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Strategy for Economic Growth in the District of Columbia
Marion Barry, Jr.
April 6, 1998




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Introduction Homeownership Strategy Employment Strategy


Recent revenue forecasts indicate that the District's financial outlook is greater than it has been in quite some time. The implementation of management reforms will improve selective aspects of the District's infrastructure and thereby, improve resident's quality of life. The Tax Revision Commission has recommended several proposals for tax restructuring to attract and retain businesses.

It is important to note that the above initiatives will not either in singularly or in tandem sustain an acceptable quality of life for the residents of this community and cause the rebuilding of a healthy revitalized Washington, D.C. It is only through an aggressive, comprehensive approach to economic growth will we be able to reach this goal.

A brief enumeration of several factors relative to the District's economy gives a rather dubious long-term outlook.

  • More than 50 % of total District revenues is derived from property, sales, and income taxes. The average city receives only 15% of its revenue from these sources.
  • Approximately 23% of the district tax revenues is earmarked for specific expenditures and/or programs.
  • The population of the District has declined has declined from 683,000 in 1980 to an estimated 543,000 in 1996.
  • The current unemployment rate is estimated at 7.8%, more than twice the unemployment rate in surrounding jurisdictions.
  • The suburbs gained 225,000 new jobs since 1992, while the District lost approximately 49,000 jobs over the same period – most of which were in the public sector.
  • The homeownership rate in the district is currently 42.5 %, well below the national rate of 65.7% and the Washington metropolitan area rate of 64.6%.

In a study conducted by McKinsey & Company, entitled, Assessing the District of Columbia's Financial Future, it was concluded that, "The District feels the effect of population and taxpayer loss immediately and without the potential of offsetting funds from other government entities (i.e. state)." Given the economic trends and population decrease, it is reasonable to postulate that the population, unemployment and out-migration will continue in a negative fashion in the long-term, unless something is done to stimulate economic growth in our communities. This can only be accomplished by strengthening the District's tax base.

The popular notion today is that if we reduce certain taxes (personal and business), then the District's economy will be revitalized. However, the D.C. Tax Revision Commission concluded that:

  • Cutting taxes is not a panacea for improving economic growth and development.
  • Population does not appear to be influenced by sales, property, or personal income taxes paid by individuals.
  • Tax incentives will move capital into zones, but there is little evidence that the welfare of zone residents is improved.
  • Effort to reduce the concentration of poverty in the District, such as through programs that increase the employment of welfare recipients, might be effective in increasing the overall population of the District.

The policy issue is whether we lower taxes on business in the hope of attracting employers and jobs, or to build a stronger tax base than can finance better services for residents and businesses. In a January study, McKinsey & Company consulting firm concluded:

It is a much better deal for the District to attract 100 new residents who are in the workforce than to add 100 new workers. The difference is the critical fact that two- thirds of all workers with jobs in the District live in the suburbs – and pay taxes there – while nearly 80 percent of D.C. residents with jobs Work in the District. A business tax cut that prompts an employer to relocate to the District or expand there could come at the expense of revenue that would improve services for residents... Unless Washington is able to tax nonresident workers (through a commuter tax), it is clearly in the city's best interest to promote hiring District residents over simply creating new jobs.

Despite that fact the District remains the center of a relatively prosperous metropolitan region, the effect of the continuous out-migration has had a tremendous impact on the district's economy. A staggering number of taxpayers that previously constituted the district's tax base have migrated to the surrounding suburbs. The majority of these migrating households that left the District between 1985 and 1995 earned between $30,000 and $75,000 annually. The result of this has been a reduced tax base, an increased tax burden on those who have remained, and a higher percentage of the District's population relying on the support of the government for some form of subsistence or aid.

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Population –Washington, D.C. 1980-1997

Population chart (9485 bytes)

Source: Federal Bureau of Census

Moreover, in the short term, the District is projected to obtain a less than proportionate share of the region's forecasted growth rate in employment and income. As a matter of fact, DRI-McGraw Hill anticipates no real growth in real personal income in 1999 for the district. In the long-term, DRI projections indicate that the population will continue to decline until 20002, reaching a level of about 525,000 in that year.

