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TASK FORCE ON DISTRICT OF COLUMBIA GOVERNANCE

Final Report and Recommendations
Overview

There is universal agreement that the District of Columbia government is not functioning properly and that remedial action is needed. Many proposals have been advanced as parts of the solution, and there are many ideas contained in the pending proposals that deserve careful consideration.

After months of careful study, the Task Force is convinced that the root cause of the District's difficulties is structural. The District government is asked to do too much, and has been given too little in the way of resources to do it. In particular, the District has responsibility for many state like functions but is without a state to fall back on for assistance (as recently recognized and explained by the Control Board in a published report). The District also has had burdensome obligations transferred to it by the federal government, without the resources necessary to discharge those obligations.

At the same time, the large portion of the District utilized by the national government or entities that relate to it (like foreign missions) is beyond the reach of the District's property taxes, reducing that source of revenue by well over $300 million per year. In addition, by Act of Congress, the District is prohibited from taxing income earned in the District by non-residents, a prohibition not imposed on any other jurisdiction by the Congress, and one that costs the District some $1 billion annually in potential lost revenue.

The District's boundaries are fixed and limited, and they do not encompass many of the areas surrounding the center city that tend to be more prosperous. The net result is that the burdens of supporting government fall disproportionately on the residents of the District and the businesses located here. This heavy burden in turn is an inducement for residents to move to the suburbs, and for businesses either to locate elsewhere or to move to sites outside the District.

While these structural imbalances are the primary cause of the District's problems, these problems have been exacerbated by governmental operations that have been inefficient or worse and that are not performed well even considering the constraints imposed on the District.

The Task Force has developed a comprehensive set of recommendations to address this unsatisfactory state of affairs. The key recommendations are:

-- Restructuring of the relationship between the federal government and the District, with unfunded obligations reassumed by the federal government and financing or operational responsibility for important state-like functions to be assumed by the federal government.

-- Retention of a formula-based federal payment that is keyed to the revenues the District is precluded from raising because of the presence of the federal government and the legislative limitations imposed by Congress.

-- A call for a commitment by District government leaders to reduce residential and business taxes to levels comparable to those in surrounding jurisdictions, concurrent with the implementation of the restructuring proposals and receipt of the formula-based federal payment.

-- Revitalization of the District's economy through the stimulus of an economic development corporation and through greater use of regional approaches to address metropolitan area-wide governmental activities.

-- Commitment by all responsible District government officials to improvements in government operations, and a collaboration of all parties to develop and execute an action plan to accomplish that end.

-- Concurrently with this collaboration, commitment to adopt:
--- a competitive pay scale for District management employees
--- a training program for government leaders of the future
--- a plan to achieve return of control of governmental functions now being carried out under court orders

-- While there is no basis now for modifying the governmental structure, establishment of a commission to review the need for charter revision in such areas as electoral reform, accounting for financial responsibility, school board reform and refinement of the ANC system.

-- Consideration of reestablishing a White House coordinating office for District of Columbia affairs.

-- Voting representation for District residents in both houses of the United States Congress.

A complete list of the Task Force Recommendations is set forth in the summary in Appendix A to the Report.

Introduction

The Task Force on District of Columbia Governance, sponsored by the Federal City Council and the D.C. Agenda Project, is a broad-based group of leaders from the business, professional, labor, religious, philanthropic, governmental, educational and civic communities of the Nation's Capital. The members of the Task Force are listed in Appendix D. The Task Force has as its mission analyzing issues and proposals relating to District of Columbia fiscal policy and government organization, and developing a comprehensive consensus position for restructuring and revitalizing the City and its government, taking due account of the national interest as well as the interests of the citizens of the nation's capital.

The Task Force began its work in earnest in the Fall of 1996. It has conducted a series of seminars on a wide range of subjects pertinent to its overall mission. For each seminar a background paper was distributed to provide the Task Force members with a baseline of information on the subjects that were explored. At each seminar, a group of speakers, all experts in their fields with extensive experience, made presentations after which there was an opportunity for dialogue with the Task Force members. The Task Force then reviewed and debated drafts of a report, and reached general consensus on this Final Report and Recommendations. Attached as appendix E is a list of the seminar topics and the presenters at each session. The Georgetown Graduate School of Public Policy school has prepared a background report summarizing all of the information disseminated at the seminars and in the briefing papers prepared for each seminar. That document is separately bound.

The Task Force has developed and adopted a statement of principles that form the foundation of its recommendations. The principles reflect the primacy of democratic values and a commitment to self-government on which government structures throughout the United States are premised. They also reflect the unique nature of the District of Columbia in our nation, the major stake that the nation has in its capital city, the need for a partnership relationship between the federal and District governments, the important role of surrounding jurisdictions in advancing the interests of the capital city, and the City's need for a sound financial base and a thriving economy. The statement of principles is attached as Appendix B to this Report.

Early in the Task Force's study efforts, the President issued his proposed National Capital Revitalization and Self-Government Improvement Plan (the "President's Proposal"). Because of the significance of that proposal, the Task Force decided to articulate a position on it, which is set forth in Position Paper Number One (Appendix C to this Report). While generally supporting the President's Proposals for redistributing certain functions and investing in the District's economic development, the Position Paper took strong issue with the proposed elimination of the federal payment to the District.

This document sets forth the overall recommendations of the Task Force on the relationship between the District government and the federal government, the organization of the District government, and means of restoring the fiscal integrity of the District. The Task Force believes that the recommendations in this report (1) represent a sound, realistic and achievable comprehensive program for addressing the serious governance problems of the District of Columbia, (2) recognize the legitimate federal interest in and responsibilities with respect to the District, and (3) are fully consistent with the guiding principles endorsed by the Task Force.

The Nature of the District of Columbia Issue

There has been considerable focus in recent months on the District of Columbia problem--on its financial difficulties and the management shortcomings of its government. While we are cognizant of serious deficiencies in the management of District governance, this report does not reiterate the details. The subject is not new. The District of Columbia "problem" is a perennial topic of attention, and has periodically been the impetus for action by the national government.

