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December 2013 GOVERNMENT OF THE DISTRICT OF COLUMBIA OFFICE OF THE CHIEF FINANCIAL OFFICER

DECEMBER 2013 REVENUE ESTIMATE SUMMARY


Overview Looking at the Districts economy, there are 3 trends that are affecting the tax base: Slowing job growth, continued growth in population, and influences from the national economy. Slowing job growth In October 2013 there were 733,867 wage and salary jobs in DC (3 month moving average)--only 867 more than there were a year earlier. The reason for the slow growth is decline in federal jobsabout 6,000 fewer in October than a year earlier. The private sector continues to add jobs, but over the past year the private sector growth has been less and less able to keep ahead of federal declines. Over the past year resident employment has also begun to decline. In October 2013 there were 330,971 employed DC residents, a decline of 3,700 (1.1%) from a year earlier. In October DCs seasonally adjusted unemployment rate edged up to 8.9% from 8.6% a year ago. Sequester and other efforts to cut federal spending are likely to continue dragging down DC employment and income growth, but the recent budget deal may relax some of the constraints that affect FY 2014 and FY 2015. Population gains In the last 3 years (2009 to 2012) District population has grown by 40,000 (6.8%), an increase that has average more than 1,000 per month over this time. The estimate for 2013 is due by the end of the year. With higher population have come more resident employment and more taxpayers (from 2009 to 2001 there was a 6.35 increase in the number of individual income tax filers). Population growth is also helping to drive higher property values. US economy: 1

December 2013 Steady, even if not spectacular, growth helps to increase private sector jobs growth in DC and to support tourism. The stock market in November was 28 percent higher than a year earlier. This has increased the portion of the DC income tax based on capital gains. Low interest rates have contributed to rising home values.

December Revenue Estimate Preliminary Actual Local Source, General Fund Revenue Estimate ($M) September 2013 Estimate December revision to estimate December 2013 Revenue Estimate Percent change from previous year 6,167.3 3.4% FY 2013

Estimate FY 2014 6,311.6 19.8 6,331.4 2.7% FY 2015 6,508.8 42.7 6,551.5 3.5%

Projected FY 2016 6,697.6 66.0 6,763.6 3.2% FY 2017 6,880.1 94.6 6,974.7 3.1%

December 2013 FY 2014:


Estimate for FY 2014 ($M) Revenue Source Sep 2013 Dec 2013 Variance Amount ($M) Percent

Property
Property (net of TIF/PILOT) Deed taxes (net of transfers to Housing Production Trust) & Estate

2,339.3
2,027.1 312.2

2,379.3
2,061.4 317.9

40.0
34.3 5.7

1.7%
1.7% 1.8%

Income
Individual Income
Withholding Nonwithholding

2,177.6
1,687.0
1450.8 236.3

2,191.7
1,714.0
1,444.5 269.6

14.2
27.0
(6.3) 33.3

0.7%
1.6%
-0.4% 14.1%

Business Income (corp. franchise and UB tax)

490.5

477.7

(12.9)

-2.6%

Sales, excise and gross receipts


Sales (net of convention center transfer, TIF, parking tax transfer to DDOT, ballpark sales tax) and Excise Gross receipts ( net of transfers)

1,295.0

1,268.8

(26.2)

-2.0%

1,036.9 258.1

1,024.9 243.9

(12.0) (14.2)

-1.2% -5.5%

Non-tax and Lottery


Non-tax Lottery

499.6
436.2 63.5

491.5
428.0 63.5

(8.1)
(8.1) -

-1.6%
-1.9% 0.0%

Total

6,311.6

6,331.4

19.8

0.3%

The revenue estimate for FY 2014 was revised upward by $19.8 million. The main source of the upward revision are higher property tax revenues, due primarily to a rebounding residential market, and increases in the non- withholding component of income taxes: o Property tax revenues are revised upwards by $40.0 million reflecting both increased property assessments and higher sales transactions and related deed taxes. o Individual income tax is revised upward by $14.2 million. This is chiefly due to the continued strength in the stock market in 2013 which is expected to result in increased non-withholding taxes associated with capital gains realizations. o The strength in non-withholding more than offsets a decline in withholding taxes due to sluggishness in labor markets and downward revisions to wages and salaries. Business tax revenue is revised downwards by 12.9 million. The downward revision reflects a decline in revenues and collections in 2013. On a yearover-year basis business income shows growth of 5.8 percent in 2014. Net sales taxes revenue is revised downward by $26.2 million mainly as a result of higher transfers and declining gross receipts. 3

December 2013 o The increase in transfers reflects accounting changes to TIF refunds which previously accrued back to sales. Non-tax revenue has been revised downwards by $8.1 million due to timing issues related to the implementation of automated traffic enforcement machines. The forecast for lottery revenue remains unchanged. FY 2015:
Estimate for FY 2015 ($M) Variance

Revenue Source

Sep 2013

Dec 2013

Amount ($M)

Percent

Property
Property (net of TIF/PILOT) Deed taxes (net of transfers to Housing Production Trust) & Estate

2,418.8
2,078.3 340.5

2,445.6
2,105.1 340.5

26.8
26.8 0.0

1.1%
1.3% 0.0%

Income
Individual Income
Withholding Nonwithholding

2,250.0
1,741.1
1500.8 240.3

2,259.4
1,757.4
1,506.2 251.2

9.4
16.3
5.4 10.9

0.4%
0.9%
0.4% 4.5%

Business Income (corp. franchise and UB tax)

508.9

502.0

(6.9)

-1.4%

Sales, excise and gross receipts


Sales (net of convention center transfer, TIF, parking tax transfer to DDOT, ballpark sales tax) and Excise Gross receipts ( net of transfers)

1,319.1

1,301.6

(17.4)

-1.3%

1,058.8 260.3

1,053.9 247.8

(4.9) (12.6)

-0.5% -4.8%

Non-tax and Lottery


Non-tax Lottery

521.0
454.3 66.7

544.9
478.2 66.7

23.9
23.9 -

4.6%
5.3% 0.0%

Total

6,508.8

6,551.5

42.7

0.7%

The revenue estimate for FY 2015 was revised upward by $42.7 million reflecting continued strength in property and the non-withholding component of income taxes. The real property tax revenue is $26.8 million higher continuing to reflect increased property assessments. Individual income tax is revised upwards by $9.4 million reflecting primarily due to the forecast strength in the non-withholding component of income taxes.

December 2013 Business tax revenue is revised downward by $6.9 million. The effect of a lower base in 2013 continues to carry over into 2015. Net sales taxes revenue is revised downward by $17.4 million and is due again to the lower base in 2014. Excluding transfers, gross sales are forecast to increase by $16.4 million Non-tax revenue has been revised upwards by $23.9 million. This reflects the increased revenue associated with automated traffic enforcement which is expected to come on line only in mid-2014 and affect the full year in FY 2015.