Concerns with the Proposed “Community Investment Fund”| November 8th, 2004 |
By Ed Lazere
PDF of this report
On October 27, Mayor Williams announced a plan to create a $450 million “community investment fund” to address resident concerns over the proposed stadium financing plan. The fund would be used to support a wide variety of activities, such as school repairs and physical improvements in libraries and recreation centers.
While the notion of investing in community needs is appealing, the specifics of this proposal raise several concerns. This appears to stem largely from the fact that the proposal was developed in short order in response to criticism of the stadium deal. The following concerns should be addressed before the community investment proposal moves forward.
It is not clear whether or when the $450 million will be available. According to the mayor’s proposal, some $30 million would be deposited in the fund immediately, and $45 million would be generated by using a portion of the tax that businesses will pay for the stadium. (Some business leaders oppose using the tax to support the community investment fund.) The remainder would come from a Tax Increment Financing, or TIF district around the stadium. In effect, all new revenues coming from this area in the future would go into the community fund. But economic research suggests that a stadium alone is unlikely to generate much new activity in the surrounding area. In that case, it is not clear whether the TIF district would be able to support the community investment fund at the intended level. The District’s independent Chief Financial Officer has not certified that the proposed TIF district would support a fund of this size.
The proposed uses of the fund are overly broad and include no accountability provisions. The only language governing the use of the fund is that it can be used for “recreation centers, libraries, small business development incentives, job training and readiness programs, school athletic facilities and such other projects that the Mayor shall find to be of benefit to any area of the District.” This language alone raises several concerns.
- The fund could be used for virtually any purpose.
- The fund could be used for services in any part of the District.
- The fund would be controlled entirely by the Mayor. There is no requirement to seek community input, to develop annual plans for use of the fund, or to seek Council approval for such plans.
- There is no requirement to provide a regular report on the uses of the fund.
There is no guarantee that the fund will enhance services. The community investment fund would support a range of activities already supported through the District’s capital budget. There is nothing in the proposed legislation that would ensure that the fund will be used to enhance funding for these types of projects. Instead, the community investment fund may simply replace funding for these activities provided through the capital budget. In short, there is no guarantee that the fund will lead to more investment in these areas.
The community investment fund will divert resources from DC’s general fund and could have high administrative costs. As noted, the community investment fund will be supported by tax revenues generated near the stadium. Because economic research suggests that the stadium alone may not generate much new economic activity. Moreover, as noted by DC’s economic development officials, there already is a tremendous amount of development occurring within a short distance of the stadium. For these reasons, a sizable share of the “new” revenue generated near the stadium would have been generated even without a stadium. This means that the community investment fund will divert revenues that otherwise would have gone into DC’s general fund.
In addition, the community investment fund would represent the first time the District would use Tax Increment Financing for public facilities such as libraries. TIF is a more expensive financing tool than the standard method for financing public facilities — through the issuance of general obligation bonds. Thus, the community investment fund may raise the costs for building libraries, recreation centers, and other facilities.