Between 1990 and 1996, the unemployment rate in the District increased from 6.7 percent to 8.5 percent. While the surrounding jurisdictions experienced significant job growth between 1992 and 1996, the District showed a steady decrease in jobs for the same period. To compound the problem of the District's eroding tax base, an analysis of job growth from 1990 to the year 2020 indicates that the district can expect to increase its available jobs by only 8 percent, while Prince George's County is projected to increase its number of jobs by 53 percent for the same period.

According to the FY 1999 Baseline Budget and Financial Plan, in each year between 2000 and 2002, expenditures are projected to grow at a rate higher than revenues. This indicates that (1) the surpluses are declining, and (2) the District's Budget is not structurally balanced. Thus, without prudent financial planning, accelerated expenditure growth could lead to future deficit situations.

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Revenue and Expenditure Growth

Revenue and Expenditure Growth bar chart (11150 bytes)

In short, the fiscal success of the district is not measured by its recent accomplishments, but by its ability to achieve and maintain long-term structural balance.

It is clear from the information presented above that the only viable option is to strengthen the tax base. And, the only way to accomplish this is to stem the tide of out-migration of those who once represented a viable tax base.

In order to address these issues, the following strategy for economic growth is proposed. The strategy emphasizes services and programs that will focus on neighborhood stabilization and revitalization through increased job training and skill development. In addition, we need to enhance current homeowner programs and establish new ones, if necessary, that will attract middle-income homeowners to our city. We also need to create opportunities for existing low and moderate income renters to move up the ladder to owning their homes.

It is only through economic growth and prosperity will the district be able to affect the quality of life of the residents of the district in a sustainable manner – and by so doing, affect the overall health and revitalization of this city. The two most important elements of an individual's quality of life are employment and homeownership. These tow elements have not been addressed. There are no policy options currently being discussed to improve either of these conditions. it is important to note that these two factors are prime indicators of sustained economic growth. Thus, in order for the district to continue to improve and sustain its economic health, the issues of employment and homeownership must be addressed.

Presented in the following pages are strategies that provide viable policy options for increasing both employment and homeownership.

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The homeownership rate in the District remains far below the metropolitan area's most comparable jurisdictions, and the nation as a whole. The increase that has taken place in recent decades, from 28% of all occupied housing units in the 1970 census to slightly more than 40% today, has not significantly closed the gap. This represents one of the most significant challenges facing the District., along with high poverty, unemployment and population loss. Indeed, the low homeownership rate contributes to these problems, facilitating departure for citizens who feel less invested in communities.

Homeownership Rates

Homeownership rates chart (14173 bytes)

All figures are from the U.S. Census Bureau Population Survey

To revitalize the District economy, stabilize the city's population, and reclaim neighborhoods, we need to dramatically increase opportunities for all of our citizens to become homeowners. Not only is the District steadily losing people to the Maryland and Virginia suburbs, but the homeownership rate is low in many neighborhoods, as little as 15.7 percent in Ward Eight, east of the Anacostia River, as recently as 1990. This reality stands in sharp contrast to that of the nation, which has experienced a dramatic resurgence in homeownership after a 12-year decline that began in 1981. At the end of 1997, the country made history by establishing a new all-time high homeownership rate of 65.7 percent, based on an increase of more than 6 million homeowners since 1993. Homeownership rose in nearly every category, including those groups traditionally furthest behind, such as African-American and Latino families, low- and moderate-income families, female-headed households, young adults, legal immigrants, and young people living in cities. Indeed, the homeownership rate increased almost everywhere in the nation, including Washington, D.C. With millions of new jobs in our country and a fast growing economy, now is the time to build upon the success of President Clinton's national Homeownership Strategy by expanding it right in the heart of our nation's capital.