The District is a creature of the Constitution, which empowered Congress to exercise "exclusive legislation" over "such District" as may by cession of particular states "become the seat of the government of the United States." After a decade of building the rudiments of a capital city, the city of Washington was given its first congressional charter in 1802, which provided for a mayor-city council form of government. Apart from various moves to respond to fiscal crises in the city, there was little congressional attention to the governance of the capital until the Civil War. Renewed interest in the District at that time led to establishment of a territorial government in 1871, made up of the city of Washington, Georgetown and the balance of the portion of the District ceded by Maryland (the Virginia portion was retroceded in 1846).

The new government, consisting of a Governor and a Council appointed by the President and a House of Delegates elected by property holders, commenced a major public works program. Within three years, it had incurred debts far beyond its ability to service or repay. This led Congress to intervene and to replace the territorial government with a Commissioner form of government. The new structure came with a Congressional commitment for a federal payment equal to one half of the annual operating budget of the District, a commitment that has never been honored.

The Commissioner system remained in place until 1967, when a mayor-city council system appointed by the President was established by executive order. It was in turn replaced by an elected government authorized by the Home Rule Act of 1973. But even that system reserved to the Congress the right to legislate in all matters affecting the District as well as to control appropriations and the District's ability to raise revenues.

In April 1995, in response to the District's deteriorating financial condition, Congress enacted the District of Columbia Financial Responsibility and Management Assistance Act, which established an Authority (the "Control Board") to help return the District to financial solvency and to improve the efficiency and effectiveness of government operations.

Given this history, the Task Force believes it is necessary to set forth in some specificity the precise nature of the current District of Columbia "problem," which includes an assessment of the principle characteristics of the District that affect its governmental operations.

Such an assessment must begin with the recognition of the unique nature of the District of Columbia--a city without a state, yet a city faced with all of the problems confronting large cities throughout the nation. In addition, the District is burdened and blessed with the special attributes inherent in being the seat of the national government. At the same time, the District is the center of a large, growing, economically vibrant region that extends across the borders of several states and involves scores of governmental entities. It is a region whose economy is characterized both by interdependence and by intra-regional competition.

An inventory of the salient characteristics of the District reveals that is has considerable advantages. It possesses physical beauty that can be a magnet for those weighing a choice of residences, and it is within easy reach of highly desirable recreational, tourist, and historical areas. Its primary employer, the federal government, is the source of a multitude of attractive jobs. The presence of the government has led to the development of an economy heavily represented by employers whose activities are directly related to the national government and are the sources of thousands other attractive jobs. Primarily because of this, the District possesses a substantial population of educated citizens, including a significant international community. Further, it is home to a remarkable array of cultural and artistic institutions, including the greatest concentration of national monuments in our nation. The center city is well built up and there is a good regional transportation system featuring a modern rapid rail system and two state-of-the-art airports as well as a reasonably serviceable highway system.

Yet despite these considerable advantages, the District has steadily lost population over the past 25 years, mostly from the middle class. In substantial part, this is a direct effect of the serious drawbacks that stand out in any inventory of the City's characteristics. The most prominent are an abysmally poor elementary/secondary education system that has deteriorated as it has lost its traditional support base from the middle class, a substantial crime rate, and a tax system that is onerous for many District citizens. The economy of the District, measured by its ability to generate employment, is continuing to decline. Large areas of the city need development and many of its highways and some of its bridges are in a poor state of repair. To these drawbacks must be added a widely held perception that District government services are poorly delivered and that its government is badly managed.

That the District government has not adequately met the challenge of efficiently discharging its overall responsibilities within its available resources cannot reasonably be questioned. The budget deficit is large. Across a range of social services, the failure to meet federal and/or local standards has resulted in judicial intervention and continued judicial oversight. The inadequacies of the schools and the problems of crime and public safety are self-evident. In many other areas of local government operations (such as street repair, licensing and permitting, vehicle registration and inspection, property assessment, procurement) service delivery and administration, including responsiveness to the public being served, ranges from inconsistent to poor. Such automated information systems that the District has are generally inadequate to the tasks they are expected to perform.

The management of the District government's workforce has contributed to the current problems. In the 1980's and early 1990's, the government payroll grew sharply, as the District became the employer of last resort. Then, as the economic turndown grew more severe, it became necessary to downsize the City workforce. The number of employees was reduced by nearly 30 percent from its peak of 52,000 in 1992 to 36,000 today. Much of the reduction has come from voluntary retirements of senior employees, and that has caused a loss of knowledge and experience. This, coupled with the historic lack of investment in training, has left the District with a workforce that is not prepared to deliver government services efficiently and in accordance with state of the art standards.

Yet there is little basis for believing that the cause of the District's problems lies in the basic form of its municipal government. A number of today's problems have arisen under other forms of government that have been tried in the District over its history of almost 200 years. Many of the City's current problems also are common to other major American cities irrespective of their form of government. The Task Force believes that the primary causes of the District's problems derive from the serious flaws in its relationship with the federal government. While these problems have been exacerbated by inadequate management of the business of government, solutions lie primarily in restructuring that relationship, not in diminishment of political rights of the citizens of the District of Columbia. At the same time, there is an urgent need for better management of the District government. Our recommendations address both of these subjects.

Recommendations for Addressing the Major
Problems Facing the District of Columbia

By far the greatest single cause of the problems facing the District of Columbia today is the crushing burden of providing the full range of city, county, and state services without having either the financial or managerial resources to do so effectively. That burden has resulted in a disproportionate tax burden on the residents and businesses of the District, and insufficient resources to devote to the subjects that are of greatest local concern--most particularly schools and public safety. There also has been a failure of leadership in the public education system, and an inability to cope with the threats to public safety and the rampant proliferation of criminal activity.

While the difficult problems of crime and public education are commonplace in large urban areas throughout the country, they seem to have become more severe in the District than in most other cities, and they are significantly more serious in the District than in the surrounding areas. A consequence of these factors has been a flight from the City to the suburbs by many middle class families, and a resultant downward spiral in the capacity of the City to solve its problems.

