I'm going to order this hearing.

This is a public hearing of the committee as a whole of the Council of the District of Columbia.

I'm Phil Mendelssohn, Chair of the Council, Chair of the Committee as a whole.

Today is Monday, May 4th, 2020 is 212 in the afternoon.

My apologies for our starting late, our starting very late.

And those agencies are we will hear testimony in this order.

District of Columbia Auditor, DC Retirement Board, and the Office of the Chief Financial Officer.

The mayor submitted the budget on April 14th of this year.

The council has 56 days before we vote first reading, which is scheduled for June 9th.

For the first three weeks, not including the week of the 14th.

The council's committees are having hearings on the proposed budget for the agencies under their purview.

Committees will mark up the following week.

The um as I said, the council will vote on June 9th first reading.

The um this is the sixth of nine hearings the committee is having related to the budget.

On Wednesday, we will hear testimony regarding the Commission on Arts and Humanities, Office of Zoning, Office of Planning, and Department of Buildings.

On Thursday, May 7th, we will hear testimony regarding the Office of the State Superintendent of Education.

And next Wednesday, May 13th, we will have a hearing on all of the legislative measures to mayor submitted, which would be the Local Budget Act for 2027, uh revised budget for fiscal year 2026, the Budget Support Act, and the Federal Portion Budget Request Act.

That's May 13th.

The um I think at this point we will proceed with um uh witnesses.

Uh again, the order will be the auditor, then the retirement board, and then the chief financial officer.

The uh for the auditor, there were two individuals who signed up to testify before I get to the auditor.

Scott Goldstein, I'm assuming he's participating virtually, and Dunchia Pradeau.

I don't know if she is here.

Don't see you.

Mr.

Goldstein, uh, the floor is yours.

Good afternoon.

The DC auditor continues to be an incredibly valuable part of DC government's ecosystem, conducting critical studies that hold the government accountable and make important recommendations.

The auditors recently released three different reports on education focused on spending.

While they note an increase in overall education spending, the majority of that increase is uh come from driving down student to teacher ratios in a way that is good for student outcomes.

They do make important points about potential duplication of initiatives across education agencies, which is worth noting in a time of tight budgets and high absenteeism, because we'd be well served to have a better coordinated, more holistic response to this challenge.

They also note a sharp increase in administrative positions in schools.

This is worth further investigation.

Uh while some positions classified as administrative are deeply valuable, such as connected schools managers, attendance counselors, or wellness coordinators.

We haven't thought strategically about how administrative staffing works and what the most effective structures are.

Whether by the auditor, the council, the state board of education, or potentially the research practice partnership.

It would be worth us as a city looking at the dozens of administrative staffing models across DCPS and charter LEAs to determine the effectiveness of different models since the cost variations are extremely high, and this takes away funding for direct student support.

We do have duplication in some ways because of the undefined mandate of the DME's office, partially as a result of our education governance model.

While mayoral control is designed to make things more efficient, in reality, it makes spending less efficient by stacking so many roles in mayoral-run agencies and the council that are stretched thin already that would normally be shared by others, like a school board.

Second, I'm testifying to ask the DC auditor to conduct a thorough on-the-ground investigation and report on the effectiveness of youth curfews.

Why is this needed?

Every independent study, everyone, from the Campbell's collective's meta-analysis to the American Journal of Criminal Justice to the Marshall Project, all show that curfews do not work.

Not only do they do not work, but studies find they actually increase youth violence for a multitude of reasons.

The conversation among council members and the mayor about this policy has been almost completely evidence-free and driven by politics.

Implementing an idea that will make them look like they're addressing something rather than actually addressing it.

I've heard many council members refer to the curfew not as a solution but as a band-aid.

But I don't see how something can make a situation worse and be a band-aid.

Band aids help stop the bleeding.

Curfews increase the blood.

Curfews plainly do not help avoid arrests, as Councilmember Pinto and others have argued, but rather put youth increasingly in interactions not only with MPD but the National Guard.

The idea expressed by some in the council, including the chairman that the curfew only applies to group of eight is directly refuted by the lived experience where police are dispersing every team they see.

I would ask any council member who thinks they're really only making groups of eight leave to go to Navy Yard during a curfew and see whether police are only dispersing groups of larger than eight or just every teenager they see.

In effect, the curb use do prohibit all teens from being in those areas at those times, increase their interactions with police and provably failed to prevent violence.

That's something you could prove through study.

Again, there has really been no evidence inserted into this debate, and I think it would be helpful for all of those reasons and more to have the DC auditor conduct a real on-the-ground study of curfew implementation in D.C.

I appreciate all the continued work by the DC auditor.

I will say that the auditor, Auditor Patterson, and I have had discussions about these two issues in advance of the hearing as well.

And in particular, it will be critical that the D.C.

Auditor does this work during the next year to help the new mayor and council members understand key issues as they take office.

Thank you.

Thank you, Mr.

Goldstein.

I appreciate your testimony.

I do not have any questions for you.

Thank you.

I will turn to Kathy Patterson.

Since the other witness uh Perdeau is not here, good afternoon, Mr.

Chairman.

Good afternoon.

I'm Kathy Patterson, District of Columbia Auditor, and I appreciate the chance to be here to talk about the budget for the Office of the DC Auditor for this year and for the proposed fiscal year budget for 2027.

I'll also use this opportunity to share my perspective on a couple of critical issues in the proposed budget.

ODCA's original FY26 approved budget is $7.8 million.

Our revised budget is 11.6 million based on the transfer in January of carryover funds totaling $3.8 million.

Our personal services budget for FY26 is $6.1 million.

Our nonpersonal budget is $5.5 million, including that carryover from fiscal year 2025.

At the end of March, halfway through the current fiscal year, we had expanded 34.7% of our personal services funds and 12.1% of our nonpersonal funds.

Regarding our non-personal services budget, we are in the same position we've been in over the last two budget cycles, facing the possibility of significant litigation costs based on a case in DC Superior Court brought by three sworn members of the Metropolitan Police Department, challenging the publication of the 2022 report.

36 fired MPD officers reinstated, received 14 million in back pay.

The judge granted our motion to dismiss the case in November 2024, but we continue to await a written decision.

The plaintiffs have already indicated they will file an appeal as soon as they review the dismissal.

If that appeal is successful and the case goes to trial, we anticipate the cost will be significant.

With the assistance of that significant carryover funds, we are initiating additional contract audits on high priority policy issues, including a third review on education expenditures by Alvarez and Marcel on the charter school facilities allotment at your request.

We anticipate additional contract audits focusing on issues that affect district expenditures, including another review of the Fair Election Program.

The mayor's proposed budget for FY27 includes 7.8 million and 35 FTEs.

That total includes 6.1 million for personal services and 1.7 million for non-personal services, the largest amount of which is in the contractual services line.

And again, I anticipate the largest portion of that non-personal service funding will support contract audits.

The proposed budget is sufficient to meet ODCA's mission.

We currently are hiring and recently had a staff member return to ODCA after spending seven years with a Federal Inspector General office.

He is our third hire in the last calendar year of individuals who formerly worked for the federal government.

As you're aware, we've been relying on the Department of General Services to find a tenant for the space we currently lease on the seventh floor of 1331 to Pennsylvania Avenue.

The rent allocated for that seventh floor is about 230,000, and we assume would be transferred from our budget to another DC agency if DGS is successful in arranging for another tenant.

I'd like to mention the transition from the Office of Independent Juvenile Justice Facilities oversight.

At the end of FY25, that office had an end in its own funding.

Mark Jordan, the executive director, continued to serve in that capacity through FY26 with compensation assumed by ODCA while working on transition issues, and also he back and also began conducting a study on public safety agency personnel costs for ODCA.

In October, we reached an agreement with the Department of Youth Rehabilitation Services Director, Sam Abbett that the agency would continue to analyze and publish the monthly population and incident data for both the Y for the Youth Services Center and New Beginnings on DYRS's own website.

That continuing publication of the data provides a vital window into the safety of the youth, staff, and public who reside, work, or otherwise occupy the YSC and New Beginnings, and it's important information for the council, advocates, other juvenile justice stakeholders, and the public at large.

The last step in that transition is to archive the reports published by the OIJJFO during its five-year career, and we are creating a landing page on the ODCA website to make that material continually available.

And finally, I'm pleased to share that Mr.

Jordan has agreed to join ODCA staff as a senior analyst.

Turning to a couple of issues from our recent reports.

Last October, we released a report finding that the Washington Convention Center and Sports Authority, known as Events DC, owed the District General Fund $68.7 million based on errors in calculating the amount of excess cash that Events DC should have repaid for fiscal 24.

As you know, the DC Code requires events DC to transfer excess cash to the district at the end of each fiscal year.

As far as I know, today no one has taken any action based on our October finding, and now approximately $62 million remains disputed by Events DC.

Given the difficult spending decisions ahead of the council, I encourage you to consider the resource representing by the Events DC excess cash situation and the ongoing failure to transfer the correct amount to the general fund.

We're conducting a similar analysis this year for fiscal 25 and anticipate having a new excess funds report in the fall.

We recently released the report titled Reserve Fund Allocations Violated District Law, finding that the Office of the Chief Financial Officer acted without statutory authority in approving expenditures from the contingency reserve and masked violations of the district's anti-deficiency act by covering expenditures that had already been made without statutory budget authority.

It's clear from our reports that the OCFO brings little to no discipline to agency spending, including facilitating the use of reserves for purposes that have not been documented as quote, non-recurring or unforeseeable needs, end quote.

The OCFO appears to approve any expenditure from the contingency reserve that has been requested, thus missing an opportunity to require justification.

The CFO could be using that office's considerable authority to drive better management of resources and help ensure value for dollars spent.

This mirrors the need for the CFO to require greater discipline in the gap closing plans that agencies are required to provide through the financial review process and issue this committee explored in the round tables in October.

I urge the council to continue to press the CFO to use his authority to require better agency resource management.

As Mr.

Goldstein just noted, we issued two reports recently that analyzed education sector spending and staffing growth, and they shed light on potential areas to explore for possible savings.

And we then summarized some of these in a recent education budget brief.

With regard to DC public school staffing costs, growth in those expenditures were built into future budgets when the mayor negotiated and the council approved a collective bargaining agreement that didn't merely provide significant pay increases, but expanded health benefits and the job categories included in the collective bargaining unit.

Our DCPS report noted the increase of nearly 400 teachers across DCPS, part of the growth in staff that has vastly outpaced a modest increase in enrollment.

That staffing growth has been paid for with large annual increases in the uniform per student funding formula.

In the mayor's proposed FY27 budget, the formula would increase another 2.55 percent resulting in total instructional costs of $2.66 billion across DCPS and public charters.

That's a total $60 million increase in instructional costs over FY26.

In contrast, last year the council approved a five-year financial plan that included an actual decrease in the uniform per student funding formula in FY27.

To reconsider that through flat funding or even having the per student base amount would be a significant savings.

With regard to oversight agency and administrative costs, administrative costs and duplication of efforts, as Mr.

Goldstein noted, are two issues that we cite for additional study in our reports on the Office of the State Superintendent of Education and the Deputy Mayor for Education.

One example of expenditures for administrative costs are those incurred in the child care subsidy program.

As total program costs grew from $23.8 million in fiscal 23 to $67.8 million in fiscal 25, the cost to administer the program increased by nearly $160 percent from $4.2 million to 10.9 at a much higher nominal rate than the subsidies themselves.

Greater program funding usually offers an opportunity for economies of scale in administrative costs.

Many federal programs impose administrative costs, percentage caps, and that might be an option for the Council to consider.

Both of the district's education oversight agencies has ongoing initiatives in school attendance, out of school time programming, and data collections.

Economies could be explored in consolidating programs.

One of the report recommendations was for Aussie and the Deputy Mayor to conduct an efficiency assessment covering administrative costs and potential duplication of efforts.

Turning to another budget pressure, for the second year in a row, the Metropolitan Police Department exceeded its annual allocation for overtime in the first quarter of the fiscal year, according to the financial review process reports.

Our staffing study using data provided by MPD determined that patrol officers used an average of 9.3 weeks of leave per year, and detectives use an average of 8.2 weeks of leave per year, leave of various types.

But this means that a significant portion of the sworn staff was unavailable for duty for a significant amount of time, which is another significant factor contributing to overtime.

Management initiatives to increase the time current sworn members are consistently unavailable for duty could also reduce overtime costs.

As I mentioned, I did mention a third study we have underway on education costs.

Additional budget-focused projects include a study of employment and training services and outcomes for TANF and SNAP recipients and an audit of agencies with a high level of leave usage to understand the extent to which discretionary leave is well managed.

We continue to consider other ways we might be able to contribute to sound budget decision making by the mayor and council.

And finally, Mr.

Chairman, I would like to exchange my auditor hat for a former council member hat very briefly to ask you to reject the mayor's proposal to terminate the Homeland Security Commission.

This is an entity created by my final major bill that you yourself shepherded through the Council as Judiciary Chairman in the Homeland Security Risk Reduction and Preparedness Amendment Act of 2006.

Five years after 9-11, this legislation pulled together every step we could think of to prepare for and mitigate disasters.

The Commission's charge was to make use of it, the extraordinary talent in our community among scientists, technologists, public safety and public health professionals, and others to issue a report each year on a preparedness topic.

I attached excerpts from your committee report on the legislation.

In its 20 years, the Commission has produced just four annual reports, but they have included a 2015 report on preparedness for a pandemic.

The 2018 report in cybersecurity included a recommendation that the district create a Chief Information Security Officer, a step that it was then taken by the Chief Technology Office of the Chief Technology Officer.

I believe using the expertise of area residents who volunteer to help ensure the district is continually thinking outside the box on what horrors could occur here and how to prevent or mitigate them is critical.

And I hope you will council will again reject the mayor's short-sighted proposal.

That concludes my prepared statement, and I would be pleased to answer any questions.

Thank you, Ms.

Patterson.

Do you have any idea why the mayor proposed that?

I don't.

I do acknowledge that it's another commission whose membership they have to continue to fill, and it's an exercise that they haven't, again, if you think about four reports across 20 years, that's not really meeting the annual report requirement.

But it's not something that is usually staffed from HCMA, my guess is another budget budget focused issue.

In your statement, you mentioned the financial review process reports, the FRPs.

Have you looked at the FRPs that came out in April?

I believe the only one that we took a look at was MPDs or whatever was the most recent one of MPD to make sure that what we were saying about overtime was correct.

So no, I haven't.

But I am aware that the Office of Budget and Planning has been looking at revising the actual documentation, and I think that's a very good and healthy sign.

The MPD FRP, did it have some of the same language that we have seen in previous years, which is, well, there's a budget pressure, but it will all be taken care of through reprogramming.

I believe, although I did not look that thoroughly at the report.

I just wanted to make sure that they in fact had spent the amount of overtime we mentioned.

I I did have occasion to see part of the MPD budget hearing this past week, and they did discuss the fact that they would seek to have their overtime made up a big chunk of it through the supplemental budget that is now before you and the remainder, presumably through the end of the year reallocation.

Well, my question wasn't so much about what's going to happen with MPD overtime, but whether the FRPs have improved in quality.

You'll recall that the um when we looked at the FRPs last year, we saw that generally they said the way we're going to manage the spending is we're just going to ask for more money.

And that wasn't isn't actually a very satisfactory way to deal with agencies overspending their budgets.

But you haven't looked at the FRP's more broadly.

You mentioned in your testimony about speaking of MPD overtime that you seem to suggest that uh there should be, I don't know, less leave taken, management initiatives to increase the time current sworn members are consistently available for duty.

How does that work?

Just to deny leave?

I am assuming the leave that they are taking is leave that they are authorized to take.

That's correct.

But one issue from a management perspective could be better management of that leave.

The report that we'll come out with in another several weeks looks a little bit more particularly, more detailed level at what kind of leave is taken.

And if, for example, an agency is reporting an extensive amount of of leave without pay, that's something that you need management's approval in order to take leave without pay.

If there's an excessive use of any other leave category, that's an again, that's something to take a look at.

This has been an issue.

Um it's an issue that Mr.

Jordan um identified in DYRS.

It's also an issue that's been identified at the Office of Unified Communications, and that's something that there was a huge amount of of leave without authorization as well as leave without pay at that agency.

And again, it raises another kind of management issue.

So the point we are trying to make is nine weeks of leave is a lot of leave in a given year, and that's an average.

So we wanted to go be you know beneath some of those basic numbers and see exactly how when and how those that leave is taken.

And we'll have a bit of that will be covered in the report that we have coming out.

So you haven't looked at that yet.

You are looking at it now.

I am looking at it a little more depth, yes.

Uh and I noticed that you did say leave, you didn't say paid leave, you didn't say what kind of leave.

Right.

It includes yeah, includes all kinds.

But the point being unavailable for duty, whether it is paid or unpaid.

Um you were on the council and you chaired the Judiciary Committee, uh, you pressed MPD to reduce its overtime.

And my recollection was that, depending upon who was chief, it was an impossible task, or they actually were able to manage overtime.

Could you say more about how that happened, that they were able to manage overtime and reduce it?

The one of the presenting issues when I served on the council um a number of years ago was court overtime.

And there, the Council for Court Excellence and others took a very strong look at that issue, and that is something that MPD did then in fact reduce.

And I think some of the focus that that the committee brought to the issue did focus on court overtime, where often you would have a detective waiting for a trial to happen that might never happen, and just an awful lot of time spent sitting in a hallway doing nothing.

And that was a a huge amount of of the overtime at that period of time.

I think that has been brought under pretty much under control.

I think the the additional the additional expenditures for overtime now I understand have been better managed in the past under Chiefs Lanier and Newsham, but that's really anecdotal information.

I haven't gone back to take a look at the at the main numbers.

What what most elected officials who speak to this issue speak about is the number, the number of sworn members, as if that were the only thing fueling overtime.

And I think the issue does merit a much deeper look than simply the fact that we have fewer officers than we did 10 years ago.

And you're looking at that we're not looking at that directly we're looking at it through the leave issue but that's I mean that's just one facet.

One of the other things that were was recommended in our staffing study was for MPD to get a better handle through data on how much time is in fact spent you know in hospital details and in transporting juveniles and other things that district commanders said was a drain on their overtime but they didn't have the numbers to back it up necessarily and I know I do know that MPD does collect a huge amount of data and I think there one of the things we recommend in the staffing study was much better use of the data.

In your statement you mentioned that you are hiring a person who had left your office and is coming back?

Yes.

Are they coming back because you are a wonderful place to work or Mr Speaker but you mentioned there are three people you are hiring from the Federal government there are three of the three that we hired two became available by having lost their Federal jobs and the the gentleman who came returned to us from Director General office I think it was his choice to to leave where he was halfway through the current fiscal year you have expended 34.7 percent of your personal service funds and 12 percent of your nonpersonal service funds your budget proposed for next year is identical to the budget for this year which is about $7000 more than what you actually spent in 2025 so that would suggest to me that there is some excess funds in your agency?

Again the the reason that I have been what's the right word sitting on money has been this the current concern about litigation wanting to be able to pay for litigation if we needed to and what we have then done is subsequently when we're in a new fiscal year then use that money in contr for contract audits and that's the process that we've been following so that it looks like we have and we do have a a big bump of money with the transfer of the carryover funds and then what we're trying to do is to um engage additional contractors to do additional studies with those funds roughly how much did the um did the court case involving the MPD officers cost at the trial court it hasn't um you want in the trial court you are waiting for the decision.

We have a it's been dismissed but will be appealed.

Correct.

So my question is how much did that cost?

That much of the process we provided that information in last year's testimony but I don't have it in this year's testimony and I will get it for the committee if you would think that the next step would be after the order is issued there would be an appeal which would require obviously some work before the DC Court of appeals and you have hired counsel for that correct we have yes we have an ongoing but I would think that that would end up costing less than what the um trial court cost dismissed the case.

We have not gone to trial no but the the Superior Court where they dismissed the case.

Right.

That is to trial court.

But I get that there was no trial it was dismissed.

Right.

I'm just trying to get a sense if you could just send me the information I'd be happy to.

I haven't been sued that many times Mr.

Chairman so I don't have it's not a it's not a topic I have great familiarity with you're doing this review on the Charter School Facilities allotment.

Yes.

When do you expect that report?

What is the total amount of funding currently available in your carryover audit support fund?

That's that would be the number that I used in our in our testimony.

The carryover was 3.8 million.

And so the total for our in non-personal services for this year is 5.5 million.

We've taken that with the contracts we've we've let so far, that's probably down to at least probably around four, and we're considering additional audit audits right now.

If if your question is what might this committee recommend be used from our budget in the supplemental, that's something I would be happy to provide some information on.

I'm a little confused.

This is transitioned from OGCA?

No.

Yeah.

Um there any statutory changes necessary to effectuate this.

The DYRS data.

Is that what you're speaking of?

Uh reporting requirements that have been transitioned over to DYRS.

Right.

Do we need to make any statutory changes?

I don't believe so.

Any budget changes?

I don't believe so.

No, this was this was DYRS data that the Independent Juvenile Justice Facilities office had developed into a website and various and sundry reports on incidents and on population.

But again, it was from DYR, there are the data that they published was from DYRS.

And the agreement that the agency made was that they would now move that information and publish it on their own website, which they have been doing.

And an element of it was made automatic working with Okto.

So I believe it's I believe that's all in motion.

He suggested that you audit curfews.

It sounds a little bit of a stretch for your duties.

That's like looking at the effectiveness of a policy.

That could be something that might be appropriate for us to consider contracting with one of the um local universities.

That was sort of my immediate thought when when he and I first spoke a couple of days ago.

But that's certainly something that we could consider.

It did strike me that.

He referred to research about the effectiveness or efficacy of curfews.

But generally uh curfew is just a straight-out ban.

No juveniles can be outside uh after 11 p.m.

And this is different.

This is setting up curfew zones, they're limited in duration.

The only affect groups of eight or more.

Um I'm not sure the research you referred to is applicable.

I don't know if you have a view on that.

I don't know.

I would I'm in curious now to sort of look into it.

Uh I don't have any other questions for you at this time.

Uh if you could work with um our staff with regard to um your offer uh for the fiscal year, the the current fiscal year revised.

Yes, and and we'll get you the litigation cost today.

Yeah.

Thank you.

Thank you.

Uh we will turn now to the DC Retirement Board.

I again have two members of the public who signed up to testify.

Robert Rabin, founder and executive director of Diverse Asset Managers Initiative, I believe he's online.

And Don Shia Purdo also signed up for this segment, but she wasn't here last time.

Is she here now?

Mr.

Rabin, good afternoon.

It's nice to see you.

And when you're ready, uh good afternoon, Chairman, and Mr.

Cash and others I've not entirely sure who's on the panel.

Can you hear me okay?

Yes.

Thank you very much for uh allowing the public to participate in this hearing.

Um super fast.

We have had this conversation before of the diverse asset managers initiative, which is a national effort to get large allocators, including pension plans to work with qualified uh high-performing women and people of color, has for years um been trying to get the DC pension plans to answer basic questions about how and whether we in the district do work with women and people of color, and I am at a um juncture point after filing FOIA requests and retaining counsel to appeal those denied requests.

Um we are still not able to get straight answers from the DC Retirement Board, and we would love for the council to re-engage and see if you can get straight answers.

