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42–192 CC 1997

THE WHITE HOUSE PROPOSAL FOR DC BUSINESS

AND COMMUNITY LEADERS’ PERSPECTIVE

HEARING

BEFORE THE

SUBCOMMITTEE ON THE 

DISTRICT OF COLUMBIA

OF THE

COMMITTEE ON 

GOVERNMENT REFORM 

AND OVERSIGHT 

HOUSE OF REPRESENTATIVES

ONE HUNDRED FIFTH CONGRESS

FIRST SESSION

MARCH 25, 1997

Serial No. 105–23

Printed for the use of the Committee on Government Reform and Oversight

(

(II)

COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT 

DAN BURTON, Indiana, Chairman 

BENJAMIN A. GILMAN, New York 

J. DENNIS HASTERT, Illinois 

CONSTANCE A. MORELLA, Maryland 

CHRISTOPHER SHAYS, Connecticut 

STEVEN H. SCHIFF, New Mexico 

CHRISTOPHER COX, California 

ILEANA ROS-LEHTINEN, Florida 

JOHN M. MCHUGH, New York 

STEPHEN HORN, California 

JOHN L. MICA, Florida 

THOMAS M. DAVIS, Virginia 

DAVID M. MCINTOSH, Indiana 

MARK E. SOUDER, Indiana 

JOE SCARBOROUGH, Florida 

JOHN SHADEGG, Arizona 

STEVEN C. LATOURETTE, Ohio 

MARSHALL ‘‘MARK’’ SANFORD, South 

Carolina 

JOHN E. SUNUNU, New Hampshire 

PETE SESSIONS, Texas 

MIKE PAPPAS, New Jersey 

VINCE SNOWBARGER, Kansas 

BOB BARR, Georgia 

——— ———

HENRY A. WAXMAN, California 

TOM LANTOS, California 

ROBERT E. WISE, JR., West Virginia 

MAJOR R. OWENS, New York 

EDOLPHUS TOWNS, New York 

PAUL E. KANJORSKI, Pennsylvania 

GARY A. CONDIT, California 

CAROLYN B. MALONEY, New York 

THOMAS M. BARRETT, Wisconsin 

ELEANOR HOLMES NORTON, Washington, 

DC 

CHAKA FATTAH, Pennsylvania 

TIM HOLDEN, Pennsylvania 

ELIJAH E. CUMMINGS, Maryland 

DENNIS KUCINICH, Ohio 

ROD R. BLAGOJEVICH, Illinois 

DANNY K. DAVIS, Illinois 

JOHN F. TIERNEY, Massachusetts 

JIM TURNER, Texas 

THOMAS H. ALLEN, Maine 

———

BERNARD SANDERS, Vermont 

(Independent) 

KEVIN BINGER, Staff Director 

DANIEL R. MOLL, Deputy Staff Director 

JUDITH MCCOY, Chief Clerk 

PHIL SCHILIRO, Minority Staff Director 

SUBCOMMITTEE ON THE DISTRICT OF COLUMBIA

THOMAS M. DAVIS, Virginia, Chairman 

CONSTANCE A. MORELLA, Maryland 

ILEANA ROS-LEHTINEN, Florida 

STEPHEN HORN, California 

ELEANOR HOLMES NORTON, District of 

Columbia 

THOMAS H. ALLEN, Maine 

EX OFFICIO

DAN BURTON, Indiana HENRY A. WAXMAN, California 

RON HAMM, Staff Director 

HOWARD DENIS, Counsel 

ELLEN BROWN, Clerk 

CEDRIC HENDRICKS, Minority Professional Staff Member 

(III)

C O N T E N T S 

Page 

Hearing held on March 25, 1997 ............................................................................ 1

Statement of: 

Green, John L., DC Chamber of Commerce, accompanied by Kwasi Holman, executive vice president of the DC Chamber; and Sheldon Repp, 

vice president and associate general counsel of Sallie Mae and chair 

of the Chamber’s Government Affairs Policy Committee; and Roger 

Blunt, Greater Washington Board of Trade, accompanied by John 

Tydings, president of the Board of Trade ................................................... 7

O’Cleireacain, Carol, Brookings Institute; and Steve Fuller, George 

Mason University .......................................................................................... 39

Williams, Joslyn N., president, Metropolitan Washington Council AFL–

CIO; Kathryn Pearson-West, executive co-chairperson, Coalition for Political and Financial Accountability, Inc.; Mark Thompson, president, 

DC Branch, National Association for the Advancement of Colored People; and Reverend Joseph Daniels, Washington Interfaith Council ......... 81

Letters, statements, etc., submitted for the record by: 

Blunt, Roger, Greater Washington Board of Trade: 

Information concerning successes of other cities .................................... 33

Prepared statement of ............................................................................... 17

Daniels, Reverend Joseph, Washington Interfaith Council, prepared statement of ........................................................................................................... 84

Davis, Hon. Thomas M., a Representative in Congress from the State 

of Virginia, prepared statement of .............................................................. 2

Fuller, Steve, George Mason University, prepared statement of ................. 57

Green, John L., DC Chamber of Commerce, prepared statement of ............ 10

Morella, Hon. Constance A., a Representative in Congress from the State 

of Maryland, prepared statement of ............................................................ 76

Norton, Hon. Eleanor Holmes, a Representative in Congress from the 

District of Columbia, 

Article from Business Times, dated March 17, 1997 .............................. 74

Prepared statement of ............................................................................... 69

O’Cleireacain, Carol, Brookings Institute, prepared statement of ............... 43

Pearson-West, Kathryn, executive co-chairperson, Coalition for Political 

and Financial Accountability, Inc., prepared statement of ....................... 101

Thompson, Mark, president, DC Branch, National Association for the 

Advancement of Colored People, prepared statement of ........................... 110

Williams, Joslyn N., president, Metropolitan Washington Council AFL–

CIO, prepared statement of ......................................................................... 92

(1)

THE WHITE HOUSE PROPOSAL FOR DC BUSINESS AND COMMUNITY LEADERS’ PERSPECTIVE 

TUESDAY, MARCH 25, 1997 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON THE DISTRICT OF COLUMBIA, COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT, Washington, DC. 