It is naive to believe that governmental intervention alone, such as through legislation or establishment of oversight agencies, can solve these problems completely. We fully recognize the social and economic forces that contribute to them and that make their resolution so frustratingly difficult. Nevertheless, there are steps that can be taken that should significantly improve the District's ability to deal with these issues. Those steps are recommended in the following paragraphs.

I. Redistribution of Functions

Presently, the District is saddled with responsibilities that are beyond its ability to pay for or discharge. These responsibilities (except for the pension liability) are not typically borne by cities, or if they are so borne, the responsible cities have significant assistance from their states to carry them out. All of these responsibilities come with financial burdens that the District is not capable of meeting; in some cases, there also are programmatic burdens that are not appropriate for a city government.

A. Unfunded Pension Liability. Of all of these responsibilities, the one with the greatest potential for long term damage to the District is the unfunded pension liability. This was originally a federal obligation, but it was imposed on the District after adoption of the Home Rule Act. At that time and during the years since, the federal government did not provide adequate funding to cover its share of that obligation. Thus, the liability has been growing and will continue to grow unless steps are taken to address the problem.

The issue is not that of covering contributions relating to current work of police officers, fire fighters, teachers and judges. The District has been making contributions on a current basis sufficient to cover the benefits earned annually. In addition, the District has made substantial contributions toward abating the unfunded liability that actually should be a federal obligation. But because of the interest component built into the actuarial assumptions underlying the benefit calculations, the unfunded liability has grown at a faster pace than the amount of the District's contribution over the current cost. Under current law, the District must begin in 2005 to make annual contributions of nearly one-half billion dollars, merely to cover the interest component of the unfunded liability.

The President has proposed that the federal government assume responsibility for the unfunded pension liability. This would be accomplished by closing the current plans and transferring them, along with the plan assets, to the federal government. The District would then be responsible for setting up a new pension system on an on-going basis for its police officers, fire fighters, teachers and judges.

In order for the President's proposal to have its full intended effect, the entire unfunded liability would have to be assumed by the federal government. While the initial proposal was not clear in this regard, we understand that the President's proposal is likely to be clarified so as to cover the entire liability.

An alternative approach would be to transfer the entire pension program to the federal government and have the District make annual contributions relating to the work performed in each year by District employees, with appropriate conditions to protect against possible future abuses.

Either way, the District's annual pension liability should be no greater than an amount based on the level of earnings of its employees in any particular year. Currently, the District is contributing almost $300 million per year to the pension fund for these employees, more than double what its contribution would be under normal circumstances.

B. Medicaid and Welfare Payments. The largest and fastest growing federal matching fund program is Medicaid. That program costs nearly $1 billion per year in the District. Currently, the District pays 50% of the program's costs (the full "state" share). Most cities do not pay any part of the Medicaid program costs; of those that do, none pays anything close to 50%. Federal law requires that the state government put up at least 40% of the state share.

Using this last provision as a guide, the President has proposed that the District's Medicaid match rate be changed to 30%, the maximum amount that would be possible if the District were part of a state. We believe it is more justifiable to set the District rate of contribution at 20% or 25%. That is still a higher contribution than most other cities make. (Local governments in New York state, which have the highest contribution share of any state in the nation other than the District, pay less than 20%).

Another expensive program is TANF (Temporary Assistance for Needy Families), the successor to the AFDC program. TANF is a block grant program, but the block grant was established based on the match rates in existence in 1995, which in the District's case was 50%.

No other city pays 50% of the cost of the cash welfare program. Most cities do not contribute at all to the program; it is covered by state appropriations. In a few states there is a local contribution. In New York, for example, the local jurisdiction puts up 25% of the program cost. We think a modification to the District's block grant to reflect a 25% contribution by the District, rather than 50%, is entirely warranted and will reduce the financial demands that are beyond the District's ability to bear.

C. Court System. The District court system mirrors that of most states. Cities generally do not bear the cost of supporting the portion of the state court system that lies within their borders. The federal government should bear the cost of the District's court system, as states do elsewhere in the nation. The President has made a proposal to assume this cost and we support it, as set forth in our Position Paper Number One.

D. Prison System. Cities do not operate prison systems. They do have jails, and so does the District. But the Lorton prison system is a function that should not be borne by the District. The President has proposed that the federal government take over responsibility for the District's sentenced prisoners, fulfilling the role played by states elsewhere. We support that concept, although we have some reservations about certain conditions that are contained in the President's proposal. We specifically oppose as unnecessary and unwarranted application of sentencing guidelines or standards on District courts, as set forth in our Position Paper Number One.

E. Mental Health Hospital. Like prisons, mental hospitals typically are not operated by cities. But unlike prisons, they are not activities that usually are carried out by the federal government. They are typically functions of state governments. For more than a century, however, the federal government did operate and entirely fund the St. Elizabeths Hospital in Southeast Washington. In 1987, pursuant to a statute enacted in 1984, the federal government transferred the hospital to the District government. Apart from having to assume financial responsibility for an antiquated and deteriorating physical plant, the District was burdened with the responsibility of paying for the hospital's several thousand employees. The population of the facility, which currently exceeds 800 persons, includes many federal prisoners, and the cost of maintaining the institution is substantial.

We believe it would be appropriate to explore carefully the termination of the mental health operations at St. Elizabeths. The City should develop a plan to relocate the current residents, either into community mental health facilities or by purchasing appropriate residential care for the St. Elizabeths patients who require it in facilities located in Maryland or Virginia. Many of the residents at St. Elizabeths are in federal custody and are paid for by the federal government, which should assume responsibility for their relocation. The District's plan should be realistic and assure that all residents are appropriately placed. An increase in homelessness has attended some past efforts to phase out institutional care; that must be avoided in this case.

** * * *

The President's proposal for federal government assumption of various responsibilities now being carried out by the District government presumes a memorandum of understanding between the two governments that would set forth the conditions under which the various transfers of functions would occur. Considerable effort has been devoted to the development of such a memorandum of understanding. Some of the conditions initially sought by the Administration were announced as part of the President's proposal.

The Task Force is concerned about a number of the conditions originally proposed and subsequently advanced during the negotiations on the memorandum of understanding. Specific concerns are referred to in our Position Paper Number One, attached as Appendix C to this Report. Several of the concerns have been alleviated by modifications in proposed conditions; others remain.