The short version is in the annual reports that DCRB puts out on demographic and diversity data, um, there is insufficient um data, evidence about whether and how we work with women and people of color as outside managers.

Other jurisdictions, New York, Illinois, Los Angeles, sort of our peers around the country have found ways to report annually specific demographic data by race and gender about the ownership or senior management teams of asset management firms with whom we place our billions of dollars.

The District of Columbia refuses to provide that uh information.

We have repeatedly asked to meet with the board to see if we can learn why.

And uh they have refused to meet with us.

We have uh we are we have information that the executive director has instructed trustees of the pension plan not to meet with the diverse asset managers initiative.

I want to be clear for the record, it's not about the diverse asset managers initiative, it's about the pensioners in the District of Columbia.

My suspicion is, and why I've come back to the council to raise the issue.

The refusal to provide the data is actually a proxy for an unwillingness to have a conversation about why we essentially don't work with women, why we essentially don't work with black people, Hispanics, Asian Americans.

We have reason to believe that the overwhelming majority of the 13 or so billion in dollars of district pensioners' money, which is put out for outside management, um, is managed by white men.

Nothing wrong with white men.

Uh but if you're not working with a diverse approval of managers, you're missing out on returns.

So, Chairman, it's really a request to you and your staff.

What can we do to get a straight answer from the retirement board about how and whether they work with people of color and why they are hiding behind an alleged concern from our outside consultants that it's a trade secret uh to provide basic demographic information that other jurisdictions provide.

I'll stop there.

I'd love for you to sort of respond if you're willing about how you and your staff are willing to get involved here.

A few years ago.

We had legislation.

I don't know if we adopted the legislation or the board um agreed to it.

We did not have legislation to require them to add it to their annual report as part of the annual report.

Um the purpose of the legislation was to encourage the retirement board to diversify its managers.

You're saying you're asking for that information and you're not getting it.

Oh, it's worse than that.

I've gotten two denials of forward requests asserting that the complete data about how and whether we work with black people, how and whether we work with women, is a trade secret.

The revelation of which would be to the competitive disadvantage of the consultant we pay to manage the money.

That same consultant is providing that information all around the country to other jurisdictions.

So we can't get the data.

Now of course I haven't seen your request, but how they work with somebody is a very vague question.

Whether they have diversification in their asset managers is a very straightforward statistical answer.

So I don't, is your question vague or is it precise?

It's precise.

Look to our annual report.

In the annual report, they provide not firm specific, but aggregated data only about a subset of the contractors with whom we're working.

What's called emerging managers.

It's about two point two billion of the thirteen billion total.

So for eleven billion dollars, they're not providing any data about the demography of the firms with whom we're contracting to manage our money.

African Americans are Hispanics to manage its money, and the degree to which the pension board and the ED are going to avoid having that conversation is now aligned.

Of course.

Okay.

Well, seeing what they've provided would help to illustrate what you're looking for.

So if you could send us that.

I will.

Thank you.

I appreciate the possibility.

All right.

We'll look into this.

Thank you.

I I appreciate you as as your staff and you know I've been at this eight years.

Something is wrong.

Something is wrong.

The degree to which the pension system is going to not answer basic questions about race and gender tells me that there's something wrong.

So I just I want to be clear about that one.

Okay.

Thank you so much for the question.

You're clear.

Thank you.

Mr.

Cash, thank you.

Appreciate you all.

We will turn now to um JP Balasti, who is executive director of the DC retirement board.

Sorry.

Sorry, okay.

All right.

Good afternoon, Chair Mendelssohn.

Thank you when you are ready.

And Committee of the Whole and members of the Council.

I want to thank you and this committee for your continued support.

DCRB looks forward to working with this committee and the council as DCRB fulfills its fiduciary and administrative responsibilities to its members.

I will be speaking on DCRB's proposed fiscal year 27 budget.

Joining me here today is trustee Lyle Blanchard, our chair of our legislative committee, who you know very well, Chair Mendelson.

Leslie West, our Chief Financial Officer, Lori Morgan, our Deputy Chief Financial Officer and Head of Budget.

Daniel Hernandez, our pension administrator, and Tom Vicente from Bolton Actuarial Services.

Okay.

DCRB's mission is to lead by serving others and includes two overarching goals to prudently invest the assets of the fund for the exclusive benefit of its members and to provide plan members with accurate and timely annuity payments and best in class services.

DCRB's priority is to invest and manage the fund, which is held in trust for the exclusive benefit of all plan members and their eligible survivors and beneficiaries.

The assets of the fund must only be used to pay benefits to plan members and reasonably associated administrative expenses.

DCRB's Board of Trustees as fiduciaries and DCRB management, who are required in good faith to discharge their responsibilities solely in the interest of the plan members and beneficiaries, must always continue to work collaboratively to maximize returns as well as manage and mitigate risk to the fund.

The district government, as the employer, is the plan sponsor and responsible for the design of the plans, administrative activities, calculating and paying the required employer contributions, as well as other employee benefits to the fund.

DCRB is plan administrators responsible for providing a limited range of pension administration services to plan members as third-party benefits administrator for district police officers, firefighters, and teachers who are covered under the retirement plans that were frozen prior to July 1st, 1997, and are funded by the U.S.

Department of Treasury, referred here in as the frozen plans.

As of September 30, 2025, there were 25,350 members in the district, and or the frozen plans jointly.

Approximately 80 percent, that's 20,500 or so of the members are now covered under the district plans, or they are jointly funded by the district and federal governments.

Although the greater portion of the benefit payments are still paid by U.S.

Treasury for accrued annuity benefits under the frozen plans, our actuary projects that district annuity payments are expected to surpass those of the U.S.

Treasury around 2031, approximately five years from now.

DCRB's total assets under management market value reached $13.8 billion as of December 31st, 2025.

As of April 30th, 2026.

DCRB's total market value also reached 14.3 billion with a current 2026 fiscal year-to-date net return of 6.7 percent.

And we continue to make progress in our efforts to create maintain a comprehensive and a sustainable retirement system for our members.

I am pleased to report that DCRB continues to be a fully funded retirement system, with the plan's aggregate actual funding status level at 104.2 percent as of September 30th, 2025, one only of less than a handful of pension plans all over the United States that are fully funded over 100 percent.

The funding status is determined by comparing the value of the assets held by the pension fund with the present value of its liabilities.

Liabilities typically include the future pension payments that the fund is obligated to pay its retirees.

DCRB's 104 percent funding status compared to the estimated average funding status of the 100 largest U.S.

pension plans of 80.2 percent displays DCRB's firm ability to fulfill its present and future obligations to its hardworking pensioneers versus its larger peers over the long term.

The board's independent actuary, Bolton conducts an actual evaluation each year to determine the funded status of the plans and to identify the district's contribution to the fund.

From its inception in 1982 through September 25, the plan has generated an annualized gross return of 8.59 percent, exceeding DCRB's actuary or long-term target rate.

One of DCRB's major ongoing responsibilities is to prudently invest the funds with the goal of earning a return that meets and exceeds the established actual long-term investment return of 6.25 percent.

This target is intended to sustain the fund's viability over the long-term investment horizon.

DCRB's fiscal year end September 30, 2025.

DCRB closed the fiscal year of 2025 at a net return rate of 10.25 percent, well ahead of our actual return target rate.

DCRB's financial statements are audited annually, and we continue to strive to consistently obtain and maintain unqualified audit opinions and report our financial activities according to the required governmental accounting standards.

Transparency is our number one priority.

On December 12th, 2025, our auditors, BCA Watson Rice, issued their opinion and identified no material weaknesses, internal control or financial reporting for DCRB.

Subsequently, in January of 2026, the District of Columbia's Office of the Inspector General, in its compliance report under government auditing standards for the fiscal year end of 2025 confirmed and concurred with our auditor's opinion that there were no identifiable material weaknesses in internal control over financial reporting of DCRB.

I am also happy to report to date that DCRB has been among a select number of public systems to ever receive the Public Pension Coordinating Council's 2025 recognition award for funding and administration and recognition of meeting professional standards for planned funding and administration.

And for the 17th consecutive year, DCRB was awarded on December 8, 2025, the Government Finance Officer Association Certificate of Achievement for Excellence in Financial Reporting for the Fiscal Year in the 2024 ACFER annual comprehensive financial report.

The highest form of recognition in government accounting and financial reporting.

We also received the National Conference on Public Employee Retirement Systems, also awarded to DCRB with 2025 Certificate of Access for Public Pension Reporting and Transparency Award.

Fiscal year 27 required district payment to the fund, our budget.

The district's certified fiscal year 2027 contribution to the fund total totals 221 million and eighteen thousand dollars, which consists of two components, the proposed contribution of 77 million and 52,000 to the teachers retirement fund as reflected in teachers' retirement system budget.

It represents 1.5 million dollars, 2.06 percent increase from fiscal year 26.

The proposed contribution of 143,966,000 for the police officers and firefighters retirement fund, as reflected in the police officers and firefighters retirement system budget, represents an increase of $6.35 million or $4.61 percent from fiscal year 2026.

The $221 million is the employer contribution amount certified by the Board's actuary as actually determined employer contribution for fiscal year 27.

The Board certified this amount to the Mayor and the Council in January 2026 for inclusion to the district's approved budget.

The total contribution of $7.9 million or $3.7 million higher from fiscal year 26 is outlined for the following reasons.

$25.5 million attributed to the investment return for the period ending 930, 2025, offset partially by the prior year's returns, 32.5 million attributed to demographic experience being less favorable than assumed in the prior year, largely higher than assumed pay increases attributable to that.

$2 million attributable to the lower than assumed post-retirement benefit cost of living adjustment, and $6 million is for the adjustment for actual actual versus expected covered payroll.

The decreases are offset by $8.9 million in increases from the normal costs.

The district's contribution of $221 million is $5.37 times the size of DCRB's operating budget of $42.1 million.

These contributions plus investment earnings will create reserves that will cover the negative fund cash flow when the district benefit payments exceed contributions for each of the plans in total.

This is an expected occurrence as the plans mature.

Proposed operating budget for fiscal year 27.

The proposed budget meets the agency's goals of efficiency, service, and stewardship at all levels of the organization.

Further, the proposed budget provides the necessary financial resources to handle and improve the agency's day-to-day operations and to achieve its strategic priorities to better serve the plan members and meet the set risk adjusted returns.

We continue to partner via MOU with various district agencies to support our operations and are making strides to strengthen various internal functions by planning to onboard specialized staff and assess the organization's needs from not only the staffing but structure and operational needs perspectives and ensuring that the budget provides departments with the necessary funding to ensure that there are sufficient resources for continued sustainable success.

DCRB's budget is classified under enterprise and other funds.

The budget amounts come from the trust fund, and any unspent amounts remain in the fund.

As it's November at its November 25 meeting, the Board of Trustees approved the agency's proposed fiscal 27 operating budget of $42.2 million.

This budget is comprised of $18.5 million in personal services and $23.7 million in nonpersonal services.

The budget represents a $2.4 million increase, 5.98% increase from the fiscal year 26.

Personal services increased $1.82 percent by $330,000.

The increase is attributed to an increase of eight additional FTEs, COLAS, and fringe benefits.

Nonpersonal services increased by $9.47 percent, $2.05 million.

The primary drivers of the $2.505 million increase include contractual services at $2.6.

The increase is offset slightly by the decrease in consultant and custodial fees of $225,000, professional services of $362,000, and IT software maintenance of $225,000.

Executive office, the decrease by $42.83 percent, equivalent to $1.27 million.

The decrease in personnel services offset by the addition of one new FTE and various salary adjustments.

The decrease in nonpersonal services of $264,000 is mainly due to supplies, $7,000, printing, $150,000, which was shifted to benefits department training, membership dues, conference fees, and purchases, equipment machinery of $95,000.

The decrease in NPS is offset by increases in local travel by $6,000, and office support by $2.25,000.

Investments has a proposed decrease of $1.08 percent, $44,000.

The increase in personal services of $63,000 is due to compensation increases and fringe benefits, which are offset by decrease in bonus pay.

The increase of $175,000 in nonpersonal services, primarily due to online services, which equivalent of $149,000, postage, $250, conference fees, $1,000, contractual services of $25,000.

The increase in NPS, nonpersonal services is offset by decrease of $283,000, mainly in professional fees, postage, training, membership dues, and custodial fees.

There is a decrease in the trustees budget of $2.45 percent.

This mainly includes is attributable to professional fees increase of $20, $20,000, and it has offset by decreases in supplies, transit, parking, office support, postage, conference fees, and contractual services.

Legal and compliance was a decrease of 6.7 percent in legal and compliance of $353,000.

The decreases due to salary adjustments, bonus pay of $375,000.

The increase in nonpersonal services is the amount of $21.8,000 is primarily due to supplies, transit parking, office support, and conference fees.

Benefits, administration, an increase of $623,000.

There is a $474,000 increase in personal services, that is attributed to three principal new FTEs, as well as increased compensation and benefits, and to execute new functions related to expanded member benefits review, processing, and membership records management.

The new positions will support the Department's diverse operational demands arising from the plans, increasing memberships, associated benefit services, as well as the benefits administration pension system.

There is a total decrease in nonpersonal services of 21,000, which is due to decreases in travel, professional services, membership dues, and training.

The decreases are offset by increases in printing, postage, and transit parking.

Operations increased of 4.15 percent, an increase total of $315,000.

The decrease is in nonpersonal services of $367,000 is mainly due to travel out of city maintenance and repairs, professional fees, insurance and bonds, audit costs, training, advertising, and contractual services.

The decrease in MPS is offset by increases in rent, transit and parking, supplies, and membership dues.

IT.

It was an increase in 25.8 percent, 3 million.

DCRB continues to review and approve its overall IT infrastructure and carefully plan for its future technology technological needs.

The fiscal year 27 budget includes funding for ongoing maintenance of IT systems, administrative systems updates, software maintenance, and technical support of newly implemented benefits pension administration system, as well as new financial management system.

There is a $590,000 increase in personnel services due to three new FTEs.

The decreases in non-personnel services of $415,000 include telephone services, travel, training, conference maintenance and repair equipment, professional service fees, and IT software maintenance, which is offset by increases in supplies, contractual services, postage, and equipment.

DCRB continues to partner with the DC's October several MOUs for network and server support services, software applications, and data services.

These agreements are routinely revised based on agency needs annually.

We have a cost-sharing arrangement with the U.S.

Treasury in which U.S.

Treasury reimburses DCRB for third-party benefits administration provided on behalf of the frozen plan, specifically the reimbursement for its costs associated with servicing frozen plan members, agreeing to special benefit project requests, and the positions responsible for completing these tasks.

We expect to receive approximately $4.7 million from U.S.

Treasury for these services in fiscal year 27.

Conversely, DCRB makes a payment to U.S.

Treasury each year for payroll services, postage and distribution expenses, as well as maintenance system upgrades expenses related to STAR, the U.S.

Treasury's pension payroll system.

For fiscal year 27, $4 million has been budgeted.

Closing, I would like to thank the Committee of the whole and DCRB in helping DCRB carry out and accomplish its goals.

Any questions, Chair Mendelssohn?

Yes, I have a few.

Wonderful.

According to your latest actual evaluation, next year's combined annually determined employer contribution will be $217 million, up by $14 million from last year's contribution.

You testified at the performance oversight hearing, with your actuary weighing in that these swings are the result of various experience changes, like changes to contracts, et cetera.

Is that a fair characterization?

That is fair.

Yes.

Each year you send the mayor and the council the annual report with evaluation that drives the annually determined employer contribution.

Numbers that are numbers that are the numbers in the police fire retirement budget chapter and the teachers retirement budget chapter.

As you know we budget not only the upcoming fiscal year but through the four-year financial plan.

Do you provide the mayor's budget office with those out year costs or are the costs they use in the budget model driven by either the mayor or the OCFOR They're driven by our needs and our contributions to the DCRB, the retirement board a five-year projection of cash contributions.

And then you share that with the mayor and the OCFOR Yes we share and have you looked at what's in the financial plan to see if they match what your projections are we have not looked at whether they match but usually they the attempted match it in the prior years.

Can you give me the projections for the annually determined employer contribution for the next four years that would be 27, 28, 2930?

Certainly go ahead.

Yeah go ahead have that from our actuary here.

Thomas any actually for Bolton we have a projection here now or just go ahead and say what it is and then you can give it to us so the projection for so fiscal 2021 2027 was 221 million dollars in rounded figures as was mentioned.

For fiscal 2028 it's projected to be 222 point six million dollars for fiscal 2029 it's projected to be 192.1 million dollars for fiscal 2030 it's projected to be 177.6 million dollars and for fiscal 2031 it is projected to be 183.9 million dollars I expect it to go up I know that there are a whole lot of factors but why does it go down from 222 million to 192 to 177?

So the reason it goes down is as JP mentioned we are have outperformed the investment returns at overall over the last five or six years.

However the way the actual calculations are done is we take into account each year's returns and to the extent they overunderperform that particular year we then phase in the impact of that over underperformance over that period of time.

So we will be ending the final phase in of the 2021 year which was a negative year, a bad return year and but we are still phasing in the excess returns that have occurred in each of the subsequent years.

So the phasing in of those excess returns is what is driving down that projected expected actual contribution.

Okay.

And then when you're done testifying if you could give us that page yes happy to thank you.

Moving to the biggest policy issue that the committee has been struggling with for almost four years now the deferred retirement option program.

In short this would be a new program layered on top of the existing retirement program for our public safety workers, police and fire that offers an incentive for existing workers to continue working to continue working after they reach their maximum retirement eligibility by allowing them to bank their annuity payments for up to the three years they may continue to work when they do then separate fully from service they would receive the lump sum of the annuity payments they would otherwise have been getting so let's see we have had some exchange of correspondence I want to thank you for responding to the committee's latest draft committee report that we shared with you earlier this year.

While I don't want to concede many of the points you use to rebut our framework I do want to focus to focus in on the budget issue you raised that it is your assessment that DCRB plan assets and therefore the budget before us cannot be used to support or administer this new we'll call it overlaid drop benefit program on the benefit administration question is that a fair characterization of the board's legal position?

That is.

Setting aside the source of funding for a moment, if a drop program were fully designed and compliant with applicable legal and tax requirements, does DCRB have the institutional capability to administer such a program?

It depends.

As we have given you three different iteration proposals from you responses, it is always best and most thoughtful to give us a thoughtful proposal for us to review and assess.

As of the last iteration, we gave you a thorough review and assessment, but your query is very vague because for us we need more details on a fourth proposal from you that would make sense.

And we haven't had the opportunity to review any latest proposal other than the one that we provided a response on earlier in this past fiscal year.

I am more than happy to revisit and re-restate our response from that latest version, if you'd like, but I can't answer thoroughly or thoughtfully your query, which is very generic, unless I have a proposal that involves being subject to regulatory requirements, fiduciary requirements of the Board Trustees and management to its members, and financial and budget requirements.

But in essence, anything outside our current operating requirements, which would involve any new administration of any new types of benefits that are outside the current benefits we manage would entail reimbursements from some district agency or agencies that are requesting such.

Well, that has to do with the source of funding, whether it is internally funded or funded from outside.

I think that is what I just heard you say that it would require outside funding.

From the district.

So again, to talk generically would not be helpful at this venue.

I think the best thing to do is to have, if you have a different proposal than the last one we have thoroughly reviewed and provided you as you thanked us for providing you information and analysis on that didn't work, we would be more than happy to look at a fourth iteration that you might have.

Well, my question was whether you have the institutional capability, not about sources of funds.

To administer a drop program compliant with applicable legal and tax requirements.

Right now we haven't received any version of that.

We also discussed with you why the district is unique as opposed to other States or counties.

I think that it would be a lot more thoughtful to give something of a proposal that you think that we could potentially work with.

Until now, we have not received that.

But we would be more than happy, as we always have, to thoughtfully review and respond to the needs.

We always want to help our members, including members that we want to try and retain, but we cannot put the whole plan and all the fund under any form of jeopardy by only handling a few.

We must look at what that means, what it triggers from our plan point of view, how it might disturb compliance with our fiduciary requirements and regulatory requirements.

So again, I can't speak generically or respond to you generically, but I can offer you that we are always available to respond to any thoughtful review and proposal and assess it to see if it works for the betterment of our members.

Well, I feel like that's not really addressing my question.

Well, your question, I understand, but your question is whether we are capable of administering.

Well, we're capable of administering what we're allowed to and permitted to administer.

Until now, the drop proposals that have been provided to us are not something that we could do.

Well I also don't think this is the venue to thoughtfully discuss it.

Well um let's see I guess maybe there is some vagueness in asking if there's the capability so let me try again.

I am not asking if you are legally capable I am not asking if you are financially capable I am asking whether the retirement board, the staff has the would have the ability to administer a program if legally it is permitted, financially it is funded, the program is designed to meet tax requirements.

So everything about it is perfect.

It's just whether you could do it I I the only way I could thoughtfully respond to you is it depends on what you propose, what kind of program proposed.

To date the programs proposed have not been something we could do and you have all the reasoning and the paperwork and our responses So I think one of the arguments I think the strongest argument that maybe I shouldn't put it that way the primary argument you have raised is that you can't use plan assets.

Absolutely That means yes one of your biggest the your priority concern is that you can't use plan assets.

That is one of them.

Well what are the others?

Well I mean we can go through this but I don't think this is the appropriate venue because if you would like we could use in answering that question we could use the last iteration you provided us and explain publicly why it didn't work.

Sure, go for it.

I I just don't think it is a good use of time.

I think the best use of time is that we would be happy so long in answering your question so long as there is third party funding for it and legally it complies with our fiduciary and regulatory requirements and that we are provided the funds to bring in the personnel to do that work and reimburse for it from a dist from the district timely that it's possible that we could do it.

But right now I don't have a design or framework from you to discuss so it's it's difficult to do that without a bit of an unfair characterization.

But so if it were to be funded outside of the retirement system, outside of the current retirement system You mentioned fiduciary I am not quite getting that so your members and I guess your staff have a fiduciary duty to ensure the integrity of the funds for the three retirement plans.

Correct.

Okay does that mean that nobody can do anything else?

No I didn't say that I already am asking does that mean nobody can do anything else?

It means that we can't do anything else that we haven't that we aren't approved to do and it means that we can't do anything else unless it is something that complies with our requirements.

I am not getting that again you are asking me a vague question.

So if we over plan if we give you a new plan I am not getting how that affects your fiduciary responsibility to your current plans you can do other things.

Well you like you go home at the end of work that doesn't affect your fiduciary responsibility plans or designs or even requested us to design which we can't do in the past that we can't comply with because you are asking us to reinvest our own assets and to actually use our own monies to administer them.

That is why we couldn't comply with them.

To date we haven't received any proposal based on what you and I have just discussed that that handles those issues to allow us to comply but there is only one issue you just mentioned and that was requiring plan resources or plan assets.

That's the only issue you have mentioned that and fiduciary responsibility so each of my questions to you has been if we funded this outside of your plan assets and every answer you given me is you can't answer it because you don't know what the impact is.

I'm not getting that very simple again we can complot we can provide a service to administer any additional plan that doesn't take from our current assets or administrative ability and capacity and that is provided for by the district any additional funds to administer any such plan so long as it complies and doesn't have any problem in creating or noncompliance with our current plan.