The subcommittee met, pursuant to notice, at 11:10 a.m., in room 

2154, Rayburn House Office Building, Hon. Thomas M. Davis 

(chairman of the subcommittee) presiding. 

Present: Representatives Davis, Morella and Norton. 

Staff present: Ron Hamm, staff director; Howard Denis, counsel; 

Ellen Brown, clerk; and Cedric Hendricks, minority professional 

staff member. 

Mr. DAVIS. Good morning. Welcome to the fourth information 

hearing on the President’s National Capital Revitalization and SelfImprovement Plan. 

In order that we can move right ahead to the witnesses, I am 

going to ask unanimous consent that my statement go into the 

record. We look forward to hearing from many of our local leading 

business and community leaders today. 

I want to thank all of you for working with us as we proceed to 

fashion a positive and historic restructuring of the Nation’s Capital. 

I would now yield to Delegate Norton for any opening statement 

she may wish to make. 

[The prepared statement of Hon. Thomas M. Davis follows:]

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Ms. NORTON. Thank you, Mr. Chairman. I would like to make an 

opening statement, an explanation of what is an unusual hearing 

for this subcommittee. 

When I asked Chairman Davis for a hearing that would include 

direct testimony from DC residents, he readily agreed, and I very 

much appreciate his willingness to provide time for DC residents 

and business representatives to testify. 

Generally, if a matter involves DC government, Congress looks 

to its elected Representatives for testimony, as we have done in 

this case. In this way, Congress observes Home Rule and avoids 

the appearance and the charge that it is going around the city’s 

duly elected representatives, who alone answer to DC residents. 

However, because this plan, at least in some areas, would change 

the relationship between the District and the Federal Government, 

without a referendum, I believe that it is important to hear formally from at least some representatives of the local organizations. 

At the same time, the subcommittee’s time is so limited that I can 

make no claim that we have been able to invite all of those we 

should hear from or that those who will testify here are entirely 

representative. However, I appreciate the deep interest that the organizations who will testify today have shown in the city’s problems and their solutions. 

Today’s testimony will supplement the efforts of the White House 

and my office to cast a far broader net across the entire city to encompass as many groups as possible. These include my town meeting on February 10th, where the chief architect of the President’s 

plan, OMB Director Frank Raines, came and stayed to answer residents’ questions; two city council hearings held by Councilmember 

Pro Temp Charlene Drew Jarvis and Councilmember Frank Smith, 

the record of which I will place in our record; and a White House 

meeting attended by ANC commissioners, union representatives, 

and civic organizations. 

In addition, I have personally spoken and received feedback at 

meetings concerning the plan, as has the White House liaison to 

the District, Carol Thompson Cole, and members of my own staff. 

I particularly value today’s testimony because work on changes 

in the President’s plan is in progress. Despite constructive criticism 

and my own reservations about parts of the plan, the response of 

elected officials and residents has been generally positive. The plan 

goes beyond what most residents expected, but not beyond what 

this city deserves. The administration has been asked to respond 

to the testimony received thus far on the President’s plan. 

This subcommittee is using the President’s plan as its working 

document as we decide which shape the final bill will take for two 

reasons. The first is that the plan has compelling conceptual 

underpinnings. The second is that the plan realistically addresses 

two audiences: the District, which needs what the plan provides 

and more, and the Congress, which this year is largely focused on 

deficit reduction. 

May I once again welcome today’s witnesses and may I thank the 

chairman once again. 

Mr. DAVIS. Thank you. 

I want to make a couple of comments. It is clear to me that whatever legislation emerges, it must provide a real map for growth in 

6

the city. I think the local taxes and regulation are a disincentive 

to sustain growth and that specific relief is necessary in these 

areas. That is the best way we can add value to the President’s 

very helpful proposals. 

Many of the studies that have been submitted to us, have made 

the point that in lowering taxes. It may be the only way to bring 

the District back, but it is local taxes and fees which are disproportionately high and encourage people and businesses to leave or 

never arrive in the District. 

It is also overregulation and dysfunctional bureaucracy which inhibits business formation and expansion. For example, I am aware 

it took American University 18 months to get a permit to replace 

a boiler, and I also recall that it took Delegate Norton more than 

a year to get a building permit to put a deck on her house. These 

examples reflect a culture of public performance that must change. 

She didn’t ask me to say that, but when I found out about it I 

thought I would. 

These changes are necessary before even the best designed and 

intended economic development plan can have even a hope of succeeding. 

Education and public safety remain two of the most serious concerns in reversing the city’s downward population slide. The BoozAllen report shows us very clearly what we have to do to improve 

and enhance personal and public safety. Unless we are able to 

come to grips with these core municipal issues, anything else we 

have to do on a grand scale could be futile. 

These series of hearings do not exist in a vacuum. Rather, we are 

continuing the process this subcommittee started 2 years ago. Having lived and worked in this region most of my life, I know how 

interdependent these issues are. At the end of the day, all of us are 

stakeholders and we will ultimately succeed or fail. 

I want to thank all of us for working together, and at this point 

I am pleased to welcome our first panel, which will consist of John 

L. Green, president of the District of Columbia Chamber of Commerce, and Mr. Roger Blunt, president of the Essex Corp., and 

chairman of the Greater Washington Board of Trade’s National 

Capital Task Force. 

Mr. Green will be accompanied by Mr. Kwasi Holman, executive 

vice president of the DC Chamber, and Mr. Sheldon Repp, vice 

president and associate general counsel of Sallie Mae and chair of 

the Chamber’s governing board of the Policy Committee. 

Mr. Blunt will be accompanied by Mr. John Tydings, president 

of the Greater Washington Board of Trade. 

As you know, it is the policy of this committee that all witnesses 

be sworn before they may testify. Would you please rise with me 

and raise your right hand. 

[Witnesses sworn.] 

Mr. DAVIS. Thank you. Be seated. 

The subcommittee will carefully review any written statements 

you care to submit and I ask unanimous consent that any such 

statements be part of the permanent record. 

I would also ask you to limit your testimony to 5 minutes so that 

we may have sufficient time for questions and to hear from our 

other panelists. 