While the homeownership rate in the District rose from just 35 percent in 1992 to 42.5 percent in 1997, it still lags behind the national rate of 65.7 percent, the Washington metropolitan area rate of 64.6 percent, and even the average for major U.S. cities of 50.1 percent. The goal of this strategy is to close the 7.6 percent gap between the District and the average (50%) for American cities by the end of the year 2001. Thus, for the first time in the more than 200-year history of the district of Columbia, a majority of Washington residents will be homeowners. Then we will keep moving forward until we close the larger 20-plus percentage point gaps, finally leveling the playing field with our suburban neighbors in Maryland and Virginia, and the rest of the country.

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3,000 Homeowners A Year

We intend to generate 3,000 new homeowners a year in Washington for the next three years, leading to an all-time high homeownership rate for the district of Columbia of 50 percent by the end of the year 20002. The 21st century should begin with a stronger economy, healthier families, and more vital communities. Rapidly rising numbers of new homeowners will serve as the economic and social anchor for our city's improved quality of life. We will compete effectively with for additional residents by bringing more middle-class homeowners into our city and improve the income mix in many of the district's neighborhoods. At the same time, we will create opportunities for existing low- and moderate-income renters to successfully move up the ladder to owning their own home, building their family's wealth and our community's prosperity.

We will help the District accomplish this ambitious homeownership goal through a combination of more aggressively marketing and utilizing our existing programs, introducing program changes to meet critical needs, and working in partnership with the private sector, community-based organizations, and the federal government to extend the reach of financial and technical assistance to interested homebuilders and homebuyers.

The new partnership will bring together homebuilders and mortgage bankers, community developers and homeownership counseling agencies, universities and hospitals, philanthropic foundations, D. C. government and federal agencies, and many other private and public sector organizations and civic leaders. The new partnership will accomplish the goal of 3,000 new homeowners by the year 20002 by:

  • making homeownership more affordable and available through reducing production and financing costs;
  • increasing access to mortgage financing and homeowners' insurance;
  • breaking down discriminatory barriers through fair housing and fair lending enforcement;
  • cutting bureaucratic red tape;
  • promoting and marketing homeownership to metropolitan residents and global visitors; and
  • engaging in education, outreach, training, and counseling.

The 3,000 new homeowners will come from the ranks of current District residents who are now renters, plus non-residents moving into the District and buying a home. Since the D. C. Department of Housing and Community Development's affordable homeownership programs currently serve approximately 500 new homeowners each year, by doubling the annual size and performance of these programs, we will generate 1,000 new homeowners a year. The increase for the program can be allocated from the projected revenue surplus. In addition, the work of the Washington faith-based community – reaching out and collaborating with ministers and church members all across the district to promote homeownership education, financing, and most importantly, pre- and post-purchase counseling – will yield another 1,000 new homeowners per year. Finally, the special emphasis on making the District more attractive to middle class families, and marketing the $5,000 federal income tax credit, will boost demand for District homes and stimulate yet another 1,000 new homeowners a year. These new homeowners will come form the ranks of middle-class homebuyers, currently living in the District or moving in from elsewhere in the region, the nation, and even other countries around the world.

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Programs Operated By The Department of Housing and Community Development

The District government's homeownership agency, the Department of Housing and Community Development (DHCD), will double the size and performance of its existing homeownership programs, as well as develop new ones. The funds to support this endeavor will be allocated from the projected revenue surplus. It is anticipated that this goal will require a yearly increase in local funds of $ 23.9 million for existing DHCD programs. A breakdown of the programs, expected outcomes and budget requirements appears below. In addition, the increase in property tax revenue is projected to be approximately $10.4 million. This projection is based on the total market sales in the District for calendar year 1997. During this period there were 3,760 home sales averaging $361,000 per home.