That's it.

If you provide a proposal and a design of another drop plan, which you attempted to do over the last three times over the last two years, which didn't work, and we gave you thorough, thoughtful responses on, I'd be glad to look at a fourth iteration.

Absolutely.

We would love to help the members and our police force, uh of which is represented on our board of trustees by retired member and an active member, and the union, we would love to help them.

So with all due respect to translate what you said, if we we the government fully fund a drop program, not the DCRB, pay a penny.

Administer that.

If you fully fund a drop plan that provides us with a design from a third party, including DC or a consultant of D the district, because we're not provide we're not permitted to design any plans.

If you you you are the program sponsors are the district government, as we stated in our testimony, but if you provide the funds, and you provide a plan that does not that complies with what we require to comply with tax laws with our regulatory obligations as fiduciaries, potentially we could do one.

But to date, we have not been provided that.

That's what I'm trying to say.

You keep asking me if we we can, but I'm more than happy to look at a fourth version.

So that sort of sounds like an answer yes to my first question.

Setting aside the source of funding, if a drop plan were fully designed and compliant with applicable legal and tax requirements, does DCRB have the institutional capability to administer such a program?

Potentially.

And if the district were to provide dedicated local fund outside of plan assets to support the administrative cost of such a program, would that address the board's concern regarding the use of plan assets, regarding the use of plan assets?

Sounds to me like the answer to that is yes.

Potentially.

So under that structure, where the program is properly designed and supported with separate local funding, there would not be a legal barrier to DCRB administering the program, correct?

Potentially.

Isn't that conceptually similar in concept to how DCRB currently administers the frozen plans on behalf of Treasury?

Where the board performs administrative functions while funding and obligations are handled by Treasury.

Again, I have control over what those plans entail, therefore I can answer clearly what my current plans have, but to date I haven't received a plan that meets those requirements from your staff.

So then the issue is how it's designed and funded.

And who designs and funds it, right?

Which is the district, the plan sponsor.

So Mr.

Ball Street, you have a pretty good sense of who the current annuitants are, the ones who are actually receiving pension payments.

I don't know them personally, but I knew I know of the group of who we've we provide annuity payments to, yes.

And so I would assume you have some sense of if we do a drop program, how many folks we're talking about, what kind of folks we're talking about firefighters, police officers, people that you're plugging into your um retirement program.

From an operational standpoint, what would administering a drop program require in terms of staffing and resources?

Are we talking about a small number of staff like two or three?

And what are we talking about in terms of a supporting system like a $20 million computer system or something that the only way I can thoughtfully respond to you is that until I see a plan with whom and how it impacts operations, I can't thoughtfully respond to you because I haven't received any plan.

I am not getting that.

And the reason I'm not getting that is that you know how many firefighters on average retire every year.

Or you know if there's a bubble coming.

You just know that.

Uh it wasn't my question.

Do you know the number that's impacting?

So, Mr.

Vincente, I am assuming that you look at not only the current population, but the future population.

In doing our annual actual evaluation, correct.

We are dealing with the snapshot in time of the population.

Yeah.

So you have a sense of I mean, you could be wrong, but actually you guys are pretty accurate.

Uh you have a sense of how many firefighters are going to retire next year or in each of the next five years.

I realize you will adjust those projections as we go through time.

But you have a sense of that.

Yes, we have assumptions built into our evaluation, which project out the number at different ages and service levels of police fire and teachers who are retire in the next year's suing year and so forth.

Yeah.

So if I asked you, I don't and I'm not going to ask you to give me the number, but if I asked you what do you project the number of firefighters retiring next year is in two years from now, you could give me uh at least, if not a number, a rough order of magnitude.

Yes.

We can give you a projection.

Okay.

We can give you projections based on assumptions, but you also have to think about if all of them that are projected want to opt in.

We don't know that.

We can give you a generic projection, as Mr.

Vicente explained, but we don't know all if all of them want to opt in.

We only know if they want to opt in until we see the actual design program if it makes sense for them and for DCRB.

With all due respect, I think you are being a little nitpicky.

So I don't have the numbers in front of me, but I'm guessing there are maybe 2,000 firefighters.

And I'm guessing that all 2,000 firefighters are not even close to retirement age.

So it's some number.

It might be 100, maybe it's 300.

So let's just say it's 300.

Okay.

Does it take do you to do it uh administer retirement benefits?

Do you need 20 people for a hundred people?

No, for 200 people?

Do you need 20 people to administer their retirement benefits?

No, I never said I did.

Well, I my question to you is what would require in terms of staffing?

Uh a small number or uh what?

And you won't answer that question.

I could only give you perhaps a handful.

Five to six people to administer that?

All right.

Well, it's usually helpful because five or six tells me it's we're not looking at twenty, we're looking at five or six.

But don't quote me because I haven't seen your plan design yet.

You're very clear that you're giving me a rough estimate.

Okay.

And what about uh supporting systems like I guess software?

Again, I don't know if it can I depending on the plan.

I don't know if it can be on the same system or a different system, how it's required to be at arm's length the potential plan.

Uh we'd have to see what the design of the plan is.

But potentially, depending on the design of the plan, it more than likely would entail a separate at arm's length system or categorization within the same system.

Not sure yet.

Again, I can't thoughtfully respond to that.

I would love to be able to respond to that.

Well, you know, when I go to the bank to open up an account, they don't create a new system, they just create a new account within the existing system.

And that's what I said.

Either it might include the it might involve a separate system because you might create a plan that involves a third party handling the actual segregated group for those annuities, however, we might work with that segregated system in administering those payments.

But that segregated system might be a third-party proposal you might see that much is much better than handling it in our plan.

I don't know what that is.

I'm trying to say that it could be that, or it could be that we, as your bank hypothetical, would open up separate accounts for that that might make sense.

But that again is depending on the the viability of the plan and design, and I can't thoughtfully answer with that kind of detail.

Would it require entirely new positions, or could people have their time accounted for separately?

So, you know, I mean a lot of like grants uh No, I would have specific people doing that.

More than likely.

My pension administrator is here, and I think he would say it's more viable to have people separately doing that and focused on that.

Yeah, we have a couple issues at hand here too.

Uh right now we use the uh STAR payroll system uh that disperses our accounts, and now we have to set up separate accounts.

We would have probably separate people to monitor those accounts, and we have a finance function, an auditing function, and then an IT system that would have to be uh coordinated.

We could not use the U.S.

Treasury to set up those accounts, as I understand.

And so that is where we're at.

And I do have by by the way, age service distributions.

Page 31 of the actual order report shows by uh by age level how many MPD folks there are.

For instance, age 50 to 54, about 318 of the 3,000.

So you want to see distributions of how many we're talking about?

You can get an idea of the level, but there will still be some FTEs associated with that uh because we are normally doing normal benefits administration work, plus we're implementing the new pension system too at the same time.

So separate people.

I think that might answer.

Yeah, that just goes back to me.

So let me I think these are more technical questions.

And so for Mr.

Vincente.

I don't want you just sitting at the table quietly.

Under a program design where retirement eligible members defer receipt of their annuity for up to 36 months.

And those amounts remain in their respective police and fire funds during participation?

Those funds would retain those assets for a longer period than it otherwise would.

So you're saying an individual who could retire in 2026, but instead does not retire.

Defers retirement.

Retirement to 2029.

So yes, the funds would remain in the pension fund for those three years.

Well, uh I'm asking in the context, I'm thinking about the a drop program.

So the firefighter could retire.

Did the firefighter decides to use the drop program, defers retirement for three years?

So it doesn't get the payment.

So those funds remain in the program.

Excuse me, remain in those retirement payments remain in the fund.

I think I just answered my question.

Those funds would retain those funds, meaning the police retirement fund would retain those assets for a longer period than otherwise would have been expected.

If they if they sit in the pension fund, yes, they are they're going to be in the pension fund for longer than they otherwise would have been if the re if the individual was going to retire at that earlier date and decides not to.

And those retained assets when continued to be invested as part of the overall fund, because the fund is invested, would earn whatever the fund's actual rate of return is during that period.

I think that depends on the design of the drop program.

So there are some drop programs where that is exactly how it works.

The money stays within the fund and the money is paid out.

There's other drop programs where the money is then rather than remaining in the fund, it's actually shunted across to a separate side account invested separately in a different way, and so not part of the overall body of the pension fund.

So there's a lot of different varieties of these drop programs out there that are done in many different ways.

So my question was plan A and your answer, and that is they would just remain in the fund.

They remain the fund and money's in there, it's in the fund.

There is one limitation to that, uh, since the drop program is basically you retire and then you take your annuity and move it to a fund.

Right now, our STAR program doesn't operate in no set of accounts.

You either get an annuity or you don't.

So that's where I was talking about plan design and Tom was talking about plan design.

What are our options here to uh to to use that, whether we can't commingle it in our with our pension funds right now, but we are based on our current system only obligated to pay an annuity out.

And that's what the that's what the U.S.

Treasury.

We have no uh recourse on that.

So if the participants are not credited with any investment return on those deferred amounts, and those deferred amounts remain in the fund, that would mean the fund retaining the full benefit of those investment earnings during the participation period.

I think that's a sort of a yes.

Right.

If the money stays in there, then the return, it gets the positive or negative return on the invested assets.

Um to the extent that experiences positive, that is the investment returns are positive.

It could be expected that if we design it this way that the uh deferred retirements remain in the fund, the fund is collecting interest, that could modestly, I emphasize modestly offset future employer contribution requirements, even if only that's only one factor among many in the calculation of the annual contribution.

So strictly from an actual standpoint, the answer is it depends.

It depends on whether the individual in this case, you know, you're you're looking at two parallel universes.

You can't do both.

The individual could in fact say, you know, I could work those three years and get a higher pension.

That's one scenario.

They could say I'm gonna stop working and take my pension, or they could say, you know what, I only want to work two more years, so I'm gonna put in my drop paperwork a year earlier than I otherwise would have retired, in which case then you may be incurring additional costs because the money is being calculated in an earlier date, the person's effective retiring a year earlier than those would have.

So those are the kind of things that we look at from an actual standpoint to say, you know, how is behavior changing?

Are individuals are the time they're entering drop, is that the same timing that they were retiring in the past, or are they entering drop earlier than when they were retiring in the past?

Are they sticking around later?

A lot of that goes into how the eligibility for the drop program is set up.

If it's set up to be you can't go into drop until the full retirement age where everybody is expected to retire anyway, then what you just said is true.

If they're actually going out earlier or entering drop earlier than they were otherwise expected to retire, that could actually increase costs.

Another factor would be what happens with cost of living adjustments while the person is in the drop program.

Do they get credit for cost of living adjustments that are made for retiree benefits during that period they're in drop, or is there benefit not subject to those cost of living adjustments that go in with the inflationary adjustments that the pension has?

So there's a lot of different moving pieces there.

Um when we do these kind of studies, we do look at a lot of levers.

And one of the levers you mentioned, which is an important lever is the drop account afforded any kind of investment return credit.

Usually the usually the less, the lower the investment return credit given, then the more likely it is that the plan will not have extra costs because of the drop program.

But really, we see we've seen programs where the labor side has pushed very hard for drops, and then ultimately very few people take it.

And so it has a non-impact at all in other situations where it's become very popular and everybody takes it.

So it really is quite a gamut of what we have seen from experience in terms of how these things have worked out.

Well, I'm guessing the ones that are really popular are the ones that offer a rate of return on the deferred and deferred payments.

Generally, yes.

Generally, the more lucrative it is, if you're giving, for example, some sort of investment return guaranteeing in the drop, if you're giving credit for post-retirement cost living adjustments to the amounts accruing in the drop account and into the open pension, if you're allowing them to take the drop earlier than their full retirement age, so it's some sort of early retirement age, then yes, those tend to be more popular.

But a lot of it goes to the culture as well of the or of the of the entity.

Some have a culture where folks stay around, others do not.

So it really does vary quite a bit.

Uh people don't always, with the drop, act in their own best financial interest.

What we what we would calculate in dollars and cents, their financial interest.

Because of course we don't know what their own personal situation is.

And a lot of times the members will be making decisions based on their own personal situation, which could encourage them or incent them to take retirement earlier or later.

And that's something we can't really tell until we start getting into it and seeing what's happening at an entity.

You know, if you have a drop program, we would make some initial assumptions about the timing of when folks would take the drop benefits, but we would have to true those up in subsequent years as we see what the behavior actually is doing.

And you know, how is it affecting the timing of retirements, how is it affecting the drop payments, uh, what's happening and so forth in those types of situations.

I also think that goes to the also the intent, Chair Mendelson, is to have these officers or fire retire at their regular retirement age and stay an extra three years, two to three years, because of the shortage.

So you don't want to put in a drop program where you're motivating these officers or fire to retire a year early and then and then only work a couple more years.

It's kind of defeating the purpose.

So again, as Tom Vicente explained, it really depends also on each individual's intent and the culture in each of these departments.

And that is part of a thorough, thoughtful discussion process with the district sponsors, the agencies on what they're trying to accomplish before you get to a design, before you get to a design proposal, uh something that meets compliance requirements and tax requirements.

Again, we'd love to help.

Thank you.

Um Mr.

Vincente, how much does Bolton work with agencies that have drop plans?

Um a significant number of our clients, especially public safety have drop programs.

Give me a second.

Mr.

Ballastry, um, you were here with the testimony uh from Mr.

Rabin with regard to not getting information about uh Yes.

Uh so I'm reading his statement.

We are finding it impossible to get what should be public and accurate information.

Do the pension plans of the District of Columbia work with black people, women, and Latinos or not?

They sent a FOIA request, as I understand it.

And he said the FOIA denial says that whether DC works with women and people of color to manage assets is a quote, proprietary trade secret, unquote.

Yeah, I'm I'm not sure it's about being a proprietary trade secret.

I don't know where where that's from, but it's more important to explain that, you know, first DCRB probably continues to operate as one of the most diverse pension funds in the U.S.

DCRB probably continues to operate as one of the most diverse pension funds in the U.S.

Diverse pension funds.

What does that mean?

Because that could be Which means a workforce that is comprised of 62 percent female and 82 percent minority employees.

Is that is that DCRB or your DCRB?

Okay.

Okay.

Now Mr.

Rabin's group went through a FOIA request for private information on our investment managers' DI investments.

We contended in the process that we could not provide more than what was publicly available in the ACFAR, which comes from an online pursuant to confidentiality terms and conditions with investment managers, which is provided to us by Makita, our consultant, as well as what we can obtain from all investment managers, which is always published transparently in the ACFR.

Now we cannot go ahead and grab more than what is provided to us.

But everything that is provided to us on diversity, equity, uh, uh on the diversity of minorities in both ownership of these funds as well as operating executives in these funds and officers of these funds is provided to and obtained through Makita consultant as well as our investments team.

And everything we can obtain, subject to confidentiality requirements with these agreements we have with investment managers, and what is available for Makita, we provide on the ACFER.

Not to cut you off, but I'm not understanding what you are saying.

Everything you are provided, everything you are provided, you provide.

Okay.

I don't not quite sure what that tells me.

And that you can't provide anything that you are not provided.

Well, as a general statement, I suppose that's true, but I don't know why you couldn't ask for something.

So let me go over this more particularly.

As I understand he wants to know whether your asset managers, and I assume an asset manager might be a company, so it might be uh, you know, 10 employees if it is a small asset manager.

Um I'm assuming, though, that you know the gender and race of the at least the principal of your asset managers.

We do.

And we provide that information.

Uh what I'm explaining to you.

We provide every information that we ask for that's available that legally we are uh able to do that.

I don't know what that means, legally able to obtain.

So do you think that's the same thing?

So if an investment manager has a confidentiality agreement with our consultant or with their LPs, which includes perhaps DCRB, who is an investor limited partner in this investment fund, they usually provide in the ordinary course everything they do provide and will provide the institutional investors, including DCRB and the consultant Makita or other consultants that work with these investment managers, everything they can.

In the ordinary course, we put that all out there, and we report on that as we're required to report everything we can possibly obtain.

I still don't know what that means.

So what is what is uh so you don't work directly with your asset managers?

We work directly with our private equity investment managers, and then we have our investment consultant that helps us with our public investment managers and our public equity requirements.

So most of our asset managers is not direct.

So let's talk about your private asset managers.

Is that what you called them?

Private asset managers?

Sure.

And you work directly with them?

We work directly with them.

Okay, and you can't tell me what the gender or race is of people, principles in those firms?

Yes, we do.

We have that information.

And we provide that information publicly in our ACFER.

And have you provided it to Mr.

Rabin in response to his request?

Absolutely.

He has gone through the FOIA requests.

We have explained as well as the mayor's office and the appeals.

All the information that is.

No, we we we provided everything that is available to us, known to us and available to us.

Did you ask your private asset managers or race?

We absolutely do.

We asked them everything they can give us.

We have to ask them that did you provide that?

We did.

We put it in our ACFE.

So then why is he say FOIA denial?

Because he was trying to get more information that wasn't available that we don't have.

I don't recall right now.

Well, that would be helpful to know.

So let's see.

Then there were the public asset managers.

So and it sounded like what you said was that that's not a direct relationship.

Public managers always work with our consultant in providing all information available that's since they are public, they are publicly required to disclose any such information that is required from them legally and whatever that is.

Does that include race and gender?

Potentially, depending on which one is provided.

I can't speak for every public investment manager.

Well, you just said that it is required, so I assume that was a like a federal requirement or something.

There's no federal requirement for that that I am concerned of.

And we primarily focus on our fiduciary duty to focus on prioritizing maximizing returns and minimizing and mitigating risk for our members.

And in the doing so, we can provide all information that is available to us, including information on the diversity and minority information and data provided to us by both private and public investment managers, and whatever is available in public sources.

We do whatever we are able to obtain, we put on in information in our ACFAR, and we transparently provide.

So I have no sense of whether this is a passive passive act on your part or active.

You report such information you are given.

Do you ask for this information?

We do.

We ask for all information and whatever they are able to provide us, they provide us.

And whatever they're whatever they're able to.

So they're not able to report their sex?

Sure they are.

Okay.

And we provide all that information.

Again, I explained to you.

We provide that information in our ACFR.

So then why is Mr.

Raven saying that you are denying his request?

I am not denying his request.

I'm providing.

Well, I think he's also embellishing.

Well, it's a quote.

So you think he's not being truthful here?

No, I didn't say he is not being truthful.

All I'm saying is what we provide is everything possible that.

And that kind of bothers me because I'm not getting why somebody's gender race is a proprietary secret.

I do get that if a public I'm not quite sure what that means, but a public asset manager with whom you don't work directly doesn't disclose information, maybe you're not able to contact them.

Yeah, I will explain to you one more time.

Whatever information we asked for and were able to obtain from both public and private investment managers, and any investment assets publicly traded that we work with and our consultant works with, that's allowable pursuant to whatever the law requires, and or pursuant to agreements that we have and confidentiality provisions we have with any of such investments, we provide and we ask for.

I don't know what else to say.

So let me go back to Mr.

Vincente again for a second.

I appreciate that we have my work for this, which I think is correct, the smoothing with regard to what the annual repayment is from the district?

The uh smoothing of the assets, the phase in of the investment returns that for the button.

But uh when I look at uh when I look at these numbers, so the actually this is not the total.

I'm just looking at police and fire.

Proposed for next year is 144 million, the last year was 137 million, that's a difference of six million.

Year before that was 143 million, that's the difference of what, uh six million?

That's not too concerning.

Uh FY24, the actual 79 million, 80 million.

That's a huge jump from 80 million to 143 million between FY24 and FR25.

Yes.

Uh I like that it's going down.

So compare FY28 at 222 million and FY30 at 177 million, roughly a difference of 50 million or 45 million.

But those are actually big swings.

Is there a way to smooth that out more?

So the spike ups have been driven by the timing of collective bargain agreements and the existence of retroactive pay increases.

So when we do our valuation every year, we're taking the actual pay information, pensionable pay information from the prior year.

We're using that for our forward-looking projections using different assumptions about how salaries gonna are going to go.

So what what the cycle has been, and it's been a little bit of a challenge.

The cycle has been here's a couple of years in a row where things look pretty normal, and then we have a couple of years in a row where, as I understand it, collective bargaining agreements have expired, and so pay increases have not been gone out, or certain pay increases have not gone out, and so we'll see actually speaking, what we call gains or favorable experience because pay increases haven't been as high.

And then after a couple of years of that, we see a reversal of that because there is a collective bargaining agreement that's signed or an arbitration agreement that's that's settled, and there's retroactive pay increases, which then essentially fills in the the increase that didn't occur the prior two years and comes in.

So going back to the year you said where there was the big increase, that was a year where all three unions, all three groups had a significant retroactive pay increase.

That's what led to the spike.

Um that's also what led to the increase this year.

Um there was a retroactive increase this year, but only for two of the groups and not as not as large as had been in previous years.

We're currently right now in the process of doing what we call an experience study.

We review what's happened over the last five years, what the timing of different changes have been, and we're trying to work with DCRB to figure out how we can smooth out these what appear to be regular but not predictable increases due to the arbitration awards and the retroactive pay increases that are have been part of them.

Um it's difficult because we don't, of course, know when the different awards or different contracts will be signed.

We don't know the level of any retroactivity that will occur if it will occur at all.

But we are working to see if we can do something about that, so we don't have this cycle of an increase in contributions followed by two or three years of decreases as contracts settle down, and then that then they're in that period where they're being negotiated, but they've expired, and then we have another spike due to retroactive pay increases.

So we're working with them now to try to figure out how can we smooth that out to knowing that we can of course never predict that accurately or not accurately.

We can never predict it uh exactly um how that's going to work.

But to put something in place so that we can avoid some of this cycle of ups and downs due to that aspect of the of the actual experience.

But that's been the piece that's been been very hard to predict.

So these big swings that occur every now and then from one year to the next.

It's not due to the stock market.

We've figured out how to smooth that, but it's due to these collective bargaining agreements.

There's two pieces of it, right?

The the the liability side is being driven by the pay increases, the asset side is being driven by the stock market.

So when we do our contribution, we're always looking at what's the gap between the liabilities and the assets.

And the allied business and assets are fairly close together, as the plan is 104% funded, as I think was mentioned earlier.

So they're pretty close together.

So you have two very big numbers with a very small gap between them.

And so relatively, it doesn't have to be an enormous change in any one of the two sides to change that gap by disproportional amount.

So example, if you if you if we said we had a hundred dollars in liability and a hundred and four dollars in assets this year, that's 104%, and then one went down, you know, the liabilities went up by two dollars, which would be just a two percent increase, and the assets went down by two dollars, all of a sudden our 104% just went to 100 percent.

So that is taking a 4 million, a $4 surplus became a $0.00 surplus, which can have an outsize effect on the contribution.

So that's part of what's going on with the volatility of the contribution.

Our contribution is made up in part by the cost of benefits being earned any year, and that contribution being earned is what's being driven by those salary increases.

So if there's a big increase in salaries, then this is a salary-driven plan, higher salaries, higher benefits being accrued.

If the investments do well or poorly, that's taking care of the asset side.

So these are the these are the two biggest drivers that we have right now with the plan in terms of the volatility of the numbers.

So I try not to go.

I'm still listening.

Okay.

Um but those are the big drivers of what we're seeing there.