7

At this time, I would ask Mr. Green for his statement on behalf 

of the Chamber, to be followed by Mr. Blunt, on behalf of the Board 

of Trade. 

STATEMENTS OF JOHN L. GREEN, DC CHAMBER OF COMMERCE, ACCOMPANIED BY KWASI HOLMAN, EXECUTIVE 

VICE PRESIDENT OF THE DC CHAMBER; AND SHELDON 

REPP, VICE PRESIDENT AND ASSOCIATE GENERAL COUNSEL OF SALLIE MAE AND CHAIR OF THE CHAMBER’S GOVERNMENT AFFAIRS POLICY COMMITTEE; AND ROGER 

BLUNT, GREATER WASHINGTON BOARD OF TRADE, ACCOMPANIED BY JOHN TYDINGS, PRESIDENT OF THE BOARD OF 

TRADE 

Mr. GREEN. Good morning, Congressman Davis, Congresswoman 

Norton and members of the House District of Columbia Subcommittee. My name is John L. Green and I am executive vice 

president for the Medlantic Healthcare Group, and I am here today 

in my capacity as president of the DC Chamber of Commerce. 

As you indicated earlier, I am accompanied by Kwasi Holman, 

who is executive director of the Chamber, and Sheldon Repp, who 

is general counsel for Sallie Mae and chair of the Government Affairs Policy Committee. 

The DC Chamber of Commerce has represented business interests in the District for almost 60 years. Founded as the business 

organization to represent black-owned businesses and professionals, today the Chamber’s major strength is in its diversity of 

more than 800 members. We are the most racially, economically, 

geographically and gender diversified organization in our city. Our 

mission is to create an environment in which businesses can locate, 

expand, and flourish. We understand that in order to retain, expand, and attract businesses to the District, we must have a stable 

government that can function and respond with quality services for 

individuals and businesses, a city whose financial underpinnings 

are secure and whose tax structure is competitive. 

We are pleased that the revitalization of the District of Columbia 

is now one of the top priorities of President Clinton and of the Congress. We welcome the dialog that you and the President have 

started on how to correct the structural flaws on top of which we 

built Home Rule. 

Before I begin, however, I would like to note that the Federal 

City Council and the DC Agenda Project have also been reviewing 

the President’s plan, and I expect that the committee will hear 

from them at the appropriate time. 

Let me first say that the DC Chamber strongly believes that bold 

action is needed on several fronts to ensure the survival and revival of the District. Bold action, however, does not mean hasty action. A unique opportunity to address the city’s problem currently 

exists. We should seize this opportunity to craft a real solution so 

that we are not back here again 5, 10 years from now confronting 

the same problems. 

The Chamber is committed to a careful and thoughtful review of 

the many proposals that are being brought forth to help resolve the 

structural and fiscal issues in the District. We welcome the President’s plan. We believe it is a strong beginning. However, we are 

8

very concerned about the elimination of the Federal payment, the 

limited scope of the plan’s financial incentives package, and the 

lack of individual and business tax relief. My comments will focus 

in these areas. 

First, the Federal payment is not a subsidy. It is compensation 

for the extraordinary costs on the city of the Federal presence. The 

final plan should assume that the city will be financially viable. To 

forego the Federal payment at this point is, at best, premature, and 

we also strongly urge that the final plan include the Federal payment or a payment in lieu of taxes. 

We have reviewed the economic development portion of the plan 

and we fully support the creation of the Economic Development 

Corp. With the city’s inability to tax income at its source, we 

wholeheartedly support the credits that have been included for the 

provision of jobs for District residents. 

We also agree that economic recovery depends on small as well 

as large businesses. Economic data seems to indicate that smaller 

businesses are leaving the city for more favorable business climates 

in the suburbs. We are pleased that the President’s plan helps address this issue. However, we would like to see the financial incentives for investment in the city expanded to the entire city and not 

to its most distressed areas alone. 

The city must be able to survive and to compete, and I think we 

must also recognize that the city is the core of a larger region, and 

I think the comments that you made earlier in terms of the interdependence are important. It is extremely important that we see 

this not as a plan to bail out the District but, rather, a plan to 

bring some parity to the District as an important component of the 

overall region, and we cannot emphasize that enough. 

A reduction in the corporate franchise tax, a reduction in real 

property taxes, tax incentives to locate in the District, all are ways 

of achieving comparability. If the President’s plan was implemented with the Federal payment in place, perhaps the city could 

afford these reductions. There must be some balance in this equation. We are convinced that we must revamp our tax structure in 

order to grow our economy. 

The Chamber believes that there must be financial incentives to 

rebuild the city’s tax base as well. The city cannot do it alone. We 

need your help desperately. The Chamber supports vigorously Congresswoman Norton’s DC Economic Recovery Act because it addresses the issue of rebuilding our tax base through tax relief for 

individuals. Those of us in the community, the business community, see not only a need for the economic revitalization of the city 

and its business community, we also see a need for people to live 

in the city, who want to live in the city, and Congresswoman Norton’s bill helps address that other imbalance that we see today. 

We believe this can be achieved through individual tax relief. In 

order for the District to survive and be viable, we must be competitive. In order for us to be competitive, we must be on an even playing field in terms of taxes, and the Federal Government must play 

the role of the State to the District of Columbia. 

We also understand that money will not solve our problems alone 

and that the business community must step up and assume our responsibilities in partnership with the city and the Chamber. We 

9

have an excellent project that we have worked cooperatively on 

with the District government that perhaps will help American University, and Congresswoman Norton will not have to wait a year 

and 18 months for permits. 

We have worked cooperatively with DCRA in a project that will 

bring together the tax and property records of every piece of property in this city, square by square, lot by lot. As a result of this 

project, this information very soon will be online and available to 

the public to assist them in obtaining building permits. This is a 

prime example of a project in which the private side, the Chamber, 

worked cooperatively with Government. 

There are other initiatives that we are working on to improve the 

city’s business climate and competitive status. They are the professional and business licensing streamlining project and our worker’s 

compensation legislative reform effort which when enacted by the 

council will bring business costs more in line with those of Maryland and Virginia. 