DHCD Programs Yearly Program Outcome Local Funds Needed (Annualized)
Home Purchase Assistance Program (HPAP) 1,000 15,700,000
Homestead Housing Preservation Program 245 1,260,000
Employer Assisted Housing Program 34 390,000
Police Officer Next Door 100 3,000,000
Move-Up Assistance Program 100 1,000,000
Church-Based network 1,000 1,200,000
Marketing Incentives to Middle-Income Homebuyers 1,000 650,000
Total 3,479 23,200,000

Using annual Community Development Block Grant (CDBG) and HOME Investment Partnership dollars from the federal government, we will dramatically increase both the funding and effectiveness of our Home Purchase Assistance Program (HPAP), which has enabled over 7,000 low- and moderate-income District families to become first-time homebuyers. Likewise, we will expand the funding and improve the effectiveness for our other existing programs – the Employer-Assisted Housing Program and the Metropolitan Police Housing Assistance Program, both of which enable hundreds of District government workers to live and own homes in the city, and the Homestead Housing Preservation Program, enabling hundreds of blighted and vacant properties to be purchased and renovated for homeownership by low- and moderate-income families, an important tool for revitalizing and stabilizing neighborhoods.

In addition, we are proposing to make several key program changes in order to address vital unmet needs. Currently, the $20,000 HPAP second mortgage subsidy is only available to low- and moderate-income District residents. We would increase the income limits for participating in the program, and we would make qualified first-time homebuyers purchasing a home in the District eligible for HPAP, even if they currently live outside Washington. By making these two changes, we will be actively recruiting suburbanites and out-of-towners to move into the District, and we will be expanding our population of middle- income homeowners.

Also, we intend to create a new Move-Up Purchase Assistance Program (MPAP) that will encourage existing District homeowners who want to but a larger and more costly home to stay inside the district rather than move to the suburbs. MPAP will provide up to $10,000 in down payment and closing assistance as an incentive for hundreds of middle-income homeowners to purchase either newly built or older homes in one of Washington's many attractive and livable neighborhoods.

And, we will establish an Officer Next Door program to make available 1,000 homes per year to be sold to Metropolitan Police department officers at a deep discount and with special financing. Police officers will live in these homes and park their official MPD vehicles on the streets in front of their homes, serving as an anchor of stability and deterrent of crime for their neighbors and community.

Finally, we will immediately commence an aggressive marketing campaign to identify new prospects for homeownership in the District. We will let potential homebuyers know about our community assets and our various programs and incentives, including the new $5,000 federal income tax credit for people who buy and live in a Washington home beginning January 1, 1998. This marketing, to be conducted jointly with private and non-profit institutions, will include homeownership counseling so that families can make the best use of special financing and other arrangements that make owning a home more affordable and secure.

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A New District of Columbia Homeownership Commission

A Homeownership Commission will be appointed to make recommendations about how to achieve the goal of an all-time high homeownership of 50 percent in the district of Columbia by the year 20002, with at least 3,000 new homeowners annually for the next three years. The Commission, will represent a broad cross section of the Washington community - lenders and builders, community developers and housing specialists, civic leaders and neighborhood activists, real estate brokers and business executives, hospital and university administrators and homeownership counselors, clergy and teachers, government officials and local residents. The Commission will be charged with the following tasks:

  1. Making homeownership more affordable by increasing the availability and lowering the cost of financing, reducing production costs of land development and home construction, and by providing flexible, targeted subsidies to potential homebuyers in need;
  2. Reducing discriminatory barriers for African-American, Latinos, women, and other groups;
  3. Make homeownership a more effective tool of community revitalization;
  4. Make homeownership a more powerful engine of the district's economy by furthering job creation and business formation and expansion;
  5. Encouraging homeownership education in schools and churches, by non-profits, lenders, and real estate brokers;
  6. Increase the quantity and quality of the District's stock of homes that can be individually purchased and occupied by homeowner families and households, including stimulating housing rehabilitation;
  7. Propose reforms and improvements in District and federal government policies, programs, and budgets as well as reforms and improvements in private sector homeownership providers, including financial institutions, realtors, etc.;
  8. Identify ways that the public and private sectors work more effectively together to expand homeownership; and
  9. Develop solutions that mobilize people to get actively involved and participate in neighborhood homeownership activities, including homebuyer clubs, homeownership committees at local churches and other key community institutions.