We have generally refrained from making specific comments on the specific conditions of transfers of functions in this final Report because we recognize that the negotiations are ongoing, and any attempt to address a particular proposal could well be superseded by events before the ink is dry on this Report. But we do urge that whatever conditions are ultimately adopted be consistent with the fundamental principle of Home Rule. Any condition that restricts District governmental discretion should be considered only if it can be justified as truly necessary, not merely convenient to the federal government and not simply advancing an agenda of one or another federal agency.

II. Restoring the District's Financial Soundness

Currently, the District is an unsound entity financially. It has responsibilities that are far beyond the capabilities and means of typical municipal governments, and that are comparable to responsibilities borne by state governments. Yet it is prevented by federal law from taxing the income earned within its boundaries by those who reside in surrounding jurisdictions, a power not denied to any other state in this nation. It also is prevented from raising revenues from property sources that are typically available to city governments. Further, it does not have a state to provide it with state aid that is a normal revenue source of local governments in other cities throughout the country. As a result, taxes on local residents and businesses are unusually high and are a disincentive to living and doing business in the District.

The reallocation of functions between the federal and District governments described above would satisfy only one half of the problem. The other half that must be addressed simultaneously relates to revenues. Currently, the excessive tax burden on District residents and businesses encourages flight to the suburbs by those who can afford to flee--who are also those who would generate tax revenues if they remained.

Property taxes are a principal source of revenues for municipal governments. In most cities, tax-exempt property (for example, property occupied by churches or schools) does not exceed 15% of total assessable property. In the District, however, that figure is three times greater-- almost 45%. Not only is the District precluded from taxing the substantial amount of property occupied by the federal government, it is also precluded from taxing property of international organizations, embassies, and other property of foreign governments and multilateral entities, as well as the property of organizations such as the National Geographic Society and the National Education Association, which have specifically been granted property tax exemptions by the Congress. The recent comprehensive study, undertaken by Carol O'Cleireacain under the sponsorship of the Brookings Institution, indicates that the inability to tax this property alone costs the District annually a minimum of $300 million in lost property taxes. Yet the property holders receive a full complement of city services just as do those property holders who are taxed.

There is no justification for the federal prohibition against taxing income earned by non-residents who work in the District. The prohibition was enacted at the time the Home Rule Act was adopted at the insistence of the congressional delegations of the surrounding states. For a city like Washington that has restricted and immutable boundaries and is surrounded by suburbs of mostly prosperous residents, an income tax is the one fair way to secure a revenue contribution from those who benefit so substantially from the opportunity to work in the City. Those people receive a full measure of City services--such as use of the highways, protection by the police and fire departments, and enjoyment of the splendid parks and recreational facilities. It is typical in our nation that those who benefit from these services contribute to their cost, as well as to the needs of the less fortunate who look to the city government for help. The District is unique in being unable to require a fair contribution from these beneficiaries of the City's assets.

The federal ban on taxing non-resident income at its source has a double negative impact on the District: (1) by denying it access to a substantial source of income, it forces an increase in the tax rates on District residents, and (2) it confers a windfall on the surrounding jurisdictions that are not required to give tax credits to their citizens whose earnings derive from the District. Those jurisdictions can maintain lower tax rates on their residents and businesses, making them a more attractive alternative for District residents and businesses. It has been estimated that the value to the adjoining states of this prohibition is some $1 billion in taxes annually. That is $1 billion that the District must raise from its citizens and that Maryland and Virginia do not have to raise from theirs.

Partly as a consequence of the inability to raise revenues from more conventional sources, the District has resorted to a bevy of business and personal taxes and fees. The resultant tax structure has been criticized as dysfunctional and unenforceable, and its burdens on businesses have contributed to the movement of many commercial establishments to the suburbs. At the same time, the District's top income tax rate is substantially higher than in surrounding jurisdictions, contributing further to movement of residents out of the District.

Various steps are necessary to restore the District's financial soundness. Our recommendations are as follows:

A. Federal Payment. Given the District's inability to raise revenue from its principal employer and major landowner--the federal government--and from many of the institutions, foreign and domestic, whose location here derives from the fact that this is the nation's capital, continuation of federal contribution is essential. The ban on taxing income at its source, imposed by the Congress for its own reasons even though not a limit that is a necessary characteristic of a capital city, provides further compelling justification for a continued federal payment.

The Task Force believes that the federal contribution must be formula based, and should be explicitly linked to the revenue the District must forego because of the presence of the federal government, as well as to the additional costs associated with the presence of the national government. A formula-based payment would allow the District government to anticipate a certain level of federal support, and to make long term plans based on revenue at that level. It would remove the determination of the federal payment from the annual appropriation process, along with the politicization that necessarily attends that process.

Additional federal support to supply the "state aid" that is not forthcoming from a state government has also been recommended. Even if the transfer of functions from the District to the federal governments described above is accomplished, the District government would still be responsible for activities which in other states are supported by aid from the state government. Among these is publicly supported higher education, which many feel is vital to assuring that District citizens are adequately prepared for the workplace of the 21st century and is the means of upward mobility for those born to disadvantaged circumstances.

B. Budget Autonomy. Although approximately eighty percent of the District's annual locally appropriated budget of more than $3.3 billion is generated from local sources, the District is not able to spend any of those funds unless they are first appropriated by the Congress. The process of budget approval is time consuming and quixotic, and approval of various elements of the budget is often subject to Congressional politics. There is no legitimate reason for the Congress to continue to be involved in the District's budget process, or for the local government to be at risk of shutting down if the Congress and the President are unable to enact a federal budget.

There is at present a congressionally-imposed oversight agency, the Control Board, that reviews the District's budgets as part of its mission to assist the District to return to fiscal solvency. That function will continue until the District has achieved a balanced budget for four consecutive years. By that time, the implementation of the restructuring and other proposals outlined in this Report for improvement in the financial position and the management of the District's government, including those initiatives already undertaken at the behest of the Control Board, should put the District on a sound business basis and eliminate the need for continuing oversight of its budget by the Congress or a federally-appointed oversight agency.