In closing, we urge you to think about the city as the unique and 

special place that it is; namely, the Nation’s Capital. And I would 

also say that for those around the country who say, why do this 

for the District, why not do it for my city as well? We only have 

one Nation’s Capital, and I think it is, indeed, deserving of the entire country’s support. 

On behalf of the DC Chamber, I thank you for this opportunity 

to speak today. If I or any member of the Chamber can be of assistance to you, as you begin to sort through the various ideas and proposals by our city, please call on us. And I thank you very much. 

Mr. DAVIS. Thank you very much, Mr. Green. 

[The prepared statement of Mr. Green follows:]

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Mr. DAVIS. Mr. Blunt. 

Mr. BLUNT. Chairman Davis and members of the subcommittee, 

thank you for convening today’s hearing on the President’s plan to 

revitalize the Nation’s Capital, and for the opportunity to testify 

before you today. 

My name is Roger Blunt and I am chairman and CEO of Essex 

Construction Corp., but I am here today in my capacity as co-chair 

of the Greater Washington Board of Trade’s newly established National Capital Task Force. Dr. Ed Bersoff, president and CEO of 

BTG Corp., will be co-chairing this task force with me. Today, however, I am joined by John Tydings, president of the Board of Trade. 

For those of you who may not be familiar with our organization, 

the Board of Trade is a regional chamber of commerce that represents more than 1,000 businesses located in suburban Maryland, 

northern Virginia, and the District of Columbia. For more than 100 

years, the Board of Trade has been involved in issues affecting the 

governance, management, and economic growth of the Nation’s 

Capital. 

Today, Chairman Davis has asked us to comment on the potential impact of the actions contemplated by the President’s plan on 

the Nation’s Capital and the region. I would like to begin by stating that the Board of Trade commends President Clinton for his 

commitment to redefining and improving the Federal Government’s 

relationship to the Nation’s Capital and for offering a thoughtful 

plan aimed at clarifying the Federal interest and responsibilities. 

However, the President’s plan cannot be viewed in a vacuum, and 

I would like to share some thoughts about how we believe this proposal fits within a broader vision for revitalizing the Nation’s Capital. 

The Board of Trade believes that there are at least three critical 

elements fundamental to restoring the city. They are: one, a functioning, accountable and efficient local government; two, a clearly 

defined partnership between the Federal and local governments; 

and, three, an emphasis on economic development and the availability of adequate resources. 

Efforts to create a functioning, accountable, and efficient local 

government are already well under way. Recognizing that the local 

government was no longer able to provide the most basic municipal 

services to its residents, businesses and visitors, the Congress, 

guided by Congresswoman Norton and Chairman Davis, established the DC Financial Responsibility and Management Assistance Authority, or control board. This control board has spent the 

last year helping the local government manage its financial crisis 

and is now working diligently to help create a functioning and efficient government, complete with policies that establish clear responsibility and accountability. 

The Board of Trade has been particularly involved with efforts 

to reform procurement and personnel policies and to establish an 

efficient and reliable financial management system. All of these 

elements are critical tools for achieving a functioning, accountable 

and efficient local government, and comprise the first step toward 

achieving financial and economic stability in the Nation’s Capital. 

The President’s plan contributes to this critical element by relieving the local government of certain programmatic and budget reVerDate May 23 2002 18:33 Jul 08, 2002 Jkt 079471 PO 00000 Frm 00017 Fmt 6633 Sfmt 6602 W:\DISC\42192 pfrm17 PsN: 42192
14

sponsibilities that cities do not normally handle. In addition, by offering intermediate-term financing for the city’s accumulated deficit, the President’s plan would significantly reduce the amount of 

resources dedicated to debt servicing. When viewed together, these 

two elements of the President’s plan should significantly reduce the 

city’s financial burden, freeing millions of dollars that can be shifted to pay for municipal priorities aimed at improving the quality 

of life for city residents and visitors. 

I would also note that the Federal City Council and the DC 

Agenda Project, in which the Board of Trade has been a participant, have been examining the President’s plan on other issues related to governance and will be providing your subcommittee with 

their views on those issues in the near future. 

President Clinton’s plan takes the second dramatic step toward 

achieving financial and economic stability by clearly defining the 

terms of the partnership between the local and Federal Governments. Since the passage of the Home Rule Charter in December 

1973, the local government has been responsible for State, county 

and municipal functions. By recognizing this disparity, the President’s plan establishes a new partnership between Federal and 

local governments that relieves the city of financing and/or providing functions typically handled by States or counties. 

Although the plan does not relieve the city of all typical State responsibilities, such as mental health and aid for dependent children, the Board of Trade believes that the proposal addresses this 

disparity to a great extent. 

In addition, the Board of Trade believes that the President’s plan 

addresses some additional concerns of the city and the region. 

First, the President’s plan resolves the growing unfunded pension liability problem that was unjustly included in the original 

charter. By assuming both the assets and liabilities of pension 

plans for police, fire fighters, teachers and judges, the President’s 

plan recognizes that the city should have never inherited a system 

that was already underfunded by $2 billion. 

Second, in addition, we believe the plan provides the opportunity 

to resolve ongoing regional concerns about the management and location of the Lorton correctional facility. While the Board of Trade 

has not endorsed any particular approach to resolving the problems 

at Lorton, we are pleased that this issue is on the table and can 

be included in the debate. 

However, with specific regard to the President’s recommendation 

that the Federal payment be eliminated, we urge this committee to 

closely examine the impacts this would have on the city’s ability to 

achieve financial stability. The Federal payment was never intended to be a gift. Rather, it was meant to provide compensation 

for a variety of the congressionally imposed restrictions on the local 

government’s ability to raise revenues. For example, 43 percent of 

all land in the Nation’s Capital is exempted from local taxes; and 

this will continue to restrict the city’s access to resources far into 

the future. In that regard, the Board of Trade has spent the past 

25 years advocating that Congress establish a rational, dependable 

formula for the Federal payment. While the Federal Government’s 

assumption of many State-like functions is an important change, 

15

we are not yet convinced changing these roles warrants the elimination of the Federal payment. 

Finally, the President’s plan places an emphasis on economic development and availability of resources. For many years, the Board 

of Trade has urged the local leaders to view economic development 

as the best means for ensuring that the city can have access to sustainable resources and can encourage job creation for residents. 