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According to the Metropolitan Washington Labor Summary released in April 1997, the District's unemployment rate stands at 7.8 percent – more than twice the unemployment rate in the surrounding jurisdictions. The report also points out that the area job recovery, which is said to have begun in February 1992, has not been equally distributed between the District and its neighbors. The suburbs gained 225,000 new jobs, while the District lost approximately 49,000 jobs over the same period – most of which were in the public sector. Many new jobs gained in the surrounding areas, which do not require advanced degrees or extensive technical experience, go unfilled for lack of available qualified labor. These conditions, when considered in combination, suggest a number of possibilities:

  • That there is an opportunity to provide jobs for unemployed District residents by preparing them to meet the need for qualified workers not only in the district, but throughout the region.
  • The District government must seize this opportunity to assess its approach to job training if it is to help reduce unemployment in the District and reinstall a real sense of value in this part of our population.

The overall goal for the District in the area of employment opportunities is simple: Promote an employment environment that provides livable wage jobs and the education and skill-building opportunities to ensure employability for all community members. The goal will be accomplished by concentrating on the following areas:

  • The creation of coalitions of business, labor and educational institutions to develop competency-based education and training programs that are targeted to needs of business – may include vocational training programs, apprenticeship programs, entrepreneurial skills training, customized on-site training and technical and vocational preparatory programs.
  • Employability development and entry-level and career employment efforts for low income youth and adults, minorities, women, individuals with disabilities and the homeless.
  • Opportunities for people in training or working to meet their dependent care needs.
  • Linkages between community job access and information systems and training programs.
  • Development of on-going training programs for people currently employed so they may improve the skills they use in their current jobs or expand their skills into new areas.
  • Development of programs for dislocated workers to assist in a successful transition to new jobs.
  • Access to literacy development and English- as -a second- language programs for those in need of assistance of overcoming literacy and language barriers to employability.
  • Apprenticeship and other workplace opportunities (i.e. summer youth employment program) in District government, with particular emphasis on providing access to low income youth and young adults from diverse culture and races.

The Department of Employment Services (DOES) is the primary agency responsible for developing and operating employment related programs. The three major program areas are: Workforce, Training and Development, Youth Employment Programs, and Job Placement and Services to Employers. In order to expand the existing programs operated by DOES and focus on the program initiatives as stated above, it is estimated that an additional $7 million of local funds will be required. The specific initiatives are presented below.

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1. Subsidized Placement

A. Full Subsidy

Subsidized placement opportunities for individuals who need to develop better technical skills before they are fully employable in their chosen field will be identified. Contractor(s) will be utilized to develop slots in the private sector, while District staff will handle the development of public sector slots and monitoring of all subsidized employment activity. It is expected that the training period for all subsidized jobs, public or private sector, will be approximately six months or 26 weeks at the subsidized wage of $5.54 per hour (includes FICA) and a tour of duty of 40 hours per week.

Service Level


500 customers


B. On-the-Job Training

Persons, particularly welfare recipients, who have not been in the workforce can acquire job skills through on-the-job training (OJT) opportunities. A marketing effort to generate OJT slots will begin. The period of subsidy will be 16 weeks at an hourly rate of $7.00 per hour ($3.50 to the government), 40 hours per week.

Service Level


500 customers


2. Job Search/Job Readiness

With a focus on employment, this component is to insure that customers needing only workplace skills and life management skills will be ready to obtain and retain employment. This activity will be provided through the Department and contractors. We will also integrate this activity with other DOES and DHS employment and training activities.