So it's really two different things.

The asset smoothing, we have a tried and true process there.

Um when we see this dip, you know, when I the numbers I told you, they they kind of went up and they went down, then they're coming back up again out in 2031 and 2032.

That's because at that point we'll have fully phased in the strong investment returns from the last two or three years, and we're not building into these projections spikes in the salary increases.

Because our because we don't know when we would predict that to occur.

So we're just using our regular salary increases, which are an average.

They're based on an average of good of high and low years of salary increases.

So they're pretty level in these projections, but what we do have is we are phasing in the investment returns, and that's what's causing the contribution to go down, and then as you get out again to 2031, it starts to go back up again because at that point you fully phased in the contribu the um the stronger investment returns, and we're projecting six and a quarter percent returns from the valuation at four.

So no investment returns that are higher or lower than our actual assumption.

So that's what's developing that pattern looking forward.

And the piece that I'm gonna take away from this is that you are looking at um what more could be done to try to smooth this.

Correct, correct.

We've been we've been looking at different ways to try to smooth out the especially the effect of these uh awards that have seemed to give in these retroactive pay increases, which have caused some of the spikes in the contribution.

So we're working actively to figure out is there a way that we can develop a policy or an approach that's reasonable, because we can, of course, do things, but some might look at them and say this is this is a nice approach, but it's not a reasonable approach.

So we gotta do to balance that.

And we'll work with DCRB carefully to figure that out.

And we're in the process of doing that now, probably end of summer into mid-summer, we'll be we'll be putting the financing touches on that to go to the board and talk to them about what we found, what we're advising.

Uh thank you.

I have no further questions for you.

Um let me turn now to so you all are excused.

Let me turn now to the um Office of the Chief Financial Officer, and we have a lot of um non-government witnesses, so I'm gonna start calling them up.

Scott Goldstein, who I believe is here virtually.

Thank you.

And Sam Bonar, who is policy director of the DC Community Wealth Builders.

Is that you?

Come to the table, please.

Uh Ricardo Scheller.

The next five are with community wealth builders.

A number of folks couldn't make it today, but Danielle is here.

Who's that?

Uh a few of the folks you're about to call aren't here.

But uh Mr.

Thundergan.

Danielle Tharkin?

So I'll just call the names Ricardo Scheller, Hayden Simpson, Austin Cipriano, Brianna McGowan, any of those folks here?

Two are online, I believe.

Austin and Aiden, I think.

Yeah.

Jen Jenkins.

Are you excellent?

Erica Wadlington.

And Bentee Betty Gentle, who's senior director of advocacy in public policy at Swathers might be.

We have clocks everywhere.

So um please be mindful we put people on a three-minute clock.

And uh don't say you weren't aware.

Mr.

Goldstein, you're first.

Good afternoon.

February 2nd, 2023.

Martin Ostromule tweets per DC CFO Glen Lee, who's speaking to the DC council about the city's finances and budget, the 2022 fiscal year was pretty good.

834 million in unexpected additional revenue.

September 30th, 2024, Alex Coma tweets CFO Glenn Lee is revising revenue estimates up for fiscal year 24 by 72 million, projecting another 160 million over the next four years.

September 30th, 2025, Martin Oster Mule tweets some relief for DC.

A new revenue estimate from the city CFO shows that revenue for fiscal year ending tonight is 28 million higher than expected.

Revenue for the 2026 fiscal year will be up 289 million.

Plenty of folks expected the estimate to be negative.

This trend isn't harmless.

The CFO is either extremely conservative in his revenue estimates or extremely bad at forecasting.

I think as the leader of an organization, if my estimates were completely consistently that off in a way that caused my organization to not be able to enhance our activities in substantial ways that advance our mission, I would have been fired a long time ago.

The mayor, unbelievably, admitted this in her budget presentation this year, saying that on average the CFO underestimates revenue by 300 million a year.

This is money that belongs to the people that the council could have used to fund critical programs, like the Healthcare Alliance TANF for child tax credit.

It is not an exaggeration to say that people have been deeply hurt and people have died because the CFO makes a unilateral decision not to allow hundreds of millions of dollars each year to be budgeted.

It is deeply disturbing to me that the chief financial officer has decided to act as an elected official, inserting his personal ideology and acting outside of the bounds of his power to hold money back that rightfully belongs to the people of DC.

Finally, in a year where everyone is talking about tough choices, we are asking nothing tough from those who are doing fine despite a tougher economy.

The chairman has stated multiple times there are no revenue raisers that would raise anywhere close to what's needed for the pay equity fund and other big ticket items.

This is simply incorrect.

There are multiple taxes that would do so, including a business activity tax, which would raise $506 million annually, uh, and not deter a single business from operating in DC because they would have to pay it wherever they are located if they do business here, which large lobbying firms and law firms have to do, and simply close the loopholes that surrounding jurisdictions don't have.

We could create a dedicated revenue stream for Womata with a land value tax.

A wealth proceeds tax would raise $61 million annually.

Simply eliminating the stepped up basis loophole would raise $43 million annually.

Council can say that we already have a progressive tax code, but we also still have loopholes.

Our reality is our reality.

If the choice we face is the elimination of medical leave, reducing TANF, cutting off behavioral health for children, or asking the very wealthiest to pay a little more and eliminating their loopholes.

Is it really your position you'd prefer to protect their loopholes uh rather than fund these critical programs because you don't want to be seen as raising taxes?

We must do better than that.

Thank you.

Um Sam Boner.

Thank you.

Uh Chairman Mendelssohn, committee staff.

Uh my name is Sam Bonner.

I'm testifying today on my birthday.

Uh, on behalf of DC community wealth builders, a grassroots coalition building community ownership, locally rooted wealth, and an economic strategy for the city of financial infrastructure instead of endless incentives.

Instead of our usual economic development motto of attract and retain, which is increasingly fragile and often fiscally irresponsible.

We are asking you to consider another one, and we're open to workshopping it.

Maybe organize, execute, and build.

Um this means local jobs and sustainable growth that lowers the cost of social programs through economic infrastructure and systems that pay for themselves.

We're here with one ask.

Fund a dedicated FTE, an employee at that CFO's office, to finish the work that DC's already started on a public bank and a land bank.

Not a new program, not a new study.

One staffer to take the studies we've already paid for and fill in the gaps so the next administration can act.

Right now, the city manages billions in public funds at commercial banks.

The interest earned on those deposits goes to bank shareholders.

Meanwhile, DC borrows money through bond issuance and pays interest to outside investors.

That money leaves the jurisdiction permanently.

A public bank could reverse both those flows.

The interest DC pays could come back into the general fund instead of going to Wall Street.

This is not a new spending program, it's a structural fix to how DC's money works.

And there's lots of good data from the Bank of North Dakota, but I don't know I'm short on time.

So DC already studied this.

Uh the Disby commissioned a public bank feasibility study in 2020.

Uh DGS also released a land bank proposal, which again not going to get into, but another great idea.

Um both stuff confirmed the legal authority exists, the capital base exists, and the unmet needs are documented.

But neither study finished the job, and there's been no movement on the regulatory changes that would be needed to move this forward.

Uh the public bank study never was never uh never modeled what DC would save on debt service by having its own bank purchase municipal bonds.

Uh community members explicitly asked for the analysis, uh, but it was not done.

The study was conducted by a FinTech advisor that sells software to private banks, so that might explain why.

But it shouldn't take that long.

DC doesn't need to build stuff from scratch.

We already have DC housing finance agency and the green bank.

The public bank could start as an extension of those institutions.

A phased approach, starting with a revolving loan fund connecting to existing capacity, uh, captures most of the benefit without as much as the major upfront capitalization.

It would expand our capacity uh for our existing institutions as well as CDFIs, which is how the land bank works.

Um with how the bank of North Dakota works.

Um, when paired with a land bank and a public bank, the combination is a complete pipeline where we put our city's wealth to work and actually, you know, like wealthy people do uh to make sure that it actually can finance the things that we need.

Um I'm asking as a birthday gift uh to tap into your curiosity, ask some questions, and learn more, and I hope you'll um invest now in the long-term fiscal responsibility of our city.

One employee uh to move things forward, and I'm happy to hear your questions.

Uh, thank you, Mr.

Bonar.

Uh, Ricardo Schelder was not here.

Aidan Simpson is online.

Yes.

Hi.

Uh I'm here testifying today for the first time uh because I believe in this program.

Uh I live in DC in Shaw near Black Valley.

And uh testifying on behalf of uh as a volunteer with DC community wealth builders.

Uh so I I work in a small business and know the struggles of keeping the business open while supporting the community.

And uh this is my first budget hearing, but I feel very strongly about the issue because I believe our current system's economic development isn't working.

Uh therefore I'm asking you to keep DC's wealth local and stop businesses from closing by establishing local financial infrastructure like a DC public bank.

I'm making this ask because it will start to solve issues in our community that are not being solved by our present system of giving incentives to uh wealth developers uh to build in DC.

So a couple of the issues I'll be targeting are uh housing prices going up.

My rent uh personally takes up about 6% of my income.

Um it's just for me to be able to live close to my workplace.

Uh also small business fragility is faced with rising rent each year.

Uh the business I work for is facing supply chain issues and high rising costs where one small accident or repair can be really devastating.

And that's not just the one I work in, but so many small businesses around DC.

Um I believe that a land bank or a public bank uh would address these by putting control back in the hands of the actual community.

Uh instead of allowing developers to extract value with high prices, we can develop low-cost options that save people money, putting wealth back into the community as a result.

So a couple of things that uh a land bank or a public bank could fund would be permanently affordable housing.

Uh, this would provide a safe haven for displacement and put downward pressure on rents.

Um programs and grants that don't just help one or two lucky business owners, but uh entire local supply chains and infrastructure that might help the whole regional uh economy um as well as more than just one or two lucky business owners.

And uh and public grocery stores, the mutual aid groups that try to provide material goods and prices uh are always rising while needs are going up.

So what if we had grocery stores that allocated food to community members who couldn't afford it?

Uh all this is better than the current system where we give developers incentives and then they charge higher prices so they can skim off the top.

If we use these people's banks to finance community institutions, especially especially cooperatively owned businesses and housing housing, wealth can stay in the community and be controlled by the community.

Uh and we can get away from this exploitative profit incentive that uh developers often have.

So once again, I'm asking you to put DC's wealth to work through a public and or a land bank.

Thank you.

Uh thank you, Mr.

Simpson.

Austin Cipriano.

Good afternoon, and thank you for the opportunity to testify today.

Um my name is Austin Cipriano.

I'm a resident of Ward 1 coming up on my first year of hopefully many in the district, along with others from DC community wealth builders.

I'm asking the council to add a dedicated FTE, the CFO's office to advance DC's public bank work, continuing the studies that DC already commissioned, not starting a completely new program.

DC manages billions of dollars in reserves that currently earn returns for Wall Street, not its own main street.

Every time DC issues bonds, it has to pay private underwriters and institutional investors, not money leaves our city and its constituents.

Public bank starts to change that.

Interest returns to the general fund, bond financing gets cheaper, and our district's existing wealth starts working for DC and our revenue instead of for bank shareholders.

Mistakes go beyond just our balance sheet.

DC has repeatedly struggled to finance the things the market isn't building on its own and that are important for me and many others.

Permanently affordable housing, grocery stores east of the Ana Costia, and other community infrastructure in underserved neighborhoods.

The problem isn't that DC lacks the wealth.

It's that the financing infrastructure isn't designed to deploy it towards those ends.

A public bank built on institutions we already have is how we can close that gap.

We just need someone at the CFO's office whose actual job it is to move the studies forward and to run the debt service analysis the 2020 survey never completed, and to build a phase and plan using existing capacity.

I urge us to fund that position.

Thank you.

Thank you, Mr.

Cipriano.

Brianna McGowan, I believe is not here.

Good afternoon, Mr.

Chairman.

My name is Daniel Dadragon.

I was born and raised in Ward 1, and I'm a proud product of District of Columbia Public Schools.

I have a master's degree in urban planning and extensive experience in affordable housing and community development.

I'm a volunteer also with DC Community Wealth Builders, a grassroots coalition advocating for public money to be invested in local financial infrastructure for the public good instead of corporate incentives.

I am asking for a dedicated full-time employee to be added to the CFO's office to fill gaps in the 2020 public bank feasibility study and work with existing city finance agencies to develop and implement plans for a public bank and a land bank.

This is not a frivolous expense or a new unsustainable program.

It is a necessary investment in sustainable, equitable, long-term economic development that pays for itself.

Our current model of affordable housing and economic development is broken.

We prioritize incentives to large corporations for the promise of social and economic benefits that often do not materialize.

We pay millions of dollars in fees to the private financial institutions that manage our money.

The projects that would make the biggest impact to everyday DC residents, such as deeply affordable housing or grocery stores in areas with low access to food are not financed by big banks.

Our affordable housing sector is in such a precarious state that it requires the gutting of tenants' rights to stay afloat.

It's obvious that the status quo is not working for DC residents or for our fiscal situation.

It doesn't have to be this way.

Through the implementation of a public bank and a land bank, we could save millions that we currently pay to private institutions managing our money and potentially even more in interest we pay to bondholders.

We could finance public projects the city needs that are economically beneficial but not profitable enough for private institutions to underwrite.

We could invest in community land trusts that ensure deeply affordable housing is available in perpetuity, and that small businesses can survive a tumultuous economic landscape.

All of these contribute to sustainable, equitable, long-term economic development better than any private investment ever could.

I know the city is going through a budget crunch due to many factors outside our control.

I must emphasize that this is a financially judicious move.

The infrastructure and planning for this institution already exists within the DC Housing Finance Agency, the DC Green Bank, and by partnering with other CDFIs.

We need at least one full-time employee in the CFO's office to get this over the finish line.

If we wish to survive and thrive in the current economic moment, we will not do so by relying on corporations that are only trying to line their own pockets.

We must use public money to invest in the public good.

Thank you for your time.

Yes, I'll send that over.

Thank you.

Good afternoon, Chairman.

My name is Jen Jenkins, and I'm a senior policy attorney with Legal Aid DC and a Ward 7 resident.

Legal aid serves residents across the district who are living at or below 200% of the federal poverty level.

These are the residents who feel budget cuts first and most acutely, and who have the fewest resources to absorb even slight income reductions.

Despite that reality, the proposed FY 2027 budget deepens existing inequities and makes it harder for our clients to meet their basic needs.

We are particularly concerned that this budget cuts funding from agencies that provide food assistance, housing stability, and health care, while asking little of those with the greatest ability to contribute.

This imbalance reflects long-standing structural inequities and policy choices that the council has the power to change.

We urge the council to direct the Office of the Chief Financial Officer to pursue a more equitable approach, one that raises revenue fairly and evaluates spending thoughtfully.

First, the district should adopt a local net investment income tax, a simple wealth tax on income derived from investments like capital gains, dividends, and interest.

This tax would apply only to high income households and could raise at least 121 million dollars annually.

It is straightforward to implement and modeled on an existing federal policy.

Second, the district should move toward a land value tax.

By taxing land rather than improvements, this approach encourages development and promotes more productive use of property.

It has been successfully implemented in other jurisdictions and could generate substantial revenue while supporting growth.

We support dedicating a significant portion of this revenue to WOMATA to ensure stable transit funding.

Third, the council should explore a business activity tax.

This would close loopholes that allow some profitable businesses to avoid paying taxes in DC and instead ensure that businesses contribute based on where they operate.

New Hampshire here in DC.

New Hampshire already uses similar, a similar model successfully, and it would provide a more stable and equitable revenue base.

Finally, we urge the council to commission a comprehensive independent review of the district's budget.

To our knowledge, the last cross agency review of this kind was over a decade ago.

An updated assessment would identify real efficiencies without cutting essential services and would strengthen transparency and accountability.

In closing, the council faces a clear choice.

You can balance the budget by cutting services for those least able to afford it, or you can pursue fair, proven strategies that protect residents and promote shared responsibility.

We urge you to choose the path that advances equity and ensures the district's economy works for all residents.

Thank you.

Thank you, Mr.

Jenkins.

Erica Wadlington.

Good afternoon, Mr.

Chairman.

So before discussing the CFO's budget, uh we wanted to acknowledge that DC is facing some real structural economic challenges that will have lasting implications for our financial position.

So this is not a short-term dip.

Though we do want to urge the council to continue to remove barriers to growth and unlock economic activity that sustains our tax base.

DCBIA, we strongly support the district's continued commitment to downtown conversion strategies.

In the BSA, there's language about office to residential conversions, and we support uh amending this program to take into account different types of bedrooms that will create further housing in our downtown corridors.

We also support the change in the operational costs for the CBE requirements in these programs.

However, we do recommend that the council allow recipients to satisfy the 35% CBE threshold either through a combination of construction and operations, but as currently permitted, it's only allowed through construction.

So we will allow, we would ask for a little bit more flexibility.

Next, DCBIA supports the creation of workforce housing tax abatements, the federal properties tax abatement, and WAMATA joint development property tax abatement.

These targeted incentives are critical tools to address distinct development challenges and expand our housing across the district.

Aside from those items in the BSA, we also wanted to commend that this committee and the council's long-standing commitment to incentivizing productive use of our underutilized properties.

We asked the council to state a course, to not raise real property taxes in this fiscal year, including any extra burdens on our commercial properties.

Incentivize reuse to grow the city's tax base.

That's the theme we wanted to echo here.

Let's not penalize it.

With that, we are also here today to specifically urge the council to fund a section of the Vacant to Vibrant Amendment Act that you pass.

Before this council had acted on that language, buildings converting from commercial to residential use would have to retain their commercial tax classification, even while they were under active construction for their new purpose.

That meant that these owners were taxed at the highest rate precisely when they were doing the right thing, investing in the district's future.

So when this committee and under your leadership, Mr.

Chairman, passed the emergency act, that was the right call.

But that emergency will soon expire.

So without funding the permanent provision, uh Section 302 of the Vacant to Vibrant Amendment Act, a building will once again be required to wait until their certificate of occupancy before they can qualify for that tax rate change.

So this involves, as you know, many buildings have to apply for our building permit, but not just any building permit.

A demolition permit, a found down foundation and grade permit, raise permits, but all those permit categories were not captured in the emergency language, but they are captured in the Vacanter Vibrant Amendment Act.

So we would recognize that this committee continue to uh support that effort and move forward that language and fully funded in this year's budget.

I see that I'm almost out of time, but I would like to end by saying we thank you for the opportunity to testify, but I am able to answer any questions that you have.

Uh thank you.

Uh Betty Gentle, who's online.

Green is Chairman Mendelssohn and members of the committee.

My name is Betty General and I'm the senior director of advocacy and public policy at Some Incorporated.

Thank you for the opportunity to testify today.

For over 54 years, some is partnered with the district to address poverty and homelessness through essential services, health care, and deeply affordable housing.

Since 1986, we have developed or preserved more than 20 affordable housing communities serving thousands of seniors, single adults, and families.

Today some testifies in strong support of Bill 26-125, the 2607 Connecticut Avenue Northwest and 411 Kansas Avenue Northwest Timeline Extension and Tax Forgiveness Act of 2026.

And we respectfully urge the council to both pass and fully fund this legislation.

We are grateful to Councilmember Schrumman, Robert White, and Lewis George for introducing the two original bills and to the council, especially Councilmember Crawford for prior actions to strengthen an underlying statute for the nonprofit workforce housing property tax exemption.

Building on that progress, we asked the council to allocate the 506,627 already identified for the Connecticut Avenue property and fund the remaining 762,373 for the Kansas Avenue property to reimburse taxes already paid.

This request is not about new expansion.

It is by stabilizing housing that is already built, occupied, and serving district residents.

This legislation realigns outcomes with the Lao's original intent, ensuring nonprofit housing providers are not overburdened by costs it was meant to prevent.

These some properties are more than housing.

Their long-term community access to expand access to high opportunity neighborhoods and preserve affordability and amid rapid change and displacement pressure.

2607 Connecticut Avenue Northwest in Ward 3 brings 23 affordable homes with case management to Whitley Park, a high opportunity area with strong transit, high performance, and green space with low-income residents have historically been excluded.

411 Kansas Avenue Northwest in Ward 4 provides 40 deeply affordable units with on-site services and a rapidly growing rise in cost neighborhood, helping ensure long-term and lower income residents are not pushed out as the community evolves.

Together, these developments ensure that residents with the lowest incomes can access safe, stable homes and opportunity, strengthening diversity, and advancing equity across wards.

We recognize this is an extraordinarily challenging budget year.

Needs across housing, human services, and health care are significant.

And we share the council's concern about reduced resources, including no new housing vouchers.

This is especially true for the resident sum serves most.

Single adults access in our emergency health care and behavioral health services.

With no proposed PSH vouchers for individuals for a second consecutive year or any new record rehousing vouchers for individuals, many individuals will face greater barriers to exit and homelessness.

Without this tax relief, these properties face ongoing financial strain from tax debt that is not sustainable to carry long term and threatens the long-term stability of these properties.

With it, some can continue providing stable service in rich housing and remain a stronger partner in addressing homelessness and housing security in the district.

Thank you for your continued partnership and for the opportunity to testify.

What's the organization?

Yeah, I mean it's it's a coalition uh of both small business owners, cooperatives, um nonprofits, and regular individuals who are frustrated by our economic development strategy prioritizing corporate incentives and and most of our small business stuff is just like you know, a carve out, a grant, a nice little thing for whoever gets it, but um or underfunded main streets, but not a real structure or infrastructure like we fund the infrastructure of the kind of attract and retain um model of economic development.

Uh we've been around for about three years, although for about 10 years before that, it was a it was sort of in another form called the DC Cooperative Stakeholders Group.

Okay.

And um you and a couple other witnesses said uh please uh fund a dedicated FTE and the CFO's office.

What is I'm kind of I'm having a hard time visualizing that.

Um what is that person doing?

Well, there's a variety of things.

Obviously, there's some things that the that we said the debt service and that savings um that we could the amount of money we could save by having the public bank buy our own debt um I think is something that uh everyone asked for and was not done in the previous study.

So I think that that would be really important to get those savings.

There's also not a full-time position for a full year.

Right.

That's the first thing.

The second thing would be um you know, going through the different options for governance structures, as well as beginning to actually um make the regulatory or proposals at least uh for the regulatory and legislative process forward, uh working with coordination, you're working with and coordinating with DCHFA, the green bank um sort of existing capacity, as well as the other agencies that might be involved.

Now, ideally we'd have an uh someone in uh involved at DGS and DemPED as well.

Um we're making those asks as well.

But I think we think this is a transformative enough investment that we want to have a few people or at least one person working on moving it forward.

So does that mean you or others said community wealth builders are testifying before other committees urging that other agencies have a staff person?

Correct.

That's an awful lot of people working on a basically a proposal, because it's there isn't there would probably need to be legislation.

We are open to there being if there needs to be enabling legislation.

Um that's something that came up in the in our conversations with uh the committee on facilities.

Um but uh mostly and if you look at the the Disby study, there were a lot of things that the city could start to do now to just expand their capacity to create a banking consortium.

There was a few different interesting ideas.

Um but none of them were they were all kind of studied in isolation.

The green bank uh didn't exist.

There wasn't any conversation about how it could interact with our existing capacity, and it didn't really model things based off of how North Dakota does it, which has been around for a hundred years and is been very successful.