C. Tax Relief for District Citizens and Businesses. Tax relief is warranted for four reasons: (1) to eliminate the inequity that results from the inability of the District to tax as broadly as other cities and states (because of the ban on taxing income of non-residents at its source) an inequity that pushes up the tax rates for those who reside in the City; (2) to offset the inability to tax federal property and other exempt property); (3) to discourage individuals and businesses from leaving the City to avoid disproportionate taxes; and (4) to recognize the special position of the national capital.

One suggested approach, which focuses primarily on the third reason, is to reduce the federal income taxes of District residents. We recognize that such a provision raises issues of tax policy and would involve substantial questions of income allocation. On the other hand, there is force to the point that such a reduction would help rectify the damage done by the policies and structures that have been in place up until now and that have so prejudiced the District's ability to maintain financial solvency. It also is true that the imposition of full taxation in the absence of full voting representation in the Congress is contrary one of the basic principles that underlay the establishment of our republic.

It is particularly important that the local tax burden be reduced. If the other steps recommended by the Task Force are accepted, it should be possible for the District to operate on a sound financial basis even while lowering the overall tax burden on individuals and businesses and simplifying its tax/fee structure. Such a reduction should encourage further repatriation of District residents (and retention of those otherwise inclined to leave). This would help to make up for the revenue lost through rate reductions or elimination of some taxes/fees.

Imposition by Congress of changes in the District's local tax structure would be inconsistent with the principles of Home Rule that are at the heart of the Task Force's recommendations. But a commitment by the District's political leadership to implement a tax reduction and simplification program, concurrently with the implementation of the structural changes outlined above and the enactment of legislation to establish a formula-based federal payment, would accomplish the desired end in an appropriate way. The Task Force calls upon the District's governmental leaders expressly and forcefully to make that commitment now, so that it can support the relief that is so desperately needed but which only the Congress can provide.

The President has proposed that the function of collecting individual District income and payroll taxes be taken over by the federal government. Several states have taken advantage of existing authority to utilize the Internal Revenue Service to collect their income taxes. This option for the District deserves serious consideration. If it is determined to be advantageous to the District it should be implemented.

D. Financing the District's Deficit. The steps outlined above would go a long way to restore the District's solvency and thereby improve its access to the private bond markets. As an interim step, the President has proposed Treasury financing of the District's accumulated deficit. This is an appropriate step to reestablish the District on a sound financial footing and the Task Support supports it.


III. Revitalizing the District of Columbia

A. Economic/Infrastructure Development. We support the concept of federal capital investment in the District as a recognition of the federal responsibility to assure that the District retains its capacity to serve the national interest. Such investment holds out some hope for longer term improvements in the economic health of our capital. The imbalance in the relationship between the federal and local governments in past decades has contributed to the District's inability to maintain its infrastructure and to underwrite new economic development. The need to overcome that lengthy period of neglect provides additional justification for a federal infusion of capital funds into the District.

We are particularly pleased with the recent Presidential proposal for an economic development corporation, capitalized with federal funds, empowered to grant federal tax credits, and authorized to solicit support nationally from the business community to augment the corporation's capital funds. We note the broad powers proposed for the corporation to condemn property, seek expedited governmental review for projects, and acquire and dispose of land. We also note the proposed governing structure, consisting of seven persons appointed by the President, and one appointee each of the Mayor and the City Council, with a majority to be District business or community leaders.

District residents are rightly concerned about the broad powers of the Board and the need to ensure that local interests are considered and local residents consulted. The contemplated memorandum of understanding that addresses permitting, licensing, zoning and other aspects of local interest will be a critical element of the corporation's basic authority. Appropriate recognition of these legitimate local concerns and provision for community and neighborhood participation in the process of selecting projects will enhance community acceptance of the corporation and give it a solid basis for operation.

We also appreciate that the memorandum of understanding can be a means of streamlining the present processes of permitting, licensing and zoning adjustments. This will remove some of the barriers that presently deter business development in the District.

There is also an issue of how the proposed new corporation will relate to existing economic development efforts. While it may not be necessary to locate all such activities in the new corporation, there needs to be a delineation of roles to avoid disputes or inconsistent policies that will only delay the vital process of economic revitalization.

Finally, we support the President's view that most of the members of the governing board should be District residents and have their principal businesses located in the District. This will assure a balanced approach to development issues. This, rather than the identity of the nominator of the governing board, is the key to success. At the same time, Presidential consultation with elected District officials prior to making his appointments would further broaden public support and help the new corporation to a successful launch.

The President also has proposed an infrastructure fund to be administered by a National Capital Infrastructure Commission. We are concerned about the terms of this proposal. It appears in large part to redirect available highway funding from local administration to the new Commission and it focuses attention only on a small portion of the District's highway system. We also are concerned about the proliferation of independent authorities to be responsible for large generic areas of governmental activity with the lack of coordination and the potential rivalry that this can spawn. Infrastructure development is a primary responsibility of local government and it should remain in the hands of the elected government notwithstanding the contribution of federal support, as is the case throughout the country.

B. Expansion of Metropolitan Area/Regional Cooperation. Many governmental activities affect the entire Washington metropolitan area and are more appropriately approached on a regional level rather than by each of the component jurisdictions separately. A prime example of the need for such regional cooperation is the public transit system. METRO illustrates the kind of improvement that can be produced through regional efforts. Regional cooperation in water treatment is another good example.

The Council of Governments ("COG") is a standing body made up of elected representatives from the area's governments to promote regional cooperation across a broad range of subject areas.

There are certain areas that would particularly benefit from greater regional cooperation. Presently, there is considerable competition among the jurisdictions with respect to economic development. While that competition cannot be eliminated, there is much that can be done on a cooperative basis to expand the economy in ways that would benefit all parts of the metropolitan area. Studies have shown that investment in new business in the District has a significant positive economic impact on the surrounding jurisdictions. Yet it is also true that if the District, as the core of the area, is not vibrant, the entire area suffers.
One subject that needs further exploration is regional financing of regionwide activities. The prohibition on taxing non-resident income at its source gives greater urgency to the development of region-wide approaches, such as dedicated regional taxes, for financing activities that affect and benefit the entire region. In particular, the field of transportation, for example, could benefit from a greater focus on regional initiatives. The Task Force believes that a renewed commitment to regional cooperation would yield benefits for the entire region, and calls upon COG to take the lead in this endeavor.