Had emphasis been placed on growing the tax base, rather than on 

increasing taxes and fees, the local government might not be experiencing such severe financial and economic crises. 

On a side note, I would like to congratulate you, Congresswoman 

Norton, for your flat-tax proposal which recognizes that stabilizing 

and growing the city’s tax base is a critical part of any effort to restore financial and economic health to the Nation’s Capital. 

Nonetheless, today’s financial situation places the city in a 

‘‘Catch-22’’ position, whereby if taxes are reduced and economic development incentives are offered, the revenue gap widens further 

and a balanced budget becomes that much harder to attain. It is 

for this reason that the Board of Trade is particularly interested 

in the two elements of the President’s plan that appear to offer resources and incentives for economic development: the National 

Capital Infrastructure Fund and the Economic Development Corp. 

The President’s plan to create a National Capital Infrastructure 

Fund recognizes that one of the most critical elements that supports economic development is physical infrastructure. Yet virtually every city that was founded more than 100 years ago is facing huge budgetary challenges as a result of aging infrastructure. 

The Nation’s Capital is no different, with the exception that most 

other cities receive some level of State funding for maintaining infrastructure, whether that be for roads, bridges, transit or water or 

sewer systems. 

The President’s initial proposal to create an infrastructure fund 

with approximately $125 million in seed money with the possibility 

of identifying other sustainable funding sources provides significant 

promise for at least beginning to address some of the most serious 

infrastructure needs immediately. However, we have heard little 

detail of subsequent developments on this part of the President’s 

plan, and we feel strongly that any proposal that does not increase 

the current level of Federal highway funds received or that does 

not allow those dollars to be spent on local as well as Federal road 

and bridge projects will not address the infrastructure needs of the 

Nation’s Capital. 

The President’s plan to create the Economic Development Corp., 

and offer nearly $300 million in grants, tax incentives and other 

economic development tools will make economic development a priority in the Nation’s Capital for the first time in its history. The 

region’s suburban jurisdictions have been implementing aggressive 

economic development activities for years, and reaping the benefits 

accordingly. Yet, the city has never committed the staff or the resources to develop, promote or implement economic development 

initiatives. The creation of an Economic Development Corp., led 

largely by local private-sector business and community leaders, not 

only provides a mechanism by which an equally aggressive apVerDate May 23 2002 18:33 Jul 08, 2002 Jkt 079471 PO 00000 Frm 00019 Fmt 6633 Sfmt 6602 W:\DISC\42192 pfrm17 PsN: 42192
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proach can be developed and maintained, but provides the resources necessary to back up such a commitment. 

In all cases, the Board of Trade feels strongly that economic development must take a city-wide approach and be led by the local 

community. Our creation of the Community Business Partnership 

reflects our commitment to that approach. By matching the resources, experience and expertise of the Board of Trade membership with developing neighborhood businesses identified by the 

Community Development Corp.’s in Marshall Heights and Colombia Heights, the Board of Trade has seen firsthand the power of 

and potential for neighborhood economic development throughout 

the city. It is through economic development that we can grow jobs 

and additional resources to sustain the Nation’s Capital for the future. 

But efforts such as these can be enhanced by an Economic Development Corp., with tools and resources that reach out to all areas 

of the city. The President’s Economic Development Corp. proposal offers these tools and resources, including $50 million in Federal 

capital, capital credits, private activity bonds and jobs credits. 

The Board of Trade is particularly excited about the potential impacts of these two provisions. We believe that these provisions, the 

DC Jobs Credit, the additional expensing provisions, will provide 

tremendous assistance and incentives to people who are working to 

set up and expand business in neighborhoods. 

I realize, Chairman Davis, that the red light is on. I just have 

three or four more paragraphs of my testimony. 

Mr. DAVIS. That’s fine. We have both read it, and we are ready 

to ask questions. Why don’t we just put it in the record and get 

right to it? 

Mr. BLUNT. Thank you. 

Mr. DAVIS. I think that both Mr. Green and your statements are 

thoughtful and reflective. 

Mr. BLUNT. Thank you. 

[The prepared statement of Mr. Blunt follows:]

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Mr. DAVIS. I will just tell you, I was just whispering to Ms. Norton that, to me, if we had a plan that we knew worked, that we 

were certain was going to work and bring it back, I am not sure 

that the cost is the major obstacle, but I think we get so tired of 

throwing a lot of resources at a situation, and you don’t get the result that you wanted, and that’s the difficulty we are struggling 

with. 

And I would like to, if I could, just address my questions now to 

you, in terms of what is going to work to bring the city back from 

a tax-based point view, expanding the tax and the business base. 

And one of the things I noted in my opening statement, and I want 

to ask each of you to react to it, is you can do what the President 

has proposed; and I think that’s fine. I don’t disagree with any of 

it. You can have the additional expensing and the DC job credit. 

But unless you make some significant changes in the regulatory 

structure and the tax structure on top of that, you are just not likely to have the effect that you would otherwise. Because it is—the 

city is so noncompetitive in some areas—in some of these areas, 

with the suburban areas and other parts of the country, that these 

are very piecemeal it seems to me. 

I would like each of you to react to that. You can agree or disagree. 

Mr. BLUNT. John. 

Mr. TYDINGS. Mr. Chairman, I will take a first crack at that. 

I think you are absolutely right. One of the things that we understand about the President’s plan is that there is in process an 

MOU, which in fact is supposed to deal with a number of the relationship issues, including some priorities and also some areas of 

emphasis. Failure to address the issues of the process, the regulatory reform, will be shortsighted. 

Mr. DAVIS. John, let me get specific for a couple minutes. I have 

met with people who are talking about how long it is taking just 

to get inspections. You bring a company or a new business or they 

want to expand—by the way, I heard the same thing in Fairfax 

when I was head of Government Affairs. It is never quick enough 

when you have got a tenant on hand, or that it takes an inordinate 

amount of time, that there is kind of a man ̃ ana attitude that we 

will get to it tomorrow or in good time. And what would privatizing 

some of those inspection services do? 

