid by District commuters to the District. The Chamber joins with the Federal City Council in supporting use of this fund to address infrastructure costs - many of them imposed on the city by its commuters such as roads and other public facilities maintenance. Such a fund could also be used to offset adjustment of upper-bracket personal income tax rates. The present disparity between District and suburban rates is high enough to prevent many of the professional people who would otherwise naturally gravitate to the city from coming here. Their tax dollars could help ease the burden on our other residents.

The District of Columbia Homebuyer Credit Act The $5,000 federal tax credit available to first-time buyers of District homes is a clear success. Bringing residents back to the District is critical to establishing long-term financial self-sufficiency for the city, and to stabilizing the neighborhoods where many Chamber members are based. The Chamber asks that the Committee support Congresswoman Norton's effort to make this benefit permanent. It is currently due to expire in 2003.

The District of Columbia Citywide Tax Benefit Act Enterprise Zone benefits -including wage credits, favorable depreciation schedules, and zero capital gains - should be made available citywide. The current census-tract-by-census-tract treatment creates anomalies: for example, business in otherwise affluent communities with large student populations may qualify, while those in struggling moderate income neighborhoods do not. Such an extension of benefits would be an important help to current efforts by District government and by the D.C. Chamber at neighborhood commercial revitalization. We must ensure that the current prosperity penetrates into District neighborhoods, because that is where city prosperity is sustained.

Sales Tax There are other opportunities for this Committee to regularize the financial relationship of federal and local government partners in the District. The Chamber urges you to clarify that all sales to the public, including those made on federal property are subject to District sales tax. There is no justification for permitting the purchase of a CD from the Smithsonian to be made tax-free, while the purchase of the same item from a Chamber of Commerce member is taxed.

Budget Process Finally, the Chamber joins the Federal City Council in asking this Committee to regularize the budget process under which the District's federal and local government partners operate by changing from federal appropriation of the District budget to local appropriation, with Congressional changes permitted only by the same procedures available for other District legislation. The current process may be suitable for federal agencies but is inappropriate in its application to a city government. As sketched by the Brookings Institution's Greater Washington Research Center, the benefits of such a process change include

Appropriations could be enacted before the start of the fiscal year and in a form used by most state and local governments;
More realistic revenue and expenditure budget estimates could be made because the budget could be prepared and approved closer to the start of the fiscal year;
Timely amendments in the form of supplementals or transfers of appropriations could be made during the year to reflect changed conditions; and
The District could enact and enforce effective anti-deficiency provisions to prevent agency overspending (there is currently no effective enforcement under the federal act).

Land Use

In its physical structure, Washington D.C. is a beautiful, 19th century city. The challenge we face is to rework these `good bones' to meet a 21" century city's needs. The fact that we are land-locked makes the situation more urgent. The majority of firms participating in the D.C. Business Connections survey wish to expand their physical plant "in the near future." Small businesses cite the availability of affordable space as a key determinant in their decision to stay or leave the District. Our seven District-based private colleges and universities - a critical asset for the District in 2 1 " century knowledge-based and tech-rich economic competition - struggle to win approval for the most modest growth.

The District's limited land resources must be used wisely. In this environment, management of federally-controlled land in the District can yield big benefits to the city, as shown by recent successes with the New York Avenue Metro Station and the siting of the new ATF headquarters, by the boom triggered by the Navy's growing presence on M Street, S.E., and by the federal / local partnership on Southeast Federal Center.

Federal land in the District not be left to lie fallow. In this regard, a major challenge is presented by the 300-acre campus of St. Elizabeth's in southeast. If Committee members have not had the opportunity to visit this remarkable place, the Chamber would be delighted to arrange a tour for you. The Chamber notes the priority given to this parcel by the National Capital Revitalization Corporation, and asks that this Committee urge full federal cooperation in putting redevelopment of this asset on a fast track.

In this regard a GAO report on the west campus issued last week is troubling, in that it outlines a lengthy evaluation and planning process which would require years to complete. The report contains no vision of St. E's potential value to the District and perhaps for this reason lacks necessary urgency. Clearly the impact of St. E's redevelopment on East of the River communities will be significant. For this reason, and in order to preserve the full value and beauty of this parcel, it is important that it be developed under a comprehensive plan, and not piecemeal - however worthy the individual proposed uses may be. But comprehensive planning can be completed without absorbing decades. In January of this year, HHS declared the St. Elizabeth's west campus, which is federally owned, to be "excess property." The next step toward development is a government declaration that the property is "surplus."

The federal and local District government partners have begun to build a record of success in efforts at the Southeast Federal Center, which includes effective engagement of the private sector. The Chamber hopes that this Committee will urge extension of these efforts to St. Elizabeth's, and to other federally-controlled land in the city.

Regionalism

Let me close by suggesting that this Committee is well positioned to help metropolitan Washington, D.C. take advantage Among these are included

Adequate support and planning to allow us to fully exploit the development potential of our region's three airports;
Support for the efforts of the 2012 Coalition to bring the 2012 Olympics and their significant economic development benefits to the region. 2012 planning is a natural vehicle for capitalizing on and coordinating metropolitan area assets; and
Investigation of and support for inter jurisdictional partnerships which can take advantage of synergies between the District and neighboring counties. A case in point is an effort currently under development by the Chamber to bring a computer remanufacturing enterprise to the area, locating the business in readily available industrially zoned land in Prince George's County, and employing workers from the District's under-utilized labor pool of regional economic development opportunities.