Um so I think that um yeah, I think that we we need someone moving it forward.

Maybe there needs to be legislation, but I think um even before that we just need someone to kind of pick up the pieces since some of the data is outdated and actually begin the coordination to figure out what we could do now and also then propose ideally legislation in future uh rounds.

Usually what we the council does is we have an idea and we ask for a study.

And it sounds like that's what we did back in 2020.

And for some reason I may be wrong, I'm associating former councilmember Che with that.

Does that sound right?

I'm not sure who is the council member who pushed it.

Okay.

Uh so there was a study, and what I'm hearing from this testimony today is that the study was incomplete.

But then out of that would come legislation that would define the policy, which then gets implemented.

And what I'm hearing is sort of um uh in reverse order that we're gonna have people implement who hasn't been defined.

And I think that's a good thing.

I wouldn't say implement criticism, but I mean I I'm aw I'm vaguely aware of the talk about a public bank, but uh I haven't heard about it in a few years.

And uh so I I'm intrigued.

Yeah.

Well, I'd love to talk with you more about it.

Um I think the we're we're not saying that it should be implemented before it's designed.

We're saying it needs to be further designed.

It needs to be designed, and I think we do a study again, and it's kind of just you I think you know how the how that goes.

Uh so we want to actually have someone looking at what we've already done and and following through on those things to start to actually organize it and connect the dots, so it isn't just an isolated looking at one little thing that we should find.

The energy behind it comes from either a council member or a mayor.

Um who did this what agency was responsible for the study before?

The public bank study was done in Disby.

Okay.

Now let me ask this is sort of a minor thing, but the some of the testimony, and this might have included yours, uh, suggested that interest it's earned doesn't go to the district but goes to Wall Street or whomever.

Yeah, for the I don't think that's correct.

Well, if we're putting our three and a half, don't quote me on that, we have a bunch of different accounts.

We have, I think it in 2020 it said we had a total of 12 billion.

Um if we're just looking at cash reserves, it's about half of our total reserves.

That's at least a billion, if not more.

If we're putting that in um Wall Street bank.

Well, let's say we all have it in the Citibank, we earn interest on it and the interest goes to the general fund.

Now, when we borrow, when we borrow, we do pay bond costs that goes to whomever.

Right.

But the interest that we earn comes to the district.

Well, but they are putting out the well, yes, so we're making some interest, but there's uh there's a a spread on that that the Wall Street banks are uh loaning out to whoever uh making decisions on that and making interest money on that.

They're giving us some of that interest back if if you know I assume we're we're putting it in a high yield savings account, but even that is not as much as they're making on the loans.

Are you suggesting a public bank that would make loans to the public?

Not just to the government.

Correct.

And they also how it works in North Dakota is instead of competing with local banks or CDFIs, they actually have participation capital, so they support and expand the existing fiscal capacity of the CDFIs that do work in the community.

Um I'm I don't know that I have time right now, but I would be willing to talk with you more about this.

Um to Ms.

Gentle.

Uh the 2607 and 411 Kansas Avenue legislation is up for final vote tomorrow.

Uh I expect it will be approved.

The um funding for 2607 was identified by the sponsor of that legislation last year.

The uh um sponsor of the 4111 Kansas Avenue didn't identify the funding, and coming up with close to $800,000 could be difficult.

But that legislation is going through the council.

Um in fact the uh committee report, because it came out of this committee noted that uh there was a negative TAFA, which means that the OCFO concluded that these projects could go forward without government uh subsidy through a uh tax abatement.

And the committee of the whole and its report said um we question that, but more importantly, we think that uh public housing, not public housing, affordable housing is important, and that um uh if it requires a subsidy, then uh we're all for it.

So I just wanted to, there's no question there.

I just want you to know that the legislation is moving forward and half of it is funded.

So as soon as it's approved, signed by the mayor, goes through congressional review.

Um the funding for the um Connecticut Avenue property is available.

And thank you too, um, especially for the the con words about some in our affordable housing efforts I'm in the committee report, um as well as keeping the process going after the bill was reassigned to your committee, so we certainly appreciate that.

And hopefully look forward to the bill passing tomorrow.

Yes.

Uh I don't think you need to lose sleep over it.

I think it will happen.

Um I'm probably not going to spend this much time with the subsequent witnesses, but um Ms.

Jenkins, and you weren't the only one to bring this up, talking about savings from uh spending.

So I remember that study from 2012.

Um it was very thorough.

Uh I mean there were a lot of proposals in there.

The idea of that kind of a study is very appealing.

A lot of the proposals in there were just not feasible.

And uh so uh I think we looked at it in 2012, and I think we've looked at it a couple of times since then.

There just are not um there are not a lot of um uh feasible ideas that come out of that kind of study.

Uh I'm looking at your testimony, uh comprehensive cross-agency study.

I do want to say we had hearings last fall.

I think you're aware of that, uh, looking at overspending.

So there were some agencies that underspent.

Uh that's why we had a surplus.

Uh there were agencies that overspent, and I have in my mind that if you look at what their initial budget was a year earlier, that last year agencies overspent by about 300 million dollars.

So if we could just stay within budget, that would free up uh significant amount of money.

But the um and I think that's important, um, and that's something that I would like to see more of in the government is um adherence to the budget.

But um the uh idea of a comprehensive cross-agency study sounds great.

And I'm not saying that we should never do that again, but I don't think that's where we're gonna find a lot of savings.

Um I would I would just say that I agree with you on that 2012 study based on what I I read in it.

But I think that if there were guidelines implemented to sort of guide the study into what would be beneficial for the council to consider where it could potentially find savings inefficiencies, um that's where I would encourage you to uh to look.

I don't think that that comprehensive study was all that helpful in in terms of the recommendations, but the way that it laid out ways to find efficiencies, I think what was really beneficial, it just wasn't in a way that I think even applies right now in 2026.

We have whole new agencies that exist.

Um have what agencies we had we have new agencies that didn't exist at the time.

Um and then I think we just have advanced more in terms of uh how the district implements policies, and I don't think that that's really outside of what the DC Auditor's Office has done and the inspector general.

Um I don't think that the government has really taken a close look at how all of the agencies are operating.

Um I do think it's worth maybe even starting with one agency trying a comprehensive study, a sort of pilot, um, and then if that goes well, then maybe expand it to other agencies where there could be potential savings.

So let me just add, and I probably shouldn't go there because this will provoke something, but um just you know, one of the problems, one of the challenges with the kind of analysis you're talking about, is also bias.

So what comes to mind is regulatory reform.

And um people would say the best regulatory reform is no regulations.

Well, that's a little extreme.

But um then when you start looking at specific regulations, uh there are proponents saying, well, this is important either to protect, let's say tenants or to protect consumers, um, or to ensure safety.

Um there is bias is another factor when we're looking at oh, well, we're just gonna if we just look at programs and find efficiencies.

Um to me, efficiency may be just getting rid of the program.

In fact, that's actually part of what we're dealing with with this budget, is some people think that efficiency is getting rid of programs that I suspect there are a lot of people in this room say we need to keep.

So it's a challenge.

It's easier said than done.

Oh, we'll just make make the government more efficient.

I do believe in making government efficient, something I often say.

Uh but um it's m uh in my experience it's much easier said than done.

And where there are real dollars to be found is in overspending.

Uh I I respectfully disagree, but I I'd be happy to follow up with your office and maybe provide some examples.

Um I do think guidelines would be necessary, like I said.

I I just I I think there is a way to um work around what you're calling bias to make a more subjective comprehensive study.

I just we would have to, you know, develop guidelines and really look at it from a more objective point of view.

Um and it the council could do that.

The council could lay out what it would want to see in a comprehensive study and it could correct for any type of bias that may or may not occur.

Um I really am just looking at dollars and cents and how those are being spent.

Um and I don't think that the bias that you're talking about would necessarily come up in this type of study that I'm proposing, but I can see what you're saying that that could be a factor.

I'll let you have the last word on that.

Ms.

Wadlington.

Um in the Budget Support Act, there are some um there's several subtitles, or maybe it's just one that deals with fees, and you touched on it in your statement.

Yes, sir.

Where did those ideas come from?

Because when I looked at the proposed fees, I was surprised by some of them.

Was this something that just came out of DLCP or did the private sector have some input into it?

Um I can get back to you on a little bit more of detail on the background.

Um my testimony I was just speaking to a little bit about like how we support the the low cost of the flat certificate of occupancy fee and then the the filing fee, the corporate filing fees, and we were just recommending a little bit more coordination between DOB, DLCP, and also OTR, because the sometimes the databases get building names incorrect or something like that.

Um we can uh we're testifying also at the DLB hearing in a couple days, so we we can provide you with some more feedback.

Well, if I remember, maybe I'll ask you the same question then.

Okay.

And then again, I may not remember.

We'll see.

Uh I don't have any other questions for you.

Those of you in person, thank you very much.

Uh thank you to all the witnesses.

Uh may not ask as many questions of subsequent panels.

Uh Erica Williams, who's listed as a public witness, but I think she's with the DC Fiscal Policy Institute.

Tazra Mitchell, who is with the DC Fiscal Policy Institute.

Brittany Pope.

Are you, Ms.

Pope?

Funky.

Do that's you.

I'll have to stop there.

Ms.

Williams, you're first.

Okay.

Thank you, Chairman Mendelson.

I am with the DC Fiscal Policy Institute, where we shape racially just tax budget and policy decisions to advance an anti-race equitable future.

Thanks for the opportunity to testify.

Mayor Bowser's budget proposal would usher in the greatest local safety net cuts in a generation and short-term revenue strategies that fail to put the district on stronger footing over the financial plan.

DC faces a perfect storm of slowing revenue growth, a trend that really still reflects the pandemic's lingering harm, as well as local recession triggered by federal layoffs and a shredded federal safety net.

This reality requires that the district find new sources of revenue that can help triage the FY2027 budget, avoid the depth of cuts that the mayor has proposed, and stabilize revenue growth over the long term.

Specifically, DC FPI recommends piggybacking immediately on a federal tax on proceeds from wealth.

DC can raise revenue needed for a balanced approach to the local recession and recapture some of the windfall tax cuts under the One Big Beautiful Bill Act for DC by taxing more of the gains generated by wealth, such as capital gains, dividends, and other forms of passive income.

Applying a local percentage on the federal net investment income tax, which is a federal tax on wealth proceeds, is a simple way for DC to raise hundreds of millions of dollars to help struggling families and residents withstand the local recession.

Just 9% of DC taxpayers would pay the wealth proceeds tax, and it would largely fall on the very wealthy.

About 82% of new revenue would come from households with incomes over 1 million, for example.

And it would be easy to administer as it would be based on federal definitions and rules with built-in compliance and with less opportunity for taxpayer evasion.

Our second recommendation is to require a feasibility analysis from the OCFO of a business activity tax for the district so that this tax proposal can be fully vetted and considered by the council later this year or next.

A feasibility analysis would aid in honing a bat's design rules and path for quick implementation and uh would help council move this proposal forward for debate.

And under this kind of analysis should include an understanding of the distribution of businesses by gross receipts and net income to get to better design hold harmless parameters from businesses already meaningly meaningfully contributing to DC's unincorporated and corporate franchise taxes and personal income tax.

It should include precise estimates of the level revenue level of revenue that could be raised under different parameters and the potential for directing some of that revenue to reduce or replace other business taxes.

We've suggested that the BAT could in part be used to buy down the payroll tax, for example.

The data collection rulemaking and processes that would be needed to quickly implement a BAT should also be part of any such analysis.

We know that New Hampshire, where an analogous tax has been in place for decades, was able to implement their version of the BAT immediately after adopting it.

So we hope that this can be moved forward by council.

And just wanted to highlight that residents of DC that have been polled about this are in favor of both the wealth tax as we proposed and a business activity tax.

Thank you.

Thank you, Ms.

Williams.

Tazra Mitchell.

Chairman, thank you for having me today.

My name is Tazra Mitchell, and I'm the Chief Policy and Strategy Officer at DCFPI.

Building on Erica's testimony, I'll focus on Mayor Bowser's revenue plan and additional revenue ideas that council may consider, including some tough trade-offs.

The mayor's budget would delay by one year one percentage point sales tax increase.

While this will reduce revenue by 146 million dollars, it will avert a tax increase that would hit DC's poorest families 7.25 times harder than the richest top 1%, according to ITEP analysis.

Because families struggling to make ends meet typically spend every dollar they take in, they end up devoting a larger share of their income on purchases subject to the sales tax.

But simply buying things like diapers and school supplies takes up a sizable share of their income while barely registering on the budgets of the low off.

On the other hand, her proposal failed to make permanent the increase to DC's EITC and restored CTC that the council approved last year.

These credits are highly effective, proven tools that would have reduced child poverty by a whopping 20% and benefit nearly 62,000 children.

Most of the tax credit benefits would go to households in the bottom 40 percentile, earning less than 61,000, although they would also benefit some middle income households with children.

Gavin DC residents are likely facing the greatest cut to the local and federal safety net in a generation.

The council may be tempted and reluctantly consider allowing the sales tax to go into effect or a portion of it and use the savings to restore the tax credits, but not without some harm.

On average, households in the bottom 40th again would fare the best, seeing a tax decrease.

However, middle income households, those earning between 61,000 and 118,000 or so would see a small increase in taxes owed, although at a lower share than with just the sales tax alone, largely because the CTC would only partially offset the sales tax increase, and the EITC generally does not reach them.

Many in this quintile are already among the households struggling to afford in the district.

So again, there would be some harm.

Another caveat is that the mayor delayed the sales tax increase for one year only, so that revenue could only be swapped on a non-recurring basis.

These are tough choices that no one wants even crunching the analysis, which is, I think, somewhat extensive in my written report, is quite painful, but it is important to expose some of the trade-offs.

The Just Recovery DC coalition has a platform full of more progressive ideas that I think would be far better than not choosing to delay the sales tax increase.

Mayor Bowser's budget proposal would also partially and temporarily decouple from select OBA tax provisions.

DC council should make permanent more of the decoupling provisions to safeguard precious local dollars.

The mayor opened the door, you all should walk through it.

To protect DC's autonomy around future federal tax changes in the long term, the council should adopt static conformity, meaning conforming to federal tax laws of a specific date, such as retroactive to January 1st.

The council should also push back on the CFO's decision to disallow use of 180 million dollars of the decoupling savings and modifying days of cash on hand is 60 days from 66 days.

Lastly, the council should also maintain the mayor's proposal to eliminate a double tax benefit that some residents receive for taxes paid to another jurisdiction by a pass through entity in a portion to them.

Thank you for the opportunity to testify.

Good afternoon, Chairman and staff.

Thank you for the opportunity to testify in support of restoring and protecting the DC Child Tax Credit and FY27's budget.

My name is Brittany Pope.

I'm a fourth generation Washingtonian and the economic security supervisor at Bread for the City.

Bread is one of the many organizations that works on economic and tax justice within the Fair Budget Coalition in order to restore and protect the DC Child Tax Credit at Echo Fair Budget Coalition's calls to build a tax system that supports racial equity and DC economic resilience.

Last fall, DC Council significantly increased economic security for approximately 78,000 children and their families through legislation that restored and enhanced the DC child tax credit.

Upon release of the mayor's FY27 budget proposal, we were disheartened to see it repealed.

At Breadford the City, we have seen firsthand the impact that direct cash transfers can have through the implementation of our in-house cash transfer program, Cash RX.

Direct cash transfers, like the DC Child Tax Credit, have played a significant role in increasing economic security and mobility in DC families.

Here's a quick snapshot of some of the ways that direct cash transfers have positively impacted the lives of our DC neighbors.

Participants were more aspirational.

The regular extra cash provided some stability and breathing room, allowing them to think more beyond the near future.

They were able to take back some of their time and spend more time with their families.

Every participant reported significantly improved mental health outcomes.

We saw improved physical health results.

Two diabetic participants who reported actively trying to improve their A1 seed numbers, saw drastic improvements, and today both are no longer diabetic.

Participants reported improves food security across the board.

They also felt better equipped to handle financial shocks and take care of past due responsibilities.

Just imagine the positive ripple effect we'll see in families with children, especially black and brown families if the DC child tax credit is restored and preserved in the budget and over the financial plan.

With a child tax credit of a thousand dollars per child, families will have a stable space to breathe, to dream, and to plan for their futures.

Investing in the child tax credit aligns with one of the district's core values to give all children and every ward the opportunity to thrive.

At this moment of federal threats and increasing economic instability, DC has the power to meaningfully invest in its families by making the child tax credit a permanent part of the city's tax code.

This is a vision that is possible to achieve through just and racially equitable taxes on DC's superfluous wealth, which is outlined in Bread for the City's written testimony, which I'll submit.

Thank you for your time.

Thank you.

And Ms.

Adobu.

Hello, um, Council Chairman, Mr.

Mendelson and staff.

My name is Olu Funke, also known as Funke Ido, and I live in Ward 3.

My ask for your attention.

One, guaranteed basic income for residents with disabilities.

Two, funding for community focused support programs and organizations, especially Bread for the City.

Three, child care tax credit.

I'm a person living with incurable and degenerative medical conditions, and I would be dead without the support medical, mental, and financial that Bread for the City, and especially its economic security support program, Cash RX has extended to me over the years.

But I can't work.

And they need continued funding.

Funding so people like me can keep hope alive.

Fund them.

That the child care tax credit will not be in this and all future budgets is a travesty that must be reversed immediately.

As a single parent, extra money meant not having to choose diapers or milk for my daughter, or if I could take her to, as she got older, to the park or get a happy meal.

It means getting our children a nice warm coat during the cold seasons.

It is for the children, and anyone that tries to take that relief away should be ashamed of themselves.

In closing, I ask that you guarantee income for me and others in my health conditions to keep us alive, fund bread for the city and its programs, and close the gap for those who are medically disabled and ensure child tax credit is a permanent part of budget in DC.

Thank you.

Thank you, Mr.

Dowu.

I do not have questions for you.

I have statements from two of you.

Please submit if you would.

Thank you all for your testimony.

John Simmons.

Okay.

Daisy Gomez Palacios.

And Vincent Orange.

Mr.

Simmons, you're first.

Turn your microphone on.

Good afternoon there, Mrs.

Stickler, City Council, and everyone, men and women in the room.

My name is John Simmons, and I hail from Ward 4.

And I came today because I was fortunate enough to give this up given this opportunity by Bread for the City, who's a city lifesaver.

I want to speak today on two simple issues very quickly.

One being the child tax credit that you heard so much about and you know so much about.

As a father of four, and a grandfather of seven, I can't tell you the importance of that child tax credit.

Whether it be a thousand dollars or a thousand cents, the importance of it in my community is immeasurable.

To have it taken away, should be unprecedented.

It should be unheard of because it's very necessary.

Very unnecessary to take it away.

I was wanting to speak to you today and hopefully garner some true understanding and support.

It appears decision makers are making very life-sustained critical, critical decisions without the public true consideration.

Such as that TALC tax credit.

Everyone will agree that children are important in every way, as we all strive to raise them healthy and safe and strong.

Knowing that to be the case, it is our responsibility and duty and honor to assist hard work and striving parents in any way that we can to help provide a better future and stability for our children, to make it easier for our parents, the parents of these children to provide for them.

So, but when it comes to businesses, it seems the pendulum seems to swing the other way without care for their constituents of or people of the neighborhoods and in these issues and situations, which they are quite aware of, but seem to have somehow find it hard to just do something for the people and about their issues.

It is it within your powers of the to make these decisions that assist the public.

Who are your constituents?

In every way to become much more easier for them to manage their situation.

I live because of these organizations, and so do my children and grandchildren that we need so seriously.

It's the difference with some of us people.

It's a small difference, but it's a true difference between just making it and barely making it.

That's the choice some of us have without your actual consideration and further help going forward.

I mean, I'm not a stickler or a great orator or anything like that.

I don't know all the budget budgets of the city council and anything like that.

Is that mean my time is up?

Well, I'm sorry, to conclude.

I'm glad that I had this opportunity to speak to you.

I wish I had more time to speak on the good duties and great work of Bread for the City or the CAR, the Cash RX program.

Because of these programs, I sit before you and I do live.

Though I don't have time to read this entire statement that I have made, I just wanted to sit in front of you about the tax child credits and the Cash R X program.

Because of these programs, I live and so many other people that I know will live and can live further and do better because of it.

We need your assistance.

We need these programs because we need them to grow.

At a time when it finally so difficult to move forward.

We asked for these help because this helped because we really need to be able to do that.

Now, Mr.

Simmons, your time was up a minute ago.

Oh, I'm sorry.

I hadn't even got started, but thank you very much for your time.

And there are 30 witnesses, most of whom are gonna say nice things about Breford the City.

So what you didn't say, I'm sure some others will say.

Well, thank you for your time, sir.

Thank you, thank you.

Um Ms.

Agaro.

I got it.

All right.

Ms.

Agaro is not here.

I'm going to go down the list in order.

Ms.

Palacios.

Yes, thank you.

Hi, Mr.

Chairman.

It's good to see you.

This is actually my first time testifying for you, so.

Good afternoon.

Thank you for the opportunity to testify.

My name is Daisy.

I work on the economic security team at Bread for the City.

I'm testifying on behalf of Bread for the City in partnership with the Fair Budget Coalition and our clients, recommending that the Council protect and fully fund the DC Child Tax Credit.

Protecting the Child Tax Credit will provide efficient, flexible assistance that promotes the personal agency of families with children, which only direct cash assistant programs can provide.

At Bread, we've seen firsthand the impact that a thousand dollars has.

In my role, I've had the opportunity to be part of the implementation of Cash RX, a direct cash transfer pilot program where participants are given cash each month with the nose strings attached, and the autonomy to decide how the families can best use the unconditional cash.

In the first few months of the program, participants reported dramatically reduced food and housing insecurity, the ability to pay late bills and rent, cover emergencies such as car repairs that are needed to get to work, see family, necessary medications, even, and also saw improvement to well-being.

One Cash Hor X participant who can join us today, and who I'll refer to as Charlotte to preserve anonymity, lives in Ward 5 with her two children, of whom she's she is the sole caretaker.

As part of the program, I have regular check-ins with her to talk about her progress in the pilot.

Since our first meeting, these conversations have always centered on how she's leveraged the guaranteed income to provide for her children.

She's described using Cash RX to safely get her daughter to and from community college so that she can graduate from high school with her associate's degree to keep her growing son warm through winter with coats that fit and to bring Nigerian ingredients into the home for dinner, ingredients that have become more expensive, but that she splurges on anyways to treat her children's homesickness.

Earlier this year, Charlotte called me to share that the investment Bred made in her family had paid off.

Her daughter was admitted to George Washington University.

Cash RX allowed Charlotte not only to keep food on the table and a roof over her family's heads, which she shared with me that she isn't sure could have been done without the program, but it gave Charlotte the support her family needed so that the children could focus on their futures.

Unconditional cash isn't is an investment.

And you can see that in the way that Charlotte was able to use it.

With her proposed FY27 budget, the mayor and CFO Glenn Lee are taking the support that's already been promised to families like Charlotte's of 70,000 children in the city, and which would have significantly reduced child poverty.

And then finally, I do want to state that as a member of the Fair Budget Coalition.