Service Level


500 customers


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3. Creation of a Dedicated Training Facility for the District

A longer range, more comprehensive use of training dollars could involve the creation of a dedicated training facility to train welfare recipients and other jobless persons in four or five work skill areas comprising the back office production system. We estimate that literacy requirements for the opportunities will be at the 5th grade level for reading and math skills. The training cycle would be one year. Trainees could begin production work after six weeks of training. We estimate that the center could train 6,000 persons over a five-year period.

We will be looking to back office business firms to provide employment for every person who completes the training program. The starting pay for the workforce of 5,000 persons will be $8 to $9 per hour. The dedicated training facility will provide the District of Columbia with the institutional capacity to transform thousands of welfare recipients, unemployed residents, and working poor residents into economic development assets.

The training facility can be designed and operated as an independent entity. Approximately $10 million in capital costs and an annual operating budget of $2.5 million is projected. The facility and the capital equipment could be privately financed. Formula and demonstration grants from DOL, HHS, D.C. Government and private sources will be the source of operating funds.

A new study shows that it is far better for the District to employ 100 District residents than to create 100 jobs, roughly two-thirds of which would go to suburban residents. Creating 100 new jobs in the District adds $191,310 in annual tax revenue. But, the District collects more than $352,000 if it adds 100 residents who have jobs, an increase of 46 percent. Thus, the McKinsey report concludes:

Unless Washington is able to tax nonresident workers [through a commuter tax}, it is clearly in the city's best interest to promote hiring District residents over simply creating jobs

Income Tax Business Income Tax Commercial Property Tax Sales Tax Total
Revenue Generated by Creating 100 District Jobs $85,510 $33,000 $62,500 $10,300 $191,310
Revenue Generated by Employing 100 District Residents $259,276 $25,740 $48,750 $18,600 $352,366

Moreover, according to preliminary estimates, the creation of 10,000 jobs, with an annual salary ranging between $15,000 and $20,000, for District residents will generate approximately $4 million in personal income tax revenue. An additional $800,000 will be generated through other ancillary taxes.

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Child Day Care and Early Development Programs

The importance of the points discussed above is undermined if little attention continues to be paid to the urgent need for Child Day Care and Early Development programs.

The number of children under the age of five is increasing not only in the District of Columbia, but in the metropolitan region. Based on the last available census data, 58 percent of all children under the age of six had parents in the labor force; 42 percent of all children in the District, ages 6 to 13, had parents in the labor force. Needless to say, there has been an increased demand for quality, affordable child care options and the expansion of family friendly work place policies. However, a report prepared by the Metropolitan Washington Council of Governments suggests that 62 percent of the potential demand for child care was unmet by regulated supply.

These statistics, when matched against the profile of the typical participant in the employment training program suggests that the limited availability of quality, affordable child care options may be a real hindrance to employment and training and employment opportunities.

The Department of Human Development (DHD) is the District government's primary provider of child care subsidies to low-income parents. Child care subsidies are available for infant, preschool and school age care in licensed centers and family child care homes, in the children's or relative's homes. Expenditures for DHD-subsidized child care were $25 million in FY 1997, for 6,619 children served. This expenditure rate translates to an average daily rate of $18.35 per child – compared with the market value daily rate of $60 per child. This disparity is exasperated by the fact that the DHS-subsidy rate has been held constant over the past five years. It would follow to expect that the quality of the subsidized child day care services may be jeopardized, and that the availability of government subsidized child day care slots for low income parents may be significantly reduced and declining.

If we are to ensure that we empower the potential beneficiaries of the employment opportunities to be true beneficiaries, we must increase the number of available slots by 4,500 as well as ensure quality care by providing child care options. Therefore, it is proposing that the daily rate for the child care subsidy be increased in order to accomplish this goal. The rate should be increased an average of $3 (part-time) to $5 (full-time) dollars per child for child care centers and child development homes.

The proposed rate increase will require an additional $7.5 million in local funds for the current client population of 6,619 children. In order to increase the number of available slots by 4,500, the local authorization would have to be increased by approximately $15.8 million.

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