IV. Reorganization of the District Government

A. Form and Reform of Government. The District government is characterized as a Mayor-Council form of government in which executive power ultimately rests in an independently elected mayor. This form of government mirrors our constitutional system and is utilized in many cities throughout the country.

There are other forms of government, among them the council-mayor/city manager system, in which much of the executive authority is conferred on a manager who is selected by the council rather than by the elected mayor. Supporters of this form believe that it has the effect of "depoliticizing" city government operations, and that it affords flexibility to deal quickly and decisively with inadequate or unsatisfactory performance. This form has been employed in a number of cities.

The Task Force believes that successful government, regardless of form, has certain attributes. The following characteristics have been advanced as indicative of good and responsible governments, and we believe that they are the appropriate standards by which to measure the success of any governmental structure:

- clarity of responsibility and accountability This is particularly relevant in light of the congressional role in District affairs.

- dynamic, committed, public spirited elected leaders.

- strong professional management that emulates the best practices in government and business, and
rewards continuous improvement in employee
performance.

- an active, informed and involved citizenry.

- a sound financial base.

There is no doubt that the District government does not function well. While the structural impediments to successful government, outlined above, have been immense and have no doubt impeded efforts to make government work as efficiently and effectively as desirable, it is also true that the day-to-day delivery of government services has been inadequate in many respects. No set of recommendations for resolving the problems of the District ought to fail to address the effectiveness of the government's operations.

But despite the serious management deficiencies, the Task Force is not persuaded at this time that a change in the nature of the present form of government is warranted. Furthermore, it would be particularly inappropriate for the national government to impose a different form of government on the District. The principle of home rule and self-government would be empty of meaning if the citizens of this jurisdiction did not even have a voice in deciding their own form of government. Even in the darkest days of financial crises for cities like New York, Cleveland and Philadelphia, the solutions implemented did not involve imposition by the federal government of permanent changes in the form of government.

What then is the best way to get from where we are today to a government that exhibits the characteristics that reflect the desired competence in public administration? Certainly the subject of District of Columbia government operation has been studied repeatedly and exhaustively in recent years. There is no need for more studies. The ideas for improvement are on the table.

The Control Board has focused on reform of the District's personnel and procurement systems. Their efforts are well along in both areas and there is no need to duplicate


them. Likewise, it has given special attention to the public schools and the Police Department. Its work in these two crucial problem areas should be part of the foundation of improved government operations.

The organization of the largest of the District's departments--the Department of Human Services--is currently being reviewed by Arthur Anderson & Co. and its report and recommendations are expected very shortly.

In the Task Force's view, Congressional intervention is neither necessary nor likely to be helpful in reforming the operation of the District government. Decisive action by the District, however, is necessary to demonstrate to the Congress and the public that the appropriate steps are being taken, so that the structural, funding and tax changes we have proposed will be accompanied by corresponding and concurrent improvements in the way the District government functions.

We believe this can be accomplished by collaborative efforts involving, as appropriate in each instance, the Mayor and the City Administrator, the Council, the Control Board and the Chief Financial Officer. Such efforts should rely on the expert advice available to them as well as their collective experience. Already, this approach has been utilized in developing improved management methods for the Police Department, which has resulted in substantially increased numbers of police officers on the street in the highest crime areas in just a few short weeks. Similar collaborative approaches could be utilized to produce substantial and immediate improvements in other areas, such as the Department of Public Works and the Department of Consumer and Regulatory Affairs.

We believe the various parties should develop a priority agenda of governmental functions to be reviewed collaboratively. They then should set forth a rigorous schedule for undertaking readily identifiable and achievable improvements. Once reorganization and reform plans are agreed upon, responsible managers should be identified, be given specific responsibility, and be evaluated on their results.

Another key prerequisite to reestablishing effective and responsive government is the rebuilding and improvement of the District's management infrastructure. The proposal for a public-private partnership to establish a senior management institute affiliated with a local university is a step in the right direction. That proposal seeks to identify supervisory level employees with talent and ambition and to train them for higher management careers in District government.

Still another positive step would be the development of performance measures for government agencies. This will make it possible to establish accountability of responsible officials. Performance measures provide a means of defining success, of providing goals, and of helping the public to evaluate the performance of their civil servants.

Part of the process of management improvement must include development of an appropriate pay scale to attract and retain the kind of managerial talent needed to lead the government. The business of government is competitive, particularly when it comes to management personnel. Just as the Control Board, the Chief Financial Officer and the new school administration have had to pay above the current District salary scale to secure management talent sufficient to their tasks, so should the District government be in a position to pay for the talent it needs to manage its activities effectively. It would be appropriate to implement the new pay scale on a progressive basis to coincide with the implementation of management and programmatic reforms in the particular areas of operation.

One characteristic of recent efforts to cope with the District's management problems can actually undermine the restoration of sound and responsive government. That is the trend toward diffusion of responsibility for governmental functions. This trend is most pronounced in the string of court decisions that have conferred substantial influence or complete control over specified District governmental functions to court-appointed agents not answerable to elected officials. While these judicial steps are understandable reactions to the perceived failures in program administration, they compound the problem of effective government operations and make the implementation of overall lasting solutions more difficult.

For example, budgets for court-supervised activities are beyond the control of elected officials and the Control Board, thus narrowing options and cramping their ability to devise sound plans to balance the District's overall budget. The diffused responsibility also deters efforts of government leaders to establish priorities and implement cross-cutting initiatives.

The termination of judicial oversight and the return of court-supervised functions to the established responsible officials should be a major goal of reform efforts, and part of the collaborative effort we envision should be to develop a plan to accomplish this objective.

In the same vein, we caution against too great a reliance on those reform proposals that would break off additional responsibilities of government and give them to independent authorities. While we recognize the utility, in some instances, of targeted initiatives under the control of independent bodies, care must be taken not to so disaggregate government functions that effective leadership and coordination is made impossible.