Thank you for your time.

Vincent Orange.

Mr.

Chairman.

Mr.

Chairman, I am Vincent Orange, former Ward 5 Council Member at Large Council Member, Attorney, Certified Public Accountant, and the candidate for mayor of the District of Columbia.

Today I come before you with a simple but urgent message.

Measured outcomes require financial truth.

The Office of the Chief Financial Officer is the backbone of that truth.

The revenue certification he will provide determines what is real and what is rhetoric.

We are facing a structural imbalance.

We have rising costs in health care and child care.

Those are positive signals.

But they do not represent a fundamental shift in the district's underlying revenue base.

They reflect timing, one-time flows and discipline financial management, not durable structural growth.

Per the February 27th revenue certification, these gains reflect timing and non-recurring collections and should not be treated as a baseline revenue without recertification and council action.

The recent revenue revision and Moody's outlooks are encouraging, but they reflect discipline, not a reason to abandon it.

Maintaining strong reserves is not optional.

It is essential to protect the district's credit standing and long-term fiscal health.

We must ensure our available and fund balance remains strong enough to maintain investor confidence and protect that standing.

This is not just accounting, this is governance, but it's also economics.

As a CPA and former council member, I know the difference between balancing the budget and solving a problem.

That is why I am proposing a fiscally disciplined approach to jumpstart the district's economy without protecting while protecting this financial integrity.

First, allow $600 million in federal tax benefits to flow through the district's economy to middle class families, seniors, workers, and businesses.

Second, preserve approximately 200 million dollars in target relief for low-income households.

Third, we drive approximately 1.5 billion in spending with DC certified business enterprises.

Together, these actions will circulate significant economic activity within the district, supporting local businesses, restaurants, retail theaters, and broad tax base while generating tax activity subject to CFO certification.

But we must be clear.

We balance the budget through discipline by cutting programs that do not meet expectations, achieving procurement efficiencies, scrubbing agency budgets for vacancies and unrelize FTEs, using any funds only upon CFO certification and using only a limited portion of the contingency reserve as a temporary bridge with a defined repayment schedule.

One-time resources must be paired with a plan to restore them.

Recurring obligations must be supported by recurring revenue.

That is the standard we must uphold.

That is why I'm calling for the establishment of a revenue alignment commission to ensure that every dollar collected is used and is as intended, is used as intended, and aligned with our long-term fiscal priorities.

We must also protect the independence of the CFO, especially in the face of federal uncertainty.

The district cannot move forward on hope.

It must move forward on verified numbers, because budgets are not just numbers, they are priorities backed by truth.

And measured outcomes begin with certified revenue, disciplined spending, and fiscal integrity.

Thank you very much, Mr.

Chairman, for allowing me to present my testimony today.

Thank you.

And Vernon Suggs.

Good afternoon, Jeremy.

Council.

My name is Ernie Suggs.

I am 67 years old, and I'm born and raised in Washington, D.C., every ward I've lived in throughout my life.

I am a product of many nonprofit programs like Bread for the City.

Programs that have wraparound services that benefit young people and old people, older people, the same.

Programs that help and advocate and fight for things like child tax credit, which is so important.

Child tax credit, the uh RX Cash RX program, which I'm a recipient of, which is so important, because as you know, living in this city now is so expensive.

And for anybody to live in this city, you got to have money.

You've got to have resources, and you gotta have a means to get by, pay your bills, buy food.

I'm here as an advocate for the child tax credit.

Also to bring some awareness to that tax credit helping that same child, that same child that will probably end up somewhere down the line over in uh the Navy Yard acting, acting out, acting crazy with this uh this mob mentality.

That same tax credit would allow them some positivity at some point in their early life to be able to maybe go to a program that will give them some insight on how to be better people so they won't end up in a situation like that.

Programs that will help our young people understand how important they are to our future.

All of those young people and people that go through programs like Red Footer City and other programs, they are our future, whether we want to accept it or not.

And there's no amount of money that we can put into the future of our community.

It's just no really no figure you can put on it.

But the child tax credit is a start, I believe.

And I'm here because vehemently believe that if we protect programs like this, we have we're at a starting point, a great starting point.

Thank you for allowing me to chapter five this afternoon.

Uh thank you, Mr.

Suggs.

Um I just have a couple of questions from Mr.

Orange.

Um you said in your statement per the February 27 revenue certification, these gains reflect timing and non-recurring collections and should not be treated as baseline revenue without recertification and council action.

What did that mean?

Well, that that means that uh that is an a dollar amount that should be certified by the chief financial officer.

But it was certified in the revenue estimate.

It was it was it was certified for this particular time period, but not as recurring.

We don't know if that is going to recur.

And then that's the the point that I'm making is that we need to make sure that we are dealing with certified revenue and not with things that we are hoping to achieve or that may be achieved, but based on examination by both the CFO and the council.

Okay.

And then you also said uh you're calling for the establishment of revenue alignment commission to ensure that every dollar collected is used as intended and aligned with our long-term fiscal priorities.

What does that look like and how would it ensure anything?

Well, for example, uh, if you're budgeting for 4,500 officers, but you only have 3100 officers, then what's happening to the other 1400 FTEs?

What happens to those dollars?

Uh when you look at the uh traffic cameras, the traffic cameras, that revenue is to uh basically fund uh vision zero.

And yet we're generating more than enough, maybe two or three times more uh than is what is necessary for vision zero.

So what is happening to those dollars?

Paid family leave, as you know, that rate was so high that the council had to reduce the rate uh in in order to not just really generate all this, all these dollars.

And so a revenue alignment commission will basically line up the revenue.

Uh if we if, as you know, we have 22 billion dollar government, 11.7 billion is from uh locally raised from DC taxpayers.

Well, let's line those dollars up and see our if they're being used for their intended purposes.

And then if it's not being used for its intended purposes, then what is it being used for?

And so we can examine uh those dollars and making sure that one, we're using for intended purposes, and two, what is really available.

And also, are we using dollars that are that are intended for a certain purpose to fund another program?

And so we're funding programs that does not have its own funding source.

Uh and I think the uh revenue alignment commission would certainly uh be transparent, certainly be something that the council couldn't examine, the mayor could examine, as well as the CFO.

And then we can uh you know start to get back to a point where uh you know we're funding what we're supposed to fund, and uh we're not going after all these unintended programs that brings us to you know uh the where we are today with this you know 1.1 billion dollar gap.

And in addition, uh in my view, I think we need to jump start our economy, and we can jump start it by uh you know, the $600 million from the decoupling uh legislation to allow that to flow to the middle class, to seniors and to our businesses, uh, as you know.

Uh our first responders are probably the ones that that's receiving the overtime.

So first police fire uh people in the hospitality committee, they will be able to deduct those dollars, but they're gonna spend those dollars back in the community.

Uh those that uh receive overtime tips, even the car interest payments, when they get those dollars back, they're gonna spend it right back in the community.

And then the 200 million dollars for uh that would go to low-income families, which was part of your bill, put that in the community as well.

So now you have $800 million that's going to circulate in the DC economy along with the announced 1.5 billion dollars for certified business enterprises, and uh and clearly it's not certified revenue.

I mean, the CFO would have to certify, but our economy would now have all these dollars circulating, and a lot of those dollars will come back to us by way of taxation and wind up in our treasury.

All right, you answered my question.

Thank you.

I don't have any other questions.

Thank you all.

Thank you.

Uh Salim Madofo.

Um Michelle Chappell, co-chair of Congress Working Group.

Abel amen how many many?

I'm sorry, I'm not pronouncing it right.

We've talked before.

Uh I see that.

That's shitty.

Uh Catherine Lanfield.

Eduardo Seraphim, Solidarity Organizer with DC Jobs for Justice.

Akua Tanqua, mom advocate with Mother's Outreach Network.

Mary Rhodes, Senior Counsel, Roman Catholic Archdiocese of Washington.

I've called twice already, I don't think she's here.

Robert Warren, lead organizer, people for fairness campaign.

And Kenyatta Smith.

She's the one who came into the office this morning.

I think she's crazy.

Uh and Lauren Green.

Oh.

Yes.

I mean, Klein, can we pull up a fifth chair?

All right.

So you'll replace Abel when we get there.

All right, let's see.

Salimado Dofo, I believe is not here.

Michelle Chappelle, I believe is not here.

Mr.

Amin.

El is fine.

Abel, Mr.

Abel.

Yes.

That doesn't work, but okay.

It's actually more proper for an Ethiopian to call him Mr.

Abel.

So for it.

Thank you.

My name is Abel Menne.

I am award four resident, and I'm I also work at Fair Budget Coalition as a policy fellow.

I've been told many uh many times uh by people that work in this building, how the budget season is really difficult this year.

Every year it's the same story of how difficult it is to find funding for programs that the district residents so justly deserve.

But of course, this is not true.

Money can easily be raised to meet the need if only the council prioritize the lives of the majority of its residents rather than the 15 uh hundred households who possess 46 percent of all wealth in the district.

Think about that, Chairman of Mendelssohn.

That means 0.2 percent, uh that's one-fifth of one percent of the population of DC has nearly half the all of the of the wealth in the district.

This is why if the council is facing the challenge of not being able to fund the many programs we're advocating for, Fair Budget Coalition calls on the council to rely on several revenue raisers we have identified.

In particular, I will focus on our call for the council to enact a business activity tax, closing a loophole by which the wealthy avoid paying taxes in the district.

The district's franchise tax applies to many small businesses, from child care centers to consulting firms to landlords, but it does not apply to some of the districts' most profitable unincorporated businesses, law firms, lobbying agencies, and accounting firms, if they are organized as partnerships.

Due to a federal limitation imposed on the district through the Home Rule Act, about one-third of mid-sized or large DC businesses with gross receipts over $5 million are exempt from the franchise tax.

Imposing a business activity tax is still consistent with the Home Rule Act, but would ensure businesses which are located in district expressly because of its proximity to the capital.

So the BAT, the Business Activities Act would ensure that these businesses pay their fair share of taxes.

Meanwhile, the exemption for the first $200,000 in revenue generated by businesses would ensure that we protect small businesses.

The budget, the proposed budget makes cuts to every program that Fair Budget is advocating for.

Thank you.

Catherine Landfield.

Good afternoon, Chairman Mendelssohn.

Thank you for the opportunity to testify today.

My name is Catherine Lamfield, and I'm the senior advocacy strategist at Fair Budget Coalition, where we fight for a fair racially equitable budget.

A tax, a just tax system is critical for our work.

This is also why we are a member of the steering committee for the Just Recovery DC campaign.

Chairman, we are in a very urgent time.

It is essential to reverse the mayor's dismantling of the safety net.

Her cuts this year touch on just about every facet of community need, even as the economic landscape becomes more challenging for residents.

You often ask us about ideas for funding to restore cuts.

Here are some ideas that I hope you are already thinking about.

Bringing revenues from decoupling back online in the budget, repurposing the 90 million in new incentives and new overtime for MPD, regaining and making use of the over 60 million from events DC, and not keeping excess days worth of funding in our already full reserve funds.

But these still cannot go as far as is needed to keep our safety net functioning for our communities.

Council should improve taxes on capital gains and or implement a straightforward wealth proceeds tax to raise at least 120 million.

Council should also raise at least 109 million by increasing the marginal rates on the highest income earners.

This revenue must be allocated directly to restoring critical programs and preventing the collapse of the safety net.

It is drastically out of balance to have rising evictions and a hollowing out of the safety net programs at the same time that the extreme concentrated wealth in D.C.

remains seriously undertaxed.

We also urge you to plan for DC's longer-term fiscal strength through two structural fixes to our tax system, a business activities tax about which you've heard a lot already, and a land value tax.

A land value tax returns some of the private value that residents gain from living near high quality public investments.

Land values appreciate for those who are able to afford living near high-quality schools, libraries, transportation, and other public investments.

And it makes sense to recycle some of those private gains back into supporting public goods and programs.

Please legislate the commencement of feasibility studies for both the BAT and LVT in this budget.

And with the federal government and mayor literally undermining our communities, we need the council to care for our own, to protect residents from harm, from displacement, even from literal attacks by armed federal squads, and from a racially inequitable but balanced budget.

Thank you, and I look forward to any questions.

And you missed my air quotes.

Balanced budget.

I did miss them.

Thank you, Ms.

Lanfuel.

Sorry about that.

Good afternoon, Chairman Lenderson.

My name is Edward A Sarafim, and I'm here representing DC Jobs with Justice.

We are a coalition of labor, faith, student, and community organizations dedicated to building an economy that works for everyone.

As trial members of the Fair Budget Coalition and partners in the Just Recovery, All In for DC campaign, we're here today to encourage the council to adopt five recommendations for fair tax policies to raise revenues, increase equity, and improve DC.

The mayor's budget is the most anti-worker budget we've seen from her.

It cuts money for union raises, it cuts money from paid family leave, it cuts money from grant programs that reduce wage theft in the district.

It continues to leave people off of their health care.

It cuts funding to housing vouchers and other income supports that allow people to live dignified lives, even if their employer isn't paying them enough.

And Chairman, we understand that with the current budget, you won't be able to fix everything.

Without increasing our revenue, we're looking at yet another austerity budget.

But we are asking you to do your job and make this the budget a fairer one.

At DC Jobs with Justice, we believe that DC's prosperity comes from its workers, not from its wealthy.

Workers keep transit moving, hospitals running, restaurants operating, schools educating, and neighborhoods thriving.

DC becomes an even better city when we support these workers.

Instead of punishing workers by cutting services, you should finally ask those who benefit most from our city to pay their fair share.

DC's wealthiest residents pay a smaller portion of their income in taxes than middle income residents.

We don't believe this is fair.

A millionaire should pay a larger share of the income than a bus operator or a custodian.

While a few extra percentage points might be a rounding error for a high earner, that same amount represents the ability to pay rent or buy groceries for a working family.

To this end, the All In for DC campaign proposes the following five recommendations for a fairer budget.

Enact a business activity tax or BAT to close loopholes.

Increase income taxes on the highest DC earners.

Improve the taxation of wealth, create a dedicated revenue stream for WAMADA via a land value tax, and protect and fully fund the DC child tax credit.

Chairman Mendelson, wealthy people are undertaxed in this city.

The money exists, it's just not being shared.

You are leaving money on the table.

Money that we could use to fix this budget and build a better district.

We know how much time you spend agonizing about how you're going to fund all of your priorities.

We are offering you a way out, a way you could fund everything that the city needs.

Other cities across the country are also doing the same thing and starting to raise taxes on wealth and income taxes on high DC on high earners, and DC needs to do the same in order to keep our residents safe and our workers respected.

Standard for working people, ask the wealthy to contribute more.

Thank you for your time, and I'm happy to answer any questions.

Mary Rhodes.

There we go.

Thank you.

Good afternoon, Chairman Mendelssohn, members of the committee and staff.

My name is Mary Rhodes, and I'm senior counsel with the Archdiocese of Washington.

I thank you for the opportunity to testify today.

I'm here to ask the council to reaffirm the applicability of the Archdiocese of Washington Real Property, Deed Recordation, and Transfer Tax Exemption Emergency Amendment Act of 2026 as it relates to recording supplemental deeds to retitle Catholic parish properties in the district so that property records accurately reflect the parishes as the property owners.

The properties are currently held under the record ownership of the Archdiocese because historic legal restrictions prevented parishes from holding title in their own names, but the parishes have always beneficially owned their own properties.

They purchased them, occupy them, maintain them, and pay expenses.

Numerous public records already reflect the parishes as the owners.

Modern laws now allow parishes to hold record title in their own names.

So in 2023, we set out to retitle the approximately 90 parishes across all eight wards in the district.

When we submitted the first four deeds, the Office of Tax and Revenue rejected them and imposed significant property taxes on the parishes, even though the properties are tax exempt church properties, and D.C.

laws clearly allow for such retitling through the use of supplemental deeds.

In 2026, the council unanimously passed the emergency legislation confirming parishes may retitle their properties in their own names through supplemental deeds and confirming appropriate tax exemptions.

When we again tried recording a deed this year, citing the very language of this emergency legislation, OTR instructed three quarter of deeds to reject it, along with any filing of supplemental deeds, transferring record ownership from the Archdiocese to the parishes.

OTR maintains that the legislative language, which states that the properties may be transferred through supplemental deeds is inapplicable, and that all references to supplemental deeds in the legislation referencing supplemental deeds must therefore be removed.

This interpretation is simply incorrect.

Even before the emergency legislation, these deeds qualified under D.C.

law as supplemental.

They merely confirm the parishes' existing ownership and modify existing records accordingly for no consideration.

Moreover, and to clarify any confusion there may have been, the emergency legislation explicitly recognized that the deeds would be in the form of supplemental deeds.

Subsection RR reads that the properties, quote, may be transferred through supplemental deeds for no additional consideration from the Archdiocese as the record owner to the respective parishes of the Archdiocese, end quote.

The legislation's very intent was to ensure supplemental deeds could be recorded to confirm parish ownership and appropriate exemptions.

In short, the language and intent of the emergency legislation, the pre-existing D.C.

law, and historical facts all support recording these supplemental deeds.

Because OTR has a different interpretation, we respectfully request the council reaffirm the clear legislative intent to ensure OTR's compliance, accuracy in the public records, and the district's continuing recognition of these tax exempt parish properties.

I thank you for your time and I'm happy to address any questions you may have.

Thank you.

And if we could get a copy of your statement.

Thank you.

Mr.

Warren, good afternoon, Councilmember Menderson.

My name is Robert Warren.

I'm a fourth generation Washington Tony.

I'm also one of the founding members of the Universal Right to Housing Initiative for People for Fairness Coalition.

And our primary goal has always been to fully implement a tax-based voucher system here in the District of Columbia, primarily for those residents born and raised here who have been economically discriminated against when it comes to the ability to access housing that's affordable, sustainable, and accessible to them.

Currently, my main focus right now is to make sure that we have a tax-based voucher system for individuals in the District of Columbia over the age of 55 years of age, born and raised in Washington, D.C.

And I know that you know there's a lot of issues around vouchers.

I just brung five women.

All of them women were over the age of 55 years of age who have been put out of harbor lights.

It's a shelter for seasonal shelter.

And these women are looking for a place to be.

Also do outreach would serve your city, ward six mutual aid and the NOMA area of Union Station.

When I'm visiting there the last three weeks, I have encountered three individuals.

An elderly man who's been out there for years, two elderly women laying out in front of the historic museum in front of the postal museum where I had to call 911 to have them service.

These individuals who are district residents born and raised here should not be living out on the streets in Washington, D.C.

when we have a 21 billion dollar budget.

It's just crazy.

I don't know what you guys are doing or what you think is right, but what's happening right now is not right.

And it needs to be addressed.

We have your office on racial equity, the mayor's office on racial equity.

How do you put forth a bill of uh a budget that where there's no equity?

How do you keep allowing individuals born and raised in Washington, D.C.

not to have access to housing?

How do you not rebuild your public housing infrastructure?

What has been reported that the DC Housing Authority has over 800 million dollars in reserve?

I like to know where they got their money from.

I asked Councilmember uh Robert White about these fundings.

There seems to be nothing coming back to the community.

But we're still asking for more money.

So, Mr.

Melison, please.

Can we figure out how we can create a tax based voucher system here in the District of Columbia for individuals over the age of 55?

The mayor says she was in support of that.

Especially if they have a 578 or 577.

I know we have a very transient city, and we have a lot of people that come in here, elderly people, people with mental health issues, and we get inundated.

So we have a triage system.

But folks who were born and raised here shouldn't be sleeping in shelters or sleeping out on the streets in Washington, D.C.

And we've been doing this for years.

I'm gonna have to cut you off.

Thank you, Mr.

Warren.

If you want to submit a statement in writing, please do so.

Mr.

Monson, I visited your office.

I talked to you about the Wilson building.

I know I appreciate the time you gave me.

You you listened, you answered my question, sir.

And I've been to your office, I've talked to your chief of staff, I've given you information.

All we're asking for is a good question.

I didn't ask you.

You're now a minute over your time.

I didn't ask you for another minute.

Thank you.

Kenyatta Smith, I believe, is not here.

Uh Lauren Green.

Please proceed.

Okay.

My name is Lauren Green.

I'm a human rights activist against the psychiatric industry and uh human rights activist for children in education.

I began I began what was intended as a beneficial corporation, the Tomato Rose Hybrid Project, um, when I was a patron of the main library of DC in 2021, and my goal was to retrofit psychiatric hospitals into hydroponic food farms and communal gardens to solve the economic and health crisis psychiatry is causing around the world.

I am a victim of an abusive unconstitutional investment of the CIA in sending me to Superior Court and St.

Elizabeth's Hospital, which was the wrong venue when I was arrested at the Hart Senate building on January 17th at 130 a.m.

And the federal statute was not applied to send me to the correct venue of the Federal District Court.

Um it caused uh neural neuralink profiling from a very aggressive judge, Robert Rigsby, uh who was part of the um the mill uh the army.

And uh it also caused the longest historical government shutdown in the history of the United States because uh it although I was the stigma of being sent to this horribly catastrophic hospital was uh was assigned, I I I believe that I actually have had uh an influence over good government throughout my life, and that um maybe it could have caused the government to sh this was sort of a disorganization and uh a lot of terrible things happened.

There was the Department of War formed, uh Charlie Kirk was assassinated, uh, the ICE raids and the shootings, and a lot of uh pandemonium ensued.

Um so my I also formed an organization when I was detained called the Citizens Against Forensic Psychiatry to stop all forensic psychiatry, including that in D.C.

and to allow defend all defendants speedy trials.

Um I I advocate to cut the entire budget for the Department of Behavioral Health in Washington, D.C.

and to spend on health care, education, and especially green workforce development more heartily.

Um renaming shelters in Washington, D.C.

cooperative development centers, because the name shelter is highly unintelligent, is extremely unintelligent, is causing people uh difficulty regaining uh employment, and it's causing them uh profiling for for low integrity and low intel intelligence issues.

Um I also would appreciate uh personally some regenerative health care to solve the problems that were caused in the jail and uh in the jail and in St.

Elizabeth's Hospital.

Uh and uh uh I um I also had um an interest in developing farms where shelters previously existed and into a more cooperative uh developmental setting.

I have so many seeds that I uh uh uh acquired at rooting DC last year.

And this year uh I I I attended rooting DC and uh they weren't giving away seeds in abundance.

Um it we I really feel like I I've been more of an economic contributor than I'm getting credit for, and it really caused a horrible problem in our government when I was detained like this two hundred and fifty-five days.

Uh for a s a minor and f a minor infraction.

I'm not sure that I was I was particip I wasn't participating in hearings.

There were ex parte hearings.

I'm not sure people were telling accurate information about me to justify this.

I I had five different court-appointed attorneys, and the last attorney was doing everything ex parte.

Her name was Catherine Massey.

I don't I was told that verbally that family members have died during the process, but I'm having difficulty reun you reuniting with my family, and I'm asking for help of um liter liter literacy access to literacy about the my son who I've been separated from uh illegally and um and and uh my other family members.

I've been separated from them.

Um and I'm looking for l uh literate information and reunification efforts with the United Nations to reunify with my son.

Um and my other f uh uh uh my other family members.