You can go out and hire somebody that’s certified. You would 

have people to inspect the inspectors to make sure that there 

wasn’t abuse and fraud. But for fire inspection and building inspection and some of these, could that be very quickly moved into a 

competitive arena? 

I will ask each of you—let me start with Mr. Green on that. 

Mr. GREEN. Well, I think that—I mean, I think that what we 

need is really a comprehensive approach. I don’t think we can go 

in and pick pieces and think that picking individual pieces will 

solve broad systemic problems. So I think that regulatory reform 

is needed. 

We have some proposals, for example, the workman’s compensation proposal, that’s with the council. That’s a step. 

Mr. DAVIS. Yes. 

Mr. GREEN. I think that some of the functions——

23

Mr. DAVIS. But, Mr. Green, if we wait for the council to act on 

this, I am just afraid—we are going to be putting a package together here in very short order, and I am just so afraid that if we 

go ahead and do a couple of nice things here, without the Mayor 

and the council reacting to the others in a very timely manner, 

that we are wasting our time; that you are not getting the bang 

for the dollar. And this ought to be done in one fell swoop by moving it through and by getting everybody to sign up. 

I hope—Congress shouldn’t have to do the regulatory reform 

piece if you can get the Mayor and council to do it. A lot of these 

proposals are going to be unsaleable unless Members are seeing 

some major changes at the city level. It shouldn’t be done piecemeal, so let’s talk about what some of those pieces should be as we 

put it together. 

It seems to me inspections keep coming up as one major problem 

and workman’s compensation. I have heard people comment about 

the Displaced Worker’s Act, and suggesting moving in a way that’s 

fair to workers but also in a way that allows you to be competitive 

with what’s being offered in Maryland and Virginia. And we can 

go on and on. 

Mr. GREEN. No, I don’t disagree with your view at all. I just simply think that we have got to make sure that the capacity is there 

to implement some of these things, and I think in many instances 

it’s a capacity question. I think it is also fairly difficult to ask people to implement recommendations and solutions when they are 

undertrained and the city hasn’t had the necessary training funds; 

underpaid. I mean, I think we have got to look at this, if we 

want—— Mr. DAVIS. But privatizing some of the regulatory functions can 

change it very quickly. 

Mr. GREEN. Some of that could help, that is correct. But I would 

say there are some functions that could be privatized, and I think 

the local government is looking at privatizing several of the functions. I think developing an adequate pay scale for employees and 

expecting them to perform is key; revamping the procurement function. I mean, I think all of those things are part of it, as well as 

addressing the tax inequities. 

But my view is that, let’s try to get at as much of it as we can, 

so that we have got a reasonable chance of succeeding. And, in the 

process, I think we have got to figure out, I mean, what’s the appropriate balance between local prerogatives and the Federal interests, so that it does not appear that we have developed something 

that was completely top down from the Federal level with very little involvement from the local level. We have got to shoot for that 

balance. 

Mr. DAVIS. Will you elaborate on the worker’s compensation 

issue you talked about, again? Then I am going to ask the Board 

of Trade representatives to respond in the same fashion. 

Mr. REPP. The Chamber, along with the Board of Trade and 

other business organizations in the city, have been studying the 

worker’s comp issue in the city for almost a year now; and our 

members tell us that the high cost of worker’s compensation insurance in the city is one of the reasons why they are leaving the city; 

and we know that there is business flight occurring in the city. 

24

As a result, the Government Affairs Committee of the DC Chamber of Commerce has been spearheading an effort to come up with 

a reform proposal that will help deal with this situation. 

We believe we have to start somewhere, and that’s one of the 

places that we believe we can start. 

I think the inspection issue that you point to is also a major 

issue for—in the building industry; and I know that my corporation, for example, has been held up for quite a few number of days 

waiting for inspectors to show. 

But to speak about workers compensation, we have a number of 

proposals that we think, while preserving the safety net for workers, will help drive down the costs of workers’ compensation in the 

city and make the—and make the costs more comparable to what 

they are in Virginia and Maryland. And that’s our goal here, is to 

make the city competitive. 

Mr. DAVIS. To the extent we can have some specifics on that from 

you, we would be happy to put it in the record and consider it as 

we proceed. 

We are suggesting that if you could have the people who write 

the parking tickets do the inspections it would get done on time all 

the time. Thanks. 

Mr. Blunt. 

Mr. BLUNT. I think I agree with many of the comments here. 

Certainly, the private sector can provide a measure of competition 

to governments who are providing services to their residents. Efficient, cost-effective service really is a function of the quality of people, the kind of resources, the training they have and the commitment of the political will to deliver those services. 

Regulatory reform is necessary, and when we think of it I think 

we should think in the context of a regional economy. There are 

many, many differences between the various jurisdictions here that 

ought to be looked at to make them more consistent to make it 

easier for businesses to cross the lines. 

Mr. TYDINGS. Mr. Chairman, I will add that the control board 

has asked us to, through the community development corporations 

in Marshall Heights and Columbia Heights, to work with some of 

the neighborhood businesses and identify the regulatory impediments; we will be giving to the board tomorrow a summation of 

each of the specific areas dealing with regulatory and process reform that needs to be done. I will forward that to you. 

Mr. DAVIS. John, we would like to see that. 

I may have some thoughts of my own as well as, Ms. Norton. But 

it seems to me we are probably going to get one crack here at this, 

and I hope it will be fairly comprehensive. 

This is very difficult even to get the most minor bill through pertaining to the District of Columbia. Ms. Norton, who is a veteran 

at this knows, how one member can come up in the Senate and torpedo the whole thing by standing up and objecting to it all night. 

In the House, there are a lot of different agendas. 

To the extent we can put together a comprehensive package that 

we think will help yield the results we want, we all want this city 

to succeed. 

Mr. GREEN. Mr. Chairman, I can’t overemphasize the importance 

of building some capacity to implement in the District. 

25

Mr. DAVIS. That’s fair. You can bite off more than you can chew. 

Mr. GREEN. We can come forward and the Congress can come 

forward with a bill that helps a great deal, but if the capacity isn’t 

there, both on the public side and the private side, to implement 

these things, then I think we subject ourselves to the criticism that 

we took a step and we couldn’t implement it. We have got to be 

sure this time around of the capacity. 