Congress also has a role to play in improving the operation of the District government, though it is one of restraint. Congressional intervention in policy and budget decisions that apply to the District can undermine the responsibility, accountability and professional management that are critical to a well-functioning government. Such intervention encourages elements of the public to lobby for congressional imposition of sought-after objectives, rather than to pursue them through the regular local political process. By making it clear that it will not interfere in
local government decision-making, Congress can contribute substantially to increased responsibility of local government.
B. Charter Revisions. While we do not see any need at this time for a complete overhaul of the District governmental structure, there may be changes in the District's charter that could be considered that might make the governmental processes work better. Consistent with the overriding principle of democratic self-government, these changes ought to be considered in a public process and be subject ultimately to a vote of the citizenry.

The Task Force believes that this is an appropriate time to commence such a process. That process can best be pursued by an independent, non-partisan Commission of District citizens, appointed by the Council in consultation with the Mayor and the Delegate to the House of Representatives.

Among the issues that might be considered by the Commission are the following:

--Changes in the Electoral Process. The Task Force notes that under current law, persons registered as independents or as members of "minor" parties may not participate in the primary elections of the two national parties. This raises the question of whether the goal of democratic self rule would be advanced by moving to open primary elections in which all voters participate. While there are different viewpoints on this issue, it is of sufficient importance to warrant careful study.

The Task Force further notes that the absence of a run-off provision in the District's election law frequently has resulted in candidates winning elections with substantially less than a majority of the votes. The Task Force thus recommends that the commission examine the desirability of mandating run-off elections in those contests in which no candidate receives a majority of the votes cast.

--Modify School Board Functions. The schools have fared very poorly since Home Rule was initiated. The current situation, akin to a receivership imposed by the Control Board, reflects recognition of the unacceptable standard of performance in the public school system. While we express no view on the appropriateness of the Control Board's actions in creating a new board, it is clear that substantial improvements in the quality of public education in the District are warranted. Certain proposals for change are being implemented, such as charter schools, and they hold promise for improvement. But more fundamental change is called for to restore the schools to their rightful position in the City as a valuable and workable source of education for our youth.

The School Board cannot escape responsibility for the current poor state of the school system. Yet we do not favor elimination of an elected body to assist in formulating school policies. What should be addressed is the appropriate allocation of the policy making and operations functions, to the end that the schools are operated under professional management that is assured of the authority and resources necessary to successful operations. Alternatively or additionally, consideration could be given to limiting the salaries and/or the staffs of the elected Board members, to assure that their focus is on policy rather than operations. While we recognize that there are different points of view on these questions, they have sufficient merit and importance to warrant consideration by the citizens' Commission.

--Modified Financial Management Accountability. The District of Columbia Financial Responsibility and Management Assistance Act delegated certain authority over financial management previously held by the Mayor under the Home Rule Act to the independent chief financial officer ("CFO"). These functions include revenue estimates, budget preparation and monitoring, treasury/revenue collections and debt management. The current structure separates budget policy and development from budget execution. The Mayor makes policy and decides on recommended policy options, but the CFO develops all budget numbers and choices and makes all payments. The current structure has produced many conflicts and may be counterproductive. Such bifurcation of responsibilities does not assure accountability to the public. Some cities, among them New York, Baltimore, St. Louis and Houston, have assured financial accountability by creating a charter-designated elected position of comptroller. This position might be studied as part of the charter review process.

--ANC's. The Advisory Neighborhood Commission (ANC) system was established at the time of Home Rule. Its purposes are to empower citizens on issues that concern them, to improve services to citizens, and to build political leadership in the District. While the system seems to work well in some neighborhoods, it is not so successful in others. Often seats go unfilled for lack of candidates. It is time to re-examine our current system to see if changes are necessary to improve the effectiveness and maximize the potential of this function of our representative government.

C. Protecting the Federal Interest. There is a duality in the role of the District of Columbia that is reflected in its government structure. The District is at once the capital of the nation and the home to hundreds of thousands of American citizens. As such, it reflects all of the interests typically found in cities of comparable size and characteristics, plus those interests that flow from the presence here of the government of a vast democracy.

Precise definition of the federal interest in the District has eluded many students of government before now, and we do not dare to attempt to put specific contours on that amorphous concept. Suffice it to say that there is a federal interest in a soundly structured and efficiently operated District government, since the national government provides essential support to many of the local governmental functions carried out in the nation's capital. Yet, there is tension between that interest and the interest in effective self government for the half-million or more United States citizens who reside in the District of Columbia.

In the past, Congressional oversight has been overly intrusive and has made it more difficult for local officials to take responsible positions that might be opposed by one or more interest groups. Congressional directives as to how locally generated funds must be spent, currently exercised through the appropriation process, are difficult to justify, particularly since the taxes of District residents supply a far greater portion of the District's revenues than does the federal payment.

The Control Board, as a creation of Congress, has been given extraordinary power not only to oversee the operations of the District government but also to preempt its actions in virtually any area of activity. It goes without saying that this degree of authority is not consistent with the principles of democratic self-government. At the same time, the Control Board is avowedly a temporary entity, with a legislatively driven sunset date following restoration of the District's fiscal integrity as evidenced by at least four years of balanced budgets.

The Task Force has not paused to debate the wisdom of the Control Board. It is a fact of life and the Board appears to be approaching its mission with seriousness of purpose and a concern for the citizens of the District and their political rights. Yet it is not acceptable as a permanent institution.

Whether another entity will be needed to perform monitoring functions on behalf of the federal government after the demise of the Control Board need not be determined now. It makes little sense to devise the terms of a different agency while the existing Board is far from the end of its term.

But we do recommend that the White House consider reestablishing a coordinating office for the Nation's Capital, similar to what existed in the 60's and 70's. That office functioned well as a means of informing District officials of White House interest in particular District activities, and of facilitating coordinated action or revision of proposed actions to accommodate legitimate concerns of either side. In this way, the coordinating office helped to foster a cooperative partnership relationship between the District and federal governments, and to move away from an overseer-governed model. In today's even more complex environment a coordinating office could perform a very valuable function in promoting such a partnership approach while at the same time insuring that federal interests are properly brought forward to be taken into account in District government decision-making.