Um I'm uh also I I honestly believe Tommy Wells would make the best man the mayor mayor for Washington DC when you think about the ontology of Tommy Wells becoming the mayor of Washington DC.

I'm I'm being restrained from Tommy Wells by the CIA and some s they don't I apparently see the CIA is trying to sabotage that effort.

But I think it would be great for the he is a child advocate.

He worked for the Department of Energy.

He's the the mind behind all the the better ideas in Washington DC.

And of course he would have to agree to that.

But um I would I would appreciate uh some legal support in handling this issue that I have with the CIA where I've been uh there's a case US versus Lauren Greenware in the US Court of Appeals for the Fourth Circuit, I'm uh inaccurately identified as wanting a competency test.

And I think that also caused some of the confusion in the legal system that I was participating with the Department of Behavioral Health when I wasn't actually doing that.

So Miss Green, I'm gonna have to cut you off within about five minutes.

Um I'm not sure how we can be helpful.

I wish we could, but I'm not uh as I'm sitting here, I'm not sure how we can be helpful.

Um I just I I think there might have been an intellectual property theft in the CIA with this organization that I created.

The United Nations, the World Bank said that there uh there I just personally I would appreciate that DC stopped spending money on psychiatry for me.

I'd I'd I'd like to have somewhere in a medical record or somewhere that um I'm refusing all psych psychiatric treatment in the United States and not the I I it looks like I was in invited to the World Bank Spring Meetings and the DC Medicaid paid for a very abusive psychiatric treatment to hold me back in um I canceled all the insurance just to make sure they couldn't do that again.

Okay.

Um thank you for your testimony.

Yes.

Um I do not have questions for any of you.

Um Ms.

Rhodes, I would like to follow up with you um to talk about where we are with the legislation.

So and I do have a question uh about this that I will ask of the chief financial officer.

So thank you.

Thank you each of you for your testimony.

We will turn now to Glenn Lee, who's the Chief Financial Officer.

And I will say this hearing is about the mayor's proposed budget for the Office of the Chief Financial Officer.

We've gotten a lot of testimony on other issues.

A brief statement, then we can go to the PowerPoint if that's okay with staff.

Attached, or we will discuss a presentation through which I will discuss the budget in greater detail.

Afterwards, my colleagues and I would be pleased to answer any questions the committee may have.

Before we start, I want to acknowledge our colleague and friend David Sengh, the OCFO's general counsel.

Today is his last day with the district.

Throughout his more than 20 years in the OCFO, Mr.

Sang has served the district with exceptional distinction, providing key advice to me, my predecessors and district stakeholders such as yourself and your staff.

Thank you, David.

Before you go any further, let me just uh echo your comments about Mr.

Sang.

Um and I understand there was an event last week, and somehow I did not know about it.

I don't know if I could have made it, but I didn't know about it.

So I think I'm using these 30 seconds to in place of that event.

So thank you for your service.

Thank you.

Thank you, sir.

All right.

Let's go ahead and start with the next slide, please.

As you know, the mission of the Office of the Chief Financial Officer is to enhance the fiscal and financial stability, accountability, and integrity of the government of the District of Columbia.

We do this in a couple of ways.

First and foremost, hundreds of us work to ensure that financial transactions are executed properly and recorded accurately.

In addition, we ensure that district does not spend more than the resources available over the long run.

Next slide.

So here's a look at our budget.

Our gross funds budget is 222 million dollars in the proposed 2027 budget, with a local budget of 182 million, roughly.

Our largest group, the Office of Tax and Revenue, uses almost 45%, or roughly $100 million of this total.

Our accounting group, OFIS, and our Treasury Group use another 15% of the budget each, about $67 million.

And our tech information groups represent about 11% of our budget.

However, a substanti a fair amount of the budget of OTR, the tax administration agency, as well as our accounting group, OFIS, have tech uh budgets or components to their budget that support technology as well.

For my experience, this is becoming an ever-growing pressure point for a public sector finance, where so much of our resources now are committed to very complicated tech operations that we have to manage in order to properly account for district resources.

Next slide, please.

This slide looks at the share of our budget that's personnel services versus non-personnel services.

We are a relatively employee-intensive group with 70 percent of our budget committed to our employees.

The majority of our operational expenses, the 31 percent, is for IT, either in terms of temporary contracts for assistance or ongoing licenses.

Roughly 60 to 70 percent of that 31 million or 31 percent is for um IT expenses.

Next slide, please.

This slide highlights uh again the um the total gross funds budget of our organization.

As I said, our local funds request is of 182 million, roughly, 181.7.

We receive um about 550,000 for federal grant funds, and that's to support the EBT card operation that is the conduit for ensuring that people with SNAP and TANF benefits receive it through a credit card-like device.

And then we uh will spend roughly 40 million dollars from special purpose revenues.

The most important of these are really the first three.

Uh, interagency service fees of 11.2 million dollars.

We share resources with DCHR that are paid by the rest of the agencies in the district for a variety of personnel services.

Our responsibility, of course, is payroll execution, far and away, as well as benefit administration.

DCR has DCHR, of course, has several other HR-related responsibilities.

The next item is Central Collections.

Our Central Collections Unit brings in roughly $55 million a year to our all resources or all funds in the district.

And then we take a share of those gross receipts to pay for our program.

That's roughly $7 million.

So our $7 million then is our share and facilitates the collection of delinquencies to the district of various kinds.

And we'll talk more about that later.

Finally, we uh the next largest one is bank fees.

We have roughly $5.5 million in bank fee expenses.

These are supported by interest earnings that otherwise would go to the general fund.

So it goes directly to a special purpose fund, and it it is exactly what we have to pay for bank fees.

Our primary providers are wells Fargo and Citibank.

Next slide.

This is a look at the change in our local fund, the 182 million dollar fund or support to the to the OCFO.

First is that we have 4.7 million less relative to 26 in merchant fees.

This is a policy decision by the mayor's office to support credit card processing through a direct fee to users of credit cards of 2.5%.

As a result, the 2.5% pays the fees to the transaction companies that run credit card processing, and therefore we don't pay out of pocket directly, and so the reduction in our local fund for this expense for this process is immediately realized as the savings to the general fund that's otherwise redirected by in the proposed budget away from our operation.

In addition, we had two tax abeyments in fiscal year 26 worth roughly uh just over a million dollars.

Those have been taken out of our budget.

Because they've expired or it was a one-time refund.

Or one-time refund.

It was added to our budget in that 26.

Okay.

Increases, the most are really three different categories.

First is a small increase in our budget to handle uh labor agreement responsibilities as well as mandated step increases for existing employees.

Um the second is operational impact of capital, and what that means is we have finished large parts of, in fact, virtually all of the implementation of our financial system, and so now there are ongoing expenses, primarily licensing fees that we have to pay to maintain those systems in order to operate them.

So this is a $3.3 million increase to do that.

And finally, um we've been given $3.7 million and 17 FTE in order to implement a series of tax enforcement or tax compliance and compliance initiatives, and we can go through that in more detail.

And in particular, um Roddy Skipworth can describe in detail what those plans are, and I know that was a question that you asked us.

Next slide, please.

Our special purpose revenue has a net increase of 5.5 million.

Um about 2.2 million is associated with those fees that support our district-wide personnel responsibility or human resources responsibility.

That's far and away the largest.

We have a collection of other adjustments that total $1.5 million in extra resources in 27 as compared to 26.

And we have uh relatively more money to operate the OPED responsibilities.

Those are the highlights of the increase.

So finally, I want to describe an effort that we undertook probably nine months ago to right size our budget through a series of budget adjustments over the years.

It became very that were unallocated to different programs or other kinds of adjustments we had to deal with.

We realized that our fundamental budget could not afford several positions that we had.

And so in order to ensure we did not overhire, we had a series of hiring freezes over the years that are very cumbersome because in the end you do you have to establish a waiver process because every once in a while one of the we have enough resources to pay for a handful of our vacancies.

That really doesn't make any sense.

So we asked our executives to look at their total complement of staff, including those that we could not afford anymore, identify their highest priority, their highest needs, and therefore their lowest needs, and then reduced overall our position count to better align what resources we have with both the 26 and 27 budget with a footprint that we could afford.

And as a result, on net, we reduced the number of locally funded positions, but again, we did not have the resources to pay for this by 23.

And on net we reduced uh SPR funded positions by four.

This allows us.

You said 23, but it says here 32.

Right.

The net effect.

So you'll see that we reduced total local fund positions by 32, but reallocated nine of those to SPR funding.

So the net effect is a 23-person reduction that used to be funded by local funds that we did not have adequate resources to pay for.

And then on that we reduced as well.

We believe now we're in a position that as vacancies occur, managers can hire right away and don't have to, we don't have to manage a cumbersome waiver process, knowing that we now have to become more efficient to manage our expectations, but on the other hand, these positions hadn't been filled for a while because we couldn't afford to do it any longer.

So we've right-sized the organization, our expectations with the footprint that we can afford in terms of employees.

Very pleased with this outcome.

We currently, because we've had a couple of years of vacancies, or I'm sorry, hiring freezes.

We have currently a vacancy rate of roughly 9%.

We expect by the end of the summer we will hire up to the position of 5%, which is what we're funded for in fiscal year 27.

Next slide.

We are now available for any questions you have.

Look forward to them.

Thank you.

Yes.

And for the current year, what is it?

Um almost 10 percent.

That implies that we need to do hiring, and so we're very aggressively implementing strategies to hire up.

Because we've had a freeze, we've had to slow down the pipeline growth.

Who put the freeze in place?

Well, it's a variety of actions that we took as well as uh in order to deal with the budgets that we uh had for fiscal year 24 and 25.

Remember, 25 was changed for all of us because of the continuing resolution.

So we, in order to take our share of reductions associated with the continuing resolution that affected our budget, we we had a hiring freeze in place.

But that was 25.

Right.

We kept it going through the first quarter of this fiscal year, just so that we could finish this effort to figure out really in the long run what could we sustain.

So your agency put the freeze in place.

It wasn't the mayor.

That is correct.

We did that, however, to ensure that we lived within our financial means.

You said two years, but uh FY25 is one year.

Fiscal year 24, our budget was not large enough to afford all of the positions that we had.

And we there was um a couple of adjustments that were unallocated, made to our budget in the proposed budget that was ordained by the council in order to manage within the resources we had, we had to institute a modified freeze, and as time went on, it became more permanent.

The bottom line is we're trying to manage within our means and have been successful doing that.

So your fiscal year 2027 schedule A shows a total of 126 vacant positions.

Does that sound right?

Roughly.

Yes.

And that's roughly 10 percent?

No.

You don't have that many employees or FTs, do you?

That's higher than 10 percent right now.

The vacancy rate has actually gone up over the past few months as the we felt the impact of the freeze has continued.

It was lifted in January, and now we've resumed recruitment for all of our vacant positions, uh, apart from those that are being eliminated in FY27, of course.

And so we're working very uh hard to get those positions filled using all available resources that we can.

Do you have a hiring plan?

Uh to elaborate on those available resources, yes.

Our uh HR team is using a number of um websites that uh link uh our job openings with people who are uh interested and have the skills to do the jobs.

Uh these include USA jobs, Green Door, LinkedIn indeed.

And then we also undertake um specialized recruitment efforts for certain position groups with professional organizations such as IAAO for appraiser positions and um GFOA for accounting positions.

And anecdotally, we hear that the market for hiring is far better than it was two years ago for obvious reasons.

And and so we're we're optimistic that we can get on track and have a workforce that fits our budget.

Uh so could you share the hiring plan with us?

Sure.

We can describe to you what we're doing that's the same.

No, I mean allowing.

I'm assuming it's written.

There's strategies in place we can document those for you.

That is the plan.

So there are strategies that we have in place.

If you'd like us to describe them to you by work group, that's probably most effective because how we approach tax auditors is far different than uh folks that manage accounts payable, for example, or accounting.

Which is fine.

So we have different strategies for different work groups.

So we're happy to share that with you.

So if you could document that and share it with us.

Yes.

How many positions will be dedicated to your cash management initiative in FY27?

I I don't know right now because from our perspective, this is uh a major initiative with the organization.

In the end, most transaction people and certainly all accounting people will be affected by some of the process changes we need to implement.

Certainly most of many of our Treasury operations folks as well.

So we're in the process of putting together the leadership team that will implement a lot of the back end changes that we need to make to ensure that we're managing resources in the environment we're in right now in a cash uh soon-to-be cash-strapped environment.

So all to say that I think it's the responsibility of the organization to adapt our current staff to this challenge and make adjustments that we need to make.

It is we may hire a consultant or two to help with some of the very technical work that we need to change.

But as an organization, we need to donate that marginal three or four percent of many of our people, 20 or 30 percent of others to make some of these adjustments.

Now you hired a consultant.

We did earlier this year.

So you're saying you may hire additional consultants?

That consultant allowed us to figure out what our strategies should be and key work areas.

It could be as we dive into a couple of those work areas that we could use high-level technical expertise to help unwind our current processes or how our systems, for example, between Treasury and Accounting can work together more efficiently.

What was the name of the consultant?

Gartner.

Gardner?

Gartner T with a T.

And are they still on board?

I think I think we completed they may do some residual work, but they effectively completed last week.

Did they help you with the cash flow analysis or projections over the next two years?

They didn't help with that as much as identified some of the complicated movement of cash through this through our system that we have to evaluate and simplify.

That was more what they evaluated, as well as our organization, figuring out our are the responsibilities aligned to the right groups and so forth.

And they they were very helpful in those two areas.

How many tax auditors are budgeted under the OTR in fiscal year 2027?

Good afternoon, Chairman.

Radizki, interim deputy chief financial officer.

For our audit administration, we are currently staffed at um about 68 auditors.

At least, excuse me, we're staffed at 68 FTEs in that administration.

They're not they're not all auditors.

Okay, my question was about auditors.

So specifically, specifically auditors.

To date we have about 28 auditors that are actually on the books, and that consists of auditors, senior auditors, and supervisors.

28.

How many vacancies?

17 currents.

Go ahead.

Sorry.

18 current vacancies in the audit department.

So when filled or roughly filled, that would be about 46 folks that are auditors or supervisors.

Now is that also the budget for FY27?

Well, the difference with 27 is we have a new initiatives and receive 17 FTE for those initiatives.

I'm not I don't know the distribution of what professions those 17 folks are, Roddy.

Yes, specifically we're we're putting together a uh revenue initiative between revenue officers and auditors, um, certain initiatives between compliance and then specifically delinquent collections.

You said you're still in the process of determining the mix of revenue officers and auditors?

Nine auditors.

Nine auditors, nine additional auditors we requested in FY27.

So that would be for FY27 if you fill all the positions 28 plus 18, which is 46 plus nine.

Correct.

Which equals 55, I think.

So let me ask the same question about revenue officers.

So for auditors, tax auditors, you said to date you have 28 on board.

There are 18 vacancies.

There will be nine additional in FY27 for a total of 55.

So what do the numbers look like for revenue officers?

So for revenue officers currently, we have uh administration.

The total the total compliment, authorized complement in that administration is 91.

So we have about 10 vacancies in that administration.

Okay, but those are not all revenue officers.

Correct.

So how many revenue officers do you have?

I think the revenue officer total is 81.

I'm assuming.

So like with the auditors, you said there were 68 in that organization or administration, of which 28 are auditors.

Right.

So wouldn't there be the same sort of wouldn't that be in in the collections administration, there's a more concentration, most of those employees in that administration are all revenue officer classifications, certain um whether it's revenue officer, senior revenue officer, supervisory revenue officers, and we're we're they're all in the collection and enforcement function.

We don't the audit group has separate functions that they perform outside of just audits.

Okay.

So there are 81 plus 10 vacancies.

Correct.

And then for FY27, how many additional positions?

Another nine?

Eight.

Eight revenue officers.

Eight revenue officers.

So that comes out to 99 total.

Correct.

What is a revenue officer do?

A lot of different functions.

So we have revenue officers that are doing more taxpayer service.

We send out many billing notices based on filings.

And so those taxpayers are able to call us and ask questions about their account.

If there are adjustments that need to be made, those revenue officers would make those adjustments.

Additionally, the the actual clean hands function is performed by revenue officers.

They will support business owners in the district through the clean hands process, making sure that they actually receive their certificate.

And then we also have a field division where those revenue officers are out in the community doing canvassing work, more proactive, meeting business owners, making sure that they know about our taxpayer portal, and we also have those that will go out and do the enforced collection, revoke sales tax licenses, and actually perform some of our stronger enforcement functions.

And when I'm operating my restaurant and not playing paying my employee taxes, and one of your folks come in, that's a revenue officer.

And when I'm applying for a clean hand certificate, that's a revenue officer.

Yes, sir.

So with the auditors, how much revenue do you estimate each auditor will generate?

Do you have an average for that?

As far as our as far as our auditors, we typically don't associate them with direct collections.

Typically, we are evaluating and rating that group based on audit assessments.

Audit assessments they are able to generate whether it is a no-change audit, an increase, or a decrease audit.

It's more of a compliance function as opposed to obviously they do bring in revenue for those change audits, but we measure them more in audit assessments.

What does that mean no change, more change, less change?

That's not exactly what you said.

But so I'm an auditor and I should do so many no change audits, or I should just do so many audits.

Well, we'll have we have a group of analysts, data analysts, and they do more of the work on audit selection, right?

And so the auditors are not going in with a mindset that we're going to increase revenue, they are a compliance function.

And whatever the whatever comes from the audit, that's what comes for that's what comes from the audit.

The more analytical work comes from our data analyst with audit selection.

And they are part of this audit group?

They are.

So when we went through the numbers 28 on board, 18 vacancies, nine additional for total 55, that's not the data analyst.

Correct.

Those are just auditors.

So do you assign a value to the data analysts?

They're going to come up with a million dollars each?

No, we don't assign a value to the data analysts.

For the auditors, we're really looking at those audit assessments.

And so we do track that year over year, what that contingent of auditors are able to assess.

And so if you're if you're now those do lead to collections, obviously, but that's how we're we're actually evaluating and measuring.

So, Mr.

Lee, the um do you and the revenue estimates include a value for what you think you'll bring in next year for audits?

Yes.

Yes, explicitly.

And we have talked about this before, and also compliance.

So not only the audit people assessing a taxpayer for additional tax, they pay it, but then also folks who or taxpayers who are not complying with existing law where the liability is clear they are not paying, yes, we collect we include that information in our revenue forecasts.

Absolutely.

So if I went to the revenue estimates, I would find a number.

Let's say a million dollars for audit revenue.

And let's say you only had 10 auditors, I could say um each one will generate 100,000.

Is that an unfair calculation?

No, not at all.

Because you it that is a straightforward look at what overall effectiveness is.

And what the data analysts are trying to do is help you drive that average up by selecting taxpayers with particular attributes, whatever kind of tax you have, that when they are audit for whatever reason are not complying to code.

And sometimes it's mistakes, sometimes it's misunderstanding, sometimes it's explicit trying to avoid taxes.

But we're uh our analysts are trying are constantly trying to find attributes, sets of attributes of taxpayers that when we do audits, we find relatively high noncompliance, the higher the better.

Because we want our auditors to be working with taxpayers where it's they have a high rate of some sort of mistake that they make.

And so to your point, we're always wanting to have more resources brought in per our current staff or current footprint.

Always trying to strive for that.

So it's fair to it's utterly fair to divide what we bring in versus uh how many people that are supporting that function?

So the answer is yes.

That's fair.

The answer is yes, but your answer was sort of no.

That you um you um maybe I shouldn't say rank.

Um you score them based on the number of audits, not on how much they bring in.

We score them based on the assessment.

Microphone.

There we score them based on the dollar amount of the audit assessment that they are able to generate.

Okay.

That's a different answer than you gave before.

I wrote down here don't assign value.

No, no, no.

The the audit, the audit assessment, but it's not that's not direct collections.

The assessment is what we're ranking the auditors on.

Okay, you lost me.

So if you audit me and you assessed that I underpaid my taxes by a million dollars, that's the assessment.

Isn't that also kind of what you expect I am going to have to pay?

Yes.

Yes.

Typically, I guess the number of the failure, but there is a failure rate to that.

And it can be up to 15 percent.

So in other words, if on average with a large population, and this is true industry-wide, there will be a share of people that you assess that you are never able to fully collect the assessed value, the assessed value, not in terms of property tax, but the assessment that's been identified in an audit.

So ahead.

So you do have a value, dollar value for each auditor.

We we could do that, yes, but we that is not the way that that administration works.

But for the audit administration, it is more based on the number of audits plus the assessed value.

Now collection and enforcement, was that included within your revenue officers?

Yes.

So collection enforcement does have a value.

Yes.

I would kind of think they wouldn't.

The person who takes my complaint, you said was a revenue officer.

I don't know that you could assign a dollar value there.

Well, typically taxpayers are calling once we have sent them a bill.

They could call proactively, but we do have a separate customer service call center for that.

But for the collections call center, we're sending out billing notices, and that is what is driving our call volume.

So for the collection and enforcement, did you call it an administration?

Yes.

So for the revenue officers, we assign a value of about a million dollars per FTE they are able to collect in a fiscal year.

That would be collections and enforcement.

You said there is a call center, but you also said that one of the functions of revenue officers, or some of the revenue officers, do uh taxpayer service.

Yes, sir.

In the fiscal year 2027 budget, the Office of Tax and Revenue generates an additional $3.7 million in revenue through, quote, compliance initiatives, unquote.

What is this specifically?

So we have a we have a series of initiatives that we would like to roll out that would allow us to garner garner incremental uh revenue growth.

So specifically, one of them will be we have a partnership with the IRS.

Uh they send us uh data extracts on audits that they perform, and then we're able to take that data and then uh make similar changes on the DC tax return.

That's one initiative.

That's one that is one initiative.

Another one is the collections call center will be able to make outbound phone calls.

Today we do not, and that's really a best practice for uh many collection collections organizations to make those outbound calls.

Now that we have made uh an investment in our call center technology, um we're able to take take full advantage of that ability to make those outbound uh automated dialer um campaigns.

Um we are going to do some automation.

I talked a little bit about uh levies and and garnishments.

That is a manual process today.

Um there are some technology options there for us to automate some of those functions by selecting uh accounts based on data attributes that will be right for levies and garnishments, and then instead of handfuls, because it is a manual process, we'd able we would be able to do more of those.

Um these are these are taxpayers that are already you know have filed and and oh, we just be able to collect on that delinquent revenue sooner.

That's three initiatives.

Yes, sir.

Any more?

Yes.

In addition, we're going to we going to expand our our fields, our field presence.

Today we we have a obviously we have a finite number of revenue officers that only limits us in the field to touch certain taxpayers.

And we kind of we value those taxpayers based on a couple different uh attributes, but it that expanded field presence will allow us to have a broader touch point in the district.

What does that mean field presence?

Um actual revenue officers out in the community, um, you know new businesses that that just pop up.

You know, we have a can we have a canvassing campaign, but we can only have a limited touch point.

There's so many businesses in the district.

But if we were able to expand that, we could have more revenue officers in the community having those touch points with with our retail, our retail industry.

More?

Yes, sir.

Um our audit administration will uh take a look at uh credit card fees, um very similar to many of our businesses have converted from uh cash to um to credit.

And so that that methodology between uh spending um cash at a restaurant versus credit at a restaurant that the auditors will be able to look at that and look for specific um under-reporting.