I think Mr. Blunt made a very important point in terms of capacity of the people, level of training they have received, pay scales. 

I think we have got to look at all of that when we think about capacity. 

Mr. DAVIS. But let me just throw a couple of comments out. 

First of all, on the inspection piece, if you allow private inspectors who have been trained—and I think the private sector could 

respond to this very quickly—you have a core group that checks on 

the inspectors to insure that there is no rampant fraud, which is 

a small percentage. You will find, without a huge investment from 

the city, that it will be much more efficient, you know, people will 

be coming at all different times of the night, and that doesn’t cost 

anything. There’s no real capacity problem there. 

And that works very quickly in terms of the Workmens’ Compensation Act if you can get together and agree on what will bring 

you down to a competitive posture. Where is the capacity problem 

there? You change the act, and you move forward. 

Mr. GREEN. Some of those functions are certainly——

Mr. DAVIS. Those are two critical ones. 

Mr. GREEN [continuing]. Are certainly amenable to privatization. 

But on the capacity side, you still need high-quality people to supervise the contracts and supervise the work. 

Mr. DAVIS. Well, procurement also is a little bit tougher, but we 

had Mayor Goldsmith from Indianapolis here just a few weeks ago 

who is basically running the city with a few procurement officers 

and has kept some core functions. But privatization, although I 

don’t advocate it in every case and I think it can be overdone, is 

a very quick way, if you can’t make a change in the culture of the 

people you have, to bring about those results. 

Now, I think we have to be careful about doing that. I think we 

have to be fair to the city employees who have worked there and, 

in some cases, just lack appropriate management and training to 

get the job done. I think there’s a balance to be made. But there 

is a quicker way to do some of these things. 

Mr. GREEN. In terms of the hearing that you mentioned, I was 

struck by one of the mayors that appeared before you who talked 

about, in some instances, city employees were given an opportunity 

to bid on the work. 

Mr. DAVIS. They should have that opportunity. 

Mr. GREEN. And they were very successful in that. I mean, I 

think that that kind of approach makes a lot of sense. 

Mr. DAVIS. I think city employees have been pigeonholed into 

some areas where they are performing tasks that don’t need to be 

performed; they are working under regulations that didn’t have to 

be written, and they are filling out forms that don’t need to be 

printed, and if you unleash them and move them in the right direcVerDate May 23 2002 18:33 Jul 08, 2002 Jkt 079471 PO 00000 Frm 00029 Fmt 6633 Sfmt 6602 W:\DISC\42192 pfrm17 PsN: 42192
26

tion, they can be every bit as capable as anybody in the private sector, maybe even more. 

Mr. GREEN. I agree. 

Mr. DAVIS. That’s a management issue. In some cases it is an information technology issue where the city is behind, and we want 

to be fair. But on the other hand, if we sit and wait for the city 

by itself to do this without some kind of impetus or carrot, as Ms. 

Norton has proposed with her tax plan, we need some cataclysmic 

things to happen, significant items. 

The only thing—I think the President’s package is a wonderful 

package, and I applaud him for putting his marker down and showing some initiative, but in my judgment, by itself, you don’t have 

the spark that is needed to ignite and take advantage of the incentives that they are offering. 

Mr. GREEN. And in my judgment, the flat tax is a spark in terms 

of residents and individuals. 

Mr. DAVIS. But still, even if you do the flat tax, you still have 

to make inroads in education and public safety even if the taxes 

are cheap. I really feel comfortable with the Booz-Allen study that 

showed in some deployments, in some of the basic blocking and 

tackling, the city can improve on that measurably. You need to 

have those in regulatory reform. 

If you still have laws, like you say, in workmen’s comp and other 

areas, you are not going to attract business. So it is comprehensive. 

It is big, if anything, and whether it’s Ms. Norton’s plan, as she has 

put her marker out there to her credit, or it is somebody else’s tax 

reduction, it should be a part of that. A city can’t compete in an 

area where they have higher taxes than 49 States. 

John, do you, or you, Roger, want to add anything to that? 

Mr. TYDINGS. No. 

Mr. BLUNT. No. 

Mr. TYDINGS. The privatization aspect, I think, is intriguing, and 

there is a need to do some jump-starting, and that may be worth 

some. 

Mr. DAVIS. How about on the procurement side, any other additional observatios on that front? 

Mr. TYDINGS. On the procurement side, the bill has now both 

passed the council, has been signed by the Mayor, and is here for 

its congressional layover period. I think it’s important for the committee to note that from our point of view, the things we have—

three of the four things we had hoped are in the bill. One dealing 

with the whole issue as it relates to competition, making it a competitive process, that’s in the bill; second as it relates to some organization of standardization so each agency doesn’t create its criteria is in the bill; and third as it relates to the whole issue, and 

it connects with what John Green has said about capacity, the 

whole issue of developing the professionalism amongst those who 

are responsible for procurement, the certification process is in the 

bill. 

And I was just asking a colleague, there’s some 20 individuals 

who have already gone through the—or are in the process of going 

through the certification process. So that bill is making progress. 

We would like to see it, frankly, move a little faster. 

27

There is one piece, however, that I think you need to be aware 

of, and that is taken out of the bill in the course of the normal give 

and take, and that is the whole issue about real estate, the acquisition and disposition of real estate. That is not in the bill that’s here 

before you. The Mayor has indicated he will come back with a separate piece of legislation on this, and we are going to track that very 

closely. 

Mr. DAVIS. That’s a very critical piece, too, given where we are 

on some of the other items. 

Do you feel confident on the procurement side that this can be 

implemented in fairly short order? 

Mr. TYDINGS. I think a lot of progress has been made. Again, it’s 

an impatience on a lot of things. It needs to get done yesterday. 

Once it gets through—I think that it is fair to say that the executive branch will be ready when the bill completes its congressional 

layover. 

Mr. DAVIS. OK. Thank you. 

I am going to have additional questions, but I am going to, at 

this point, recognize Ms. Norton, who has some questions. 

Ms. NORTON. Well, I very much appreciate the very thoughtful 

testimony of those of you who are trying to do business every day 

in a city that is not exactly business-friendly all the time. 