D. Alternative Approaches to Political Reorganization. The Task Force heard presentations from advocates for alternative approaches to political reorganization. These include proposals for full statehood for the District, making the District a federal city, and retrocession to Maryland. There is no consensus within the Task Force that any of these alternatives should be recommended. Moreover, each involves a change so fundamental as to demand the fullest consideration by the people of the District over an extended period, a process that ought to be initiated only if there is some reasonable prospect that, if local citizens became persuaded of the wisdom of a particular proposal, it could be implemented. We do not see such a prospect for any of these alternative approaches at this time. Nor do we believe that it would be useful to explore them now, for the structural changes in the District's relationship with the federal government and the reform of financing and tax policies affecting the District are critically important to the District's health and survival. The prospect that now appears substantial for achievement of these initiatives in the immediate future ought not be undermined by advancement of far more controversial proposals for which there is little hope of acceptance and which could prove to be divisive of the overall community.

But the one other issue that should be dealt with now is that of representation in the Congress, where the citizens of the District have long been denied a rightful voice. That is the subject of the following section of the Report.

V. Congressional Representation

The statement of principles adopted by the Task Force includes the following: "The residents of the national capital are entitled to be represented on a voting basis in the national legislature." That principle ought not to be subject to dispute. Democracy works when citizens have representatives in the bodies that make their laws and when those representatives possess voting power. That is what gives meaning to the great premise on which the United States experiment rests--that government derives its powers from the consent of the governed.

While the Constitution authorized the establishment of a national capital, nothing in its terms or in the rationale offered for that particular provision suggests that the right to vote should be withheld from those citizens who happen to reside within the boundaries of the national capital. Yet since the establishment of the District of Columbia its citizens have not had the right to a representative in the national legislature who stood on equal terms with the representatives of all other citizens of the nation.

In 1978, Congress adopted the Voting Rights Amendment to the Constitution that would have given the District of Columbia full voting representation in the House and Senate- two Senators and the number of House members warranted by the District's population. Although the amendment mustered the required two-thirds vote in both houses, it was adopted by only 16 states during the seven years allotted for its approval and thus failed of ratification. Even before the District was granted Home Rule, the Congress voted in 1970 to permit the election of a District of Columbia delegate to the House of Representatives. The delegate has floor privileges and sits on House committees, where she has voting power. Beginning in 1993 the Delegate was granted the right to vote in Committee as a whole, but that authority was withdrawn in 1995.

Citizens of the United States who reside in the District of Columbia are subject to full federal taxation. In times of war or national need, their able-bodied young adults have been subject to the draft, and the City has given its share of youth in the nation's military service. District citizens are fully subject to federal criminal laws, to environmental, job safety and other federal regulations, and to all other burdens of national citizenship. Everywhere else in the United States, citizens who are subject to these laws are entitled to elect representatives in the legislature that enacts the laws. Only the citizens of the District are denied this fundamental right of citizenship in a democracy.

In every other democratic nation the citizens of the national capital have full voting representation in the national legislature. There is no justification for denying the citizens of the capital of the greatest nation in the world representation in their national legislature. The Task Force believes that the citizens of the District are entitled to and should have voting representation in the United States Congress.

A. House of Representatives. While the District today has an elected delegate to the House of Representatives she possesses no voting power on the House floor. The absence of that power diminishes her effectiveness as a representative of the District's citizens. Representatives from surrounding jurisdictions do have the vote, and they exercise that voting power, as they should, in the interests of their constituents. Several of those representatives are in the peculiar position of sitting on the very committees that often decide the fate of the District. Notwithstanding their good intentions toward the District, that puts the District at a distinct disadvantage in situations where the District's interests and those of its neighbors do not coincide.

There can be no excuse for withholding full voting rights from the District's representative in the House. The House has the power to grant voting power in Committee of the Whole to the District's representative, and we urge in the strongest possible terms that it do so. As full taxpayers to the federal government, the citizens of the District are entitled to voting representation in the House. There should also be a constitutional amendment to confirm the voting rights of the District's representative in the House, so that its representative will be the full-fledged member of the national legislative body that District citizens are entitled to have.

B. Senate. District citizens are also entitled to voting representation in the United States Senate. Without voting representation in both chambers, the citizens of the District would not be truly represented in the national legislature, as are all other citizens of the nation. Moreover, the Senate fulfills certain unique functions in our governmental structure. It alone confirms Presidential appointees, approves treaties and tries impeachment cases. Representation in the House alone would not give District citizens a voice in these crucial decisions.

We acknowledge differing opinions on the issue of the number of Senators that should be allotted to the District. Some would contend that because of the unique status of the District--not quite a city, not quite a state, and without an exact analog elsewhere in our country or in the world--two Senators representing only District residents is not automatically compelled. But others respond that the Senate makeup is not based on population, but rather on state status, reflecting the constitutional compromise to accommodate large and small states, and that there are some states with populations of the same scale as that of the District.

Whatever the resolution of this debate, there can be no justification for denying to one-half million American citizens any representation in the upper house of the national legislature. As a minimum interim step, we recommend that the Senate immediately permit the District to elect a delegate who would have floor privileges and would participate and vote in Senate committee activities. This would provide an opportunity for the views and interests of the District's citizens to be advanced in the highest body in our constellation of governing legislatures.

But there is no substitute for voting power to make a legislator effective. We therefore believe that a constitutional amendment must be initiated to provide for voting representation of District citizens in the Senate (as well as the House). Pending that, our proposed first step of a delegate would end the indefensible exclusion of the District from any representation at all in the world's greatest deliberative body.


Conclusion

We are presented with a historic opportunity to make substantial improvements in the governmental structure and operation of the District of Columbia. History teaches that such opportunities occur only rarely, and it recognizes those who have the foresight and the courage to turn such opportunities into meaningful gains.

To realize those gains in this case, the Task Force believes that all those involved must join forces and, putting aside particular preferred proposals, support a consensus position that has the greatest potential for acceptance. We have endeavored to present such a position in this Report. We sincerely it can be the basis for the improvements that will put the District on the road to becoming a world class national capital.





April, 1997

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