Kind of that cash seepage, if you will, looking at the size, the size of businesses and then how much that cash by uh credit ratio should really be.

Okay.

Any more?

Yes, sir.

Um, this is very fruitful here.

Last one is we have a um campaign we would like to look at uh probate collections.

Um today we do uh probate collections, we have one probate court in the district.

Um when we do analysis on our on our own tax system, we have a very transient population as you know.

So taxpayers will earn income in the district, have a tax liability, but um retire or do some other type of um transition to uh states that have a more friendly um retirement.

Uh yeah, I move from here to Florida.

Exactly.

And so what's your probate folks going to do?

So right now we would file, right now we would file a probate uh claim here in the district, but the taxpayer could open up uh the taxpayers beneficiaries could open up a probate uh estate in Florida.

And so today we would miss out on that because we only have the ability to file those probate claims here in the district, but we want to start being able to file those in other jurisdictions.

And we're going to use a vendor to help support us being able to file probate claims in other jurisdictions for taxpayers that earned income and that incur tax liabilities here in the district.

So this is all through your revenue officers or revenue and audit?

Right.

So that that probate probate collections, it's we work, we work together, um, but it's mostly a it's mostly a collections function.

So I want to ask you how many staff are dedicated to these new compliance initiatives.

Is that part of the nine additional in audit and eight additional in tax revenue?

Yes, sir.

And this would be new, this would be new growth that we would be able to generate with these with these employees.

So the 17 that's the nine in audit and eight in um revenue officers to 17, that would be entirely for these new compliance initiatives?

Yes, sir.

Mr.

Chairman, I believe.

Uh well for fiscal year, the first fiscal year we're ramping up, so we're estimating $3.7 million.

The out years, uh we estimate at least 10 million dollars a year, and that's inherent in the in the proposal.

So in other words, the forecasts have been adjusted for that.

As we normally do for policy initiatives.

And that's reflected in the revenue estimates.

Right now short answers, yes.

But it's not in the February forecast because it is held out separately as a positive impact to the budget process.

So in other words, if there's a change that requires legislation and there is more revenue, we include information in our budget plan documents that show, should you choose them, how much money would be incorporated into the plan.

The plan itself is balanced against these resources, but you won't look in the sales tax revenue forecast or the income tax forecast and see their share of this money.

Rather, it's held out along with other revenue proposals as a revenue that the proposed budget balances against.

But if you choose not to go forward, then you know explicitly what revenues left over.

And that's just a So you're saying it's in volume one in the table that shows revenues from this budget.

Yep.

Yes, sir.

So it's there.

Yeah, and in the financial plan as well.

But we we call these initiatives or policy proposals for enhanced revenue.

But the plan is balanced against the proposed plan, but until of course you ordain it, it's it's not incorporated into the revenue forecasts themselves.

In the fiscal year 2027 budget, the Central Collections Unit generates an additional $3.9 million in revenue through and quote initiative, unquote.

I love some of the budget book descriptions.

They really don't say anything.

What specific initiatives will be implemented?

And here's how this will work.

Only the Attorney General can file a lawsuit or file suit against people who owe the district resources or money.

And so we will partner with these two individuals to hand over those debts that are owed to the district that require explicit court action.

And we believe this is the most effective way we can expand resource collection for the Central Central Collections unit is by working with the Attorney General's office and taking a much more active role with their partnership of debtors who need legal action in order to collect.

Two new positions at Attorney General.

Yes.

But they will work almost exclusively as I understand it with our Central Collections Unit Funds.

Do these positions show up in the budget?

Because my understanding is that the Attorney General's budget for the Attorney General has a reduction of 52 positions or 58 positions.

These two FTEs will show up in the AT0 OCFO budget.

So it shows up in our budget.

A special purpose revenue to new FTEs.

But to be clear, they're under the chain of command of the Attorney General.

Yes.

We'll provide funding to the Attorney General through MOU.

And this is some?

What specific initiatives will be implemented?

It's what I am hearing from you is basically litigation to enforce collections.

The types of cases that have been described to me that are fruitful is many associated with Department of Motor Vehicle Past II liabilities of people who have operated vehicles in the district.

In addition, our overall outstanding delinquency debt is about $220 million, and there is a fair share of that that could be subject to this particular kind of enforcement action that's beyond what we normally do.

So we're we're excited to get started with the work.

So looking forward to this initiative moving forward, given our responsibility is to track down delinquencies that are owed to the district.

So you estimate $3.9 million in FY27 would be the revenue from this?

Is this like the last issue the um uh compliance initiatives so that it goes up in the out years?

Not at this time.

Not at this time.

The uh the revenues we're looking to monitor and track how well the um these cases go, litigation goes, and then we'll obviously adjust the forecast going forward.

So until the hiring is in effect and people are are online in the AG's office.

You can't count on resources because it's solely dependent on those folks.

But you are counting on 3.9 next year.

Yes, that is true.

Are you is there anything in the financial plan for subsequent years?

Is it 3.9 or zero?

I don't know.

Um we'll we'll check on that.

I'm I I don't I don't know.

Unlike with the tax side, I I understand that.

I let's check what the out years look like.

I apologize.

We'll we will provide an answer to you.

Clearly, we wouldn't be moving forward with this if we didn't think there was an out-year impact.

It's the issue is whether or not we are confident that it can stand up as effectively as we know Mr.

Skipworth and his team will stand up because we've had experience with that.

Your capital budget for FY27 is 2.25 million.

What is this for?

OCFO has uh a capital project titled IT upgrades.

We use it for smaller system enhancements for uh end-of-life replacements for equipment and IT infrastructure uh hardware.

NFI 27, the uh 1 million of this amount is planned for our the continuation, continued support for our OCFO uh cloud migration project and going on for a year or two and will continue to go on for another year or two.

Um also planned is uh uh infrastructure and network uh replacement of hardware, and then we also have some servers at the end of their useful life.

Uh those two together are about 1.2 million, and then we have uh a small project for to upgrade our server security uh for $50,000.

So I guess the total of that's the planned use of the 2225.

Um I don't have the capital budget in front of me.

Is there are you done with with diffs and done done with funding for diffs at this time?

Um there is a question about the the procurement modernization project, which is a component of diffs, uh just recently become a component of DIFS, and so that um could well be additional funds in the diffs project in the future, but not in FY27.

So is there any money in the capital budget for the uh procurement modernizations?

No.

And the reason for that is this project is driven by OCP in Octo.

And we have we're now almost completed with the first phase, which was activating within diffs or the Oracle system.

We have the procurement module so that many of the procurement functions will migrate away from the legacy system that OCP has into the Oracle platform or diffs, which is has saved the district a ton of money by being able to do that as opposed to OCP buying their own system.

So we're very pleased with that.

We still have some work to be done there.

It's unclear right now, at least to us, what the next priorities are in the full implementation of uh monetizing procurement is that's driven again by OCP.

We look forward to sorting that out, but at this point in time, we don't have, we're focused on getting this current process done.

They have not they're not in a position to provide us the detail of where they want to move next, so it wasn't appropriate to include anything in our budget.

Do you have a sense of how much money will be necessary for this?

No.

No, we don't moving forward.

Give me a sense of magnitude.

A million, ten million, a hundred million.

You know, it it depends on it depends fully on the different parts of uh different changes that OCP wants to make to procurement processes.

They're do they're the driver here.

We're providing the platform and then the integration of their process into DIFS, which is we'll say the district again substantial sums in the long run.

But uh it we really need to understand from OCP and Okto their next steps.

Which is fine.

They were busy completing the first phase.

Not knowing is fine, is my point.

Okay.

So help me understand better your special purpose funds.

Um why do you have, for instance, this a special purpose fund for interagency fees?

But I may ask that for each of them.

I may run out of stamina to ask about each of them.

But why wouldn't this just be um general fund money or local funds?

This is a long-standing arrangement that we uh CFO lee described.

We share this fund with DCHR.

It uh assigns a charge, a per a small percent of fringe benefits, actually health benefits charges across to the uh that agencies use to pay for their payroll expenses.

A small portion of that is compiled in a fund.

Uh and this fund is shared with DCHR, and the purpose is to fund the payroll and personnel expenses uh across the district.

Those expenses are incurred by us and DCHR through the services we provide.

Again, ours is primarily payroll, but there are some benefits that we manage as well.

And DCHR uses their share of this, and I believe it's an even share.

Yes, split 50%.

If they're $11.5 million a year, roughly for a variety of services that they can describe.

You said how much million?

11 uh I'm sorry, 11 million 250,000.

Is your share?

We share evenly.

So in other words, our share is 11,250,000, as is theirs.

And the source of the funds is you said a small percentage of the health benefits, fringe benefits cost for each of the employees in the district.

We take from each agency that small percentage.

And it's compiled in a fund, and that fund is the interagency service fund.

So you collect from each agency a small percentage of their fringe benefits.

That's actually the health benefit.

Put that in this fund.

Yes.

And then out of this fund you pay your costs for payroll and key CHR pays its costs for whatever.

Payroll and personnel across the district.

Central collections.

So does that mean Central Collections is kind of run out of its the funds it generates?

Yes.

So it collects money from him and her and them.

It goes into the special purpose fund, and then out of that they pay their expenses.

And their expenses are seven million?

Yes, sir.

Bank fees.

So Wells Fargo, where we have some money, they charge us for some of that.

Their services, they also give us interest.

Why do we have a special purpose fund for that?

Why isn't that just a local fund expenditure?

Well, that grew out of a we were correcting an incorrect practice many years ago when the banks were just netting our interest.

They were taking off their fees off the top.

And so to correct that, um, we want to cover uh record all the costs and all the revenue uh a hundred percent.

And so the special purpose revenue was a way to record.

Here's the interest, here's the bank, here's the fee that we paid the bank, and the revenue source for that is the interest income and so that interest income just enough to pay for the bank fees is put into this special purpose revenue fund.

The rest of the interest stays in the general fund.

So the way it used to work?

I almost followed that.

Yes.

So at the end of the year, that's this is SPR, this fund balances to zero.

We just take the portion of the amount of interest needed to pay for the bank fees into this fund.

The rest of the interest stays in the general fund.

So let's say 15, 20 years ago, we'd earn I'll just make a number up, 10 million dollars in interest.

The banks would give us 9,500,000 and keep 500,000 for their fees.

And there was a question as to whether they were charging us the right amount for fees.

It's not terrible, not terribly transparent.

I vaguely remember this.

Yeah.

But is the answer to have a special purpose fund?

As opposed to having them bill us for the fees?

They bill us for the fees, and we pay them, we establish a we have a contract with them, we pay them after they give us invoices, and we record those expenses, and then the revenue source to pay those is the interest.

We take the interest that's needed to pay for those fees.

Your question is right on, though.

Is a special purpose fund necessary for that clarity in that transaction?

If we were to implement this kind of arrangement with our new financial system, we wouldn't do this.

Or just have it a straight general fund expense.

Either way, there's many practices that led to the proliferation of special purpose funds, both how elected officials wanted to track a particular revenue stream and an extra particular expense and other convenience relative to our legacy financial systems that today we would treat differently.

But the bottom line is for a couple extra steps in accounting, we still the effect is still the same.

The general fund has as a revenue the interest uh that is everything but these bank fees, and then we explicitly have can track exactly what the bank fees are.

We just do it through the device of a special revenue fund.

You know, this reminds me of the testimony.

You did you hear the testimony of several witnesses at the beginning talked about a public bank?

Have you looked at that at all?

I have, yes.

Thoughts?

Um, it it depends on what state you are in, because typically states highly regulate formation of banks, especially things like credit unions, cooperatives, cooperative banks, and so forth.

Uh so it depends on that legal structure first, and then second, um you have to jump through hoops with the Federal Reserve to be able to ensure you have enough capital to operate.

All to say that your initial analysis isn't necessarily on the benefits or maybe not so much benefits that those speakers were talking about, but it's a lot of work has to go in to figure out where relative to district law and Federal Reserve, what are the requirements to even stand up that sort of institution?

Um in the particular state I was working in at the time, it was not viable without state legislation.

Here we're far more nimble.

Uh so maybe that's not as much of a problem.

But the point is we found it fruitful first to figure out what the regulatory responsibilities, capital requirements and whatnot were to stand up such an institution to take deposits, and then you can start working on the economics, because if it's impossible to stand it up, it wasn't worthwhile.

So that's my bowl uh in terms of just establishing it.

I think that's important.

The second is the proponents or the people sponsoring the creation of a bank really need to identify what outcome they're looking for.

In other words, are we trying to minimize interest rates on consumer loans?

Are we trying to create a you know through uh 20, 30, 50 basis point savings on mortgage rates, which is a different kind of structure than if you were to focus on consumer loans.

What is it we're trying to do?

Or are you looking at a mechanism to provide lower interest rates for developers of low-income housing or something like that?

Well, if you do that, then you have to evaluate what's the point of the housing production trust fund, if not to help subsidize those those buildings.

So you really have to focus on and identify really clearly what is the outcome so you then can learn how to structure the capital stack that supports that, you know, the the limits on on borrowing and so forth.

So, yes, in the 2017 and 18, I spent a lot of time on this topic.

Special purpose funds, lottery reimbursement.

I'm sorry, lottery reimbursement.

When the uh several years ago when the OCFO, when the lottery became part of the OCFO's administrative authority, uh we consolidated their administrative functions into OCFO central administration.

And so at savings uh to when you looked at both those uh uh processes together.

So in other words, we we and the OCFO AT0 agency um provide legal services, procurement services, um our internal audit and security uh services, HR, personnel services, and as well as executive oversight.

And so there is and so we when that consolidation happened, it wasn't a consolidation of agency and agency, but it was just those administrative functions, then uh we arranged for a payment to be made for to support those um central central services.

So I'm guessing lottery revenues, not all, sort of like the um bank fees, lottery revenues equal to what you expenses are are put into this fund, and then the expenses are paid out as yes, for 27 it's it's a little over 2.2 million.

And again, when we first did this, there was there was a savings at lottery because they no longer had to um support those functions.

Yeah.

But it sounds like it could be the same as the prior discussion.

This could just be straight old entries, income and expense entries uh with the general fund.

But so this is dates back to that um lottery coming into the OCFO and the lottery paying for its own expenses, but its expenses are being um borne by OCFO, so the fund was created to do that.

Give me a second here.

The district currently requires developers to forward fund TIFS.

What I mean by that is developers fund the improvements and then are reimbursed.

This was not always the case.

Uh while this change apparently predates your tenure, Mr.

Lee.

Uh I'd like to understand why we require this for TIFFS, because it makes the TIFF less attractive for development.

Yeah, I'd like to understand as well.

And so it does predate uh me.

I did not realize this particular change had occurred.

There's a couple of policy decisions that have been made outside of our office, and so rather than answer this uh uh with only half the answer, we will uh respond in writing a more complete answer of how this change occurred, what were the decisions that led to this?

It's complicated because it's a TIFF.

It also is complicated because it's associated with the downtown TIFF, which has been used many different ways uh as I'm learning.

So I'd I'd rather have my staff take a few more days and provide a complete picture for you here.

You said policy changes outside of your office?

Yeah, I'm I'm I'm there's discretion that DIMPED has as well as we have in managing in TIFFs, and I I just don't understand it well enough that I felt it was uh useful for me to try to um escape by.

I'd rather have a precise answer to the to you.

And I I think this is an important issue for economic development, and I I'm sympathetic to it.

So I you're right.

This predates me, and and we're happy to have a comprehensive answer for you.

All right, that would be very helpful.

Um and it sounds like you understand exactly what I'm asking about.

Yes, yes.

On March 3rd, the council approved an emergency bill enabling the Archdiocese of Washington to file supplemental deeds clarifying long-standing equitable and beneficial ownership of properties by individual parishes without incurring a transfer tax.

My understanding that the recorder of deeds refuses to implement the law.

I think you were here when a representative of the Archdiocese testified.

Yes.

The council's intent was very clear.

And that was namely we wanted the deeds to be processed with minimal paperwork and with no tax liability.

And that seems to have been frustrated.

Can you explain what's going on?

Actually, I think I know what the explanation is.

And that's that the legislation used the term supplemental deed.

Right.

So the intent, the intent couldn't have been clear.

I appreciate that, but the fact pattern and the way that that was structured, that law was structured, um, has some problems.

And my understanding is that the AG is a recommendation for a correction, and our, and I I saw it earlier today, we we concur with that recommendation.

I believe it was in part of an amendment that you were proposing, if I recall correctly, our team feels that that is the solution.

And so we are willing to work with your staff, the archdiocese, and of course the AG to help you move that that correction through.

Well, this was two months ago.

So I remember that I had an amendment and I pulled the amendment back because the Archdiocese objected to, I think, so again, this was two months ago.

The Archdiocese said that the um the amendment I think struck the term supplemental deed, and the Archdiocese said that absolutely had to be in there.

Regardless, I think our intent couldn't have been clearer, and that is these deeds, title is held in the name of the Archdiocese, although in practice it's been the individual churches that have owned, operated, and so that's the same.

If there's land and they want to put the title in the churches and not have to file a thousand pages of paperwork and also not have to pay a transfer tax since it's them.

We couldn't have been any clearer about it.

I don't I just don't get why.

I think the term is a hang up.

I think it it it has from my limited understanding, it has very specific legal meaning, and the fact pattern on the ground with the archdiocese isn't that creates a problem with that term supplemental deed.

And so I can't describe why it doesn't work for the archdiocese.

We don't I believe there's disagreement about just how um the relationship between the archdiocese and the individual parishes actually works, and so we are um happy to have more dialogue about that.

I I understand your objective.

We clearly don't have a stake in that objective, but the way the original uh legislation was structured apparently is problematic relative to what we see as the fact pattern with with the ownership.

And so um again, we concur with the recommendation that that the AG provided uh and can work with the Archdiocese and the AG to look at alternatives if they have a particular uh concern about the notion of a supplemental uh amendment.

I may be wrong, but I want to use the word minister as in it seems to me this is a ministerial function.

What the recorder of deeds does are what your I I don't know if it's attorneys at OTR.

No, it's ministerial, and it's like the ministers are overanalyzing this.

If if St.

Matthews, I don't know the St.

Matthews is one of them, but I'll just say that.

If St.

Matthews is a church in the diocese, and it turns out that the title is held in the name of the Archdiocese, and the Archdiocese wants it held in the name of St.

Matthews.

Who cares?

So the council said we don't care.

We passed this bill, and it's like the ministers are overanalyzing this and saying, well, we need to understand the relationship between St.

Matthew's and the Archdiocese.

I think with any action that um the recorder takes, or quite frankly, in our tax world, we um we first try to understand the facts that are brought to us and how it relates to the law and the practices that we have from the that are based in law.

And so it is our responsibility to be as true to the law as we can possibly be relative to the to the uh fact patterns, and evidently there's an issue with the concept and notion of the supplemental deed relative to what your intent was and the diocese, archdiocese corporate structure.

And so I would push back there and say we we don't want too much discretion.

We want to follow the law.

And we would be happy to work with your staff to explain what we understand the reality to be and and look at different options to resolve this.

And I I yeah, we would have happily walk through what's been provided to us, our interpretation of the law that we're supposed to carry out and show where we think there's a gap here.

Happy to do that.

And with the AG as well, AG staff.

It's feeling very bureaucratic to me.

So let me move on.

We've noticed a number of funds whose names were changed in the FY26 Budget Support Act.

But the fund names in the financial system and printed budget books have not been changed accordingly.

For example, the Medicaid Collections Third Party Liability Fund is now the Medicaid Provider Fraud Reimbursement Fund.

The budget book and financial system still refer to it as the former name.

Now, part of my question here, which I'm not sure I like, is does the OCFO have a plan to make sure the naming conventions are consistent with what is in the statute?

I'm not sure I agree with all these name changes.

But if we're going to do the name changes, there should be some consistency.

Mr.

Kennedy.

Hi, Eric Kennedy.

Uh Deputy CFO for the Office of Budget and Planning.

Yes.

To your um question.

Um oftentimes when there are name changes, we get a lot of them up front, but it's not like a 20-minute process.

So every year we update the uh financial system to accommodate those name changes.

So whatever name changes have occurred, assuming whatever they want to do with it, whatever it actually happens, you allow it to happen or whatever, it will we'll make those changes in um 27.

They'll be in the 27 system.

So to be clear, I think this is like many components of the mayor's proposed budget until you ordain it.

We're not going to make permanent changes to our structures.

And so yeah, that's one reason, but that is one reason.

In some instances, however, it is we may not have known about it at the time, or we may not have had time to make the change.

Like that could have been a provision that happened two days or so.

I'm not saying it did, but it could be something that happened just before the budget had to be transmitted, and we don't have time to do it.

So um, but we always go back and make those changes.

Like, for example, I heard we always go back and make those changes.

I'll stop.

Are there any name changes that are important?

Because I sort of when I looked at that in the BSA, I was kind of thinking, don't we have better things to do in this government?

Um but there might be some name changes that are important.

Are there?

Yeah.

So for us, we don't really weigh whether they're important or not.

We weigh whether they fit the where whether they look they have too many characters and we can get them in the right way.

But um no, we don't prioritize.

Once a name has changed and it doesn't comport back to what we have in our system, we change it.

Okay.

Um that answers that question.

Well, don't be too quick to change them until we adopt the budget support.

Absolutely.

Absolutely.

Absolutely.

Yeah.

That won't happen.

We won't do anything in for whatever we're gonna do, it's not gonna happen until September.

Yeah.

Yep.

September, October.

Okay.

Yep.

And your takeaway could be, don't we have better things to do?

Um let me change the subject.

Uh clean hands.

So I don't have anything specific here, but over the last couple of months I've been getting complaints about the clean hands process, that it takes too long and that it is, I want to say very uncoordinated and unnecessarily burdensome on folks that there's an expiration to clean hands.

When I say expiration, that I don't have the details in front of me, but I get a clean hands uh certificate from you.

But there's still some maybe I don't get a clean hand certificate.

Maybe it's that you check on whether I'm current with DMV and that's only good for like 30 days, and if the process takes more than 30 days, forget it.

This is way too bureaucratic.

It looks like you're the one who can answer this.

Yes, sir.

So over the over the years, so I I've been at um OTR for the past five years, and through these hearings, we've heard a lot of testimony about uh clean hands, and we've put a lot of um improvements in.

Hopefully you've seen less complaints on clean hands through the No, I'm getting more.

When I say I'm getting more, I don't remember getting complaints a year ago, but I'm getting them now.

Right.

So we are we are there is a time uh frame that a clean hand certificate is good for because of obviously the changing of uh the taxpayers' tax status um through returns and and and certain due dates.

So there is a time frame.

It's not um it's not good forever.

So we will issue it, it's good that day.

Um we'll give taxpayers uh um a a time frame to use it for whatever they need it for, a contract, a grant or something of that nature.

And if um they need it, again, they'll have to come back to us for another clean hand certificate.

So how long does it take to issue a clean hand certificate?

Uh it it depends on the the taxpayers.

Uh we have taxpayers that have very simplistic uh tax structures, and we have some that have more complex uh tax structures with disregarded entities and things like that.

That does take some some of the I'm remembering now that was one of the complaints was that um uh somebody got caught up in clean hands because of affiliated organizations?

Yes.