I appreciate your comments on my own tax plan, especially because they come from people who do business in the city. And for 

the record, I want to say that it is interesting to see the extent to 

which businesses have applauded the individual part of my tax 

plan. There is a separate section that would aid business, but what 

I think it reflects is what employers tell me over and over again, 

that stimulus to the DC economy with the present outflow of middle-income residents has the chief effect of making jobs for suburbanites. And they tell me on the basis of their own experience 

that we are losing people. We will lose half of our working people 

in 6 years. Half of the people who work will be gone in 6 years. 

So there is an understanding on the part of business that they 

would like to hire DC residents, and the President’s bill gives them 

some incentive to hire DC residents, but, of course, at the lower 

end. It would largely be at the lower end. And these are the people 

who are paying the taxes now. For 63 percent of the people who 

pay taxes in the District of Columbia make $30,000 or less, and 

anybody who thinks a great city can survive on that needs to tell 

me how. 

In any case, the juncture between business and residential taxpayers is an important one to note and one that interestingly businesses have been among the first to understand. I appreciate that 

you have not simply looked at what, in an isolated sense, might 

seem good for business, which is part of my plan, which is very 

good for business, but have understood how all the parts of this 

puzzle fit together. And, therefore, your testimony carries some 

considerable weight. 

I have also supported the President’s plan and now his economic 

development plan. I do so because I am very pleased to see the 

thought that’s gone into what is really a traditional approach, but 

one that we all had to see is a whole lot better than nothing, but 

it’s an empowerment zone approach. 

28

My concern with it is not that we don’t need it here. It is that 

by the time anything kicks in, nobody may be left. It takes time 

to build back in this way. And, of course, I know of no empowerment zone that has built back even a neighborhood, much less a 

city, so that I have to confess that for those who want to be the 

last to leave and turn off the lights, I don’t want to be among them. 

And my frustration comes from the need, I think, to do something 

other than the usual thing in this city, if you want to see it survive. 

And so I appreciate that the business community has taken off 

whatever, its philosophical, ideological notions and looked to see 

what works. I appreciate that the chairman is trying to find something that works, even given the fact that these bills cost money 

and it is going to be hard to get people on both sides of the aisle 

to support one approach. This is very difficult. 

I want to look more closely at the economic development approach in the hope that whatever we do will help stimulate more 

quickly than has generally been the case. And to that end, I would 

like to ask you if you might know of examples where the types of 

incentives, such as tax credits, have had a significant effect on 

turning around parts of cities or cities. 

And the background to this, because we are trying to find ways 

to improve the Economic Development Corp. part of the bill to encourage people to believe that it will, in fact, have the effect it 

wants to have, and to encourage business to understand that it can 

help them and help them in more than, you know, 20 years’ time, 

or however long these things tend to take. 

I was concerned with an article reporting on the responses of 

some businesses to the economic development plan that was in the 

Washington Times. There’s a short statement from it I would like 

to read and ask as a background to my question on whether you 

think tax credits would stimulate business to stay. I want to give 

these paragraphs as background to the question because I was concerned with the responses that business people had. 

‘‘President Clinton’s $300 million plan to help revitalize Washington, DC, drew raves from legislative and big business last week, 

but several DC entrepreneurs say the plan offers them little relief 

or incentives to expand.’’

‘‘In theory, this would compel me to create more jobs, but in reality it’s not enough. I don’t think the carrot he is offering is 

enough alone to make me want to hire District residents,’’ said 

John Shulman, the chief executive officer of Onyx International, a 

six-person investment banking firm in the District. ‘‘It’s a lot of 

propaganda now.’’

‘‘Mr. Shulman was referring to a part of the President’s plan that 

calls for a DC jobs credit program. It would give a 40 percent Federal tax credit to DC employers hiring city residents who earn less 

than $28,000 a year. The break would apply to the first $10,000 of 

earned income. 

‘‘White House aides say the provision could generate 78,000 jobs 

over 5 years, if Congress passes it.’’

Now I want your response to a figure like that. 

‘‘Business owners and lawmakers acknowledge that the tax incentive and job credits form the first Presidential proposal to boost 

29

DC business in decades. But small-business owners are critical of 

the overall package. 

‘‘There is nothing in it for me,’’ said Bonnie Cain, the publisher 

of DC City Desk, an on-line newsletter about city politics, and an 

advisory neighborhood commissioner for Ward 1. ‘‘I would like to 

say the plan makes me more interesting to investors, but I don’t 

see anything in the plan that does.’’

‘‘The Clinton proposal also would create the DC Economic Development Corp., a quasi-government agency that would control $95 

million in tax credits for investors or lenders to DC businesses. 

I am trying to read it all to give a balance, the same thing that 

this piece gives. 

‘‘Business owners said other provisions in the plan, such as tax 

credits for expansion costs, would give companies a much needed 

boost, especially those poised for an upgrade.’’

‘‘My strategic plan calls for me to expand. This just makes it 

more attractive and more timely,’’ said Donald Delandro, the president of Affordable Supply Co., a custodial and food service supply 

company that employs 10 in Northeast. But he said the plan would 

not be enough by itself to fuel his expansion. 

‘‘If I get the contracts, I could envision getting at least five more 

people, but that’s contingent upon the contracts I am going after,’’

he said. ‘‘In my view, the real key is getting the Federal agencies 

to see what contracts they can give to businesses in the inner city. 

That’s where the rubber meets the road,’’ Mr. Delandro said. 

‘‘Despite the plan’s drawbacks, some entrepreneurs say it is a 

long-awaited step in the right direction. 

‘‘The devil is in the details. I don’t think the plan is all that great 

myself, but before there was nothing,’’ said Caple Green, owner of 

a Chesapeake Bagel Bakery franchise in Washington. ‘‘Now that 

the President has put his foot forward, Congress should pick it up 

from there and take it up another notch.’’

That’s what the Washington Times found when it went asking 

for a response from several businesses in the city. 

I would like, therefore, to repose my question to you, examples 

of where tax credits and business investment incentives have led 

to significant stimulation of the economy for residents and your response to what I have just read. 

Mr. HOLMAN. Well, if I could begin, the DC Chamber, among 

other projects, has been working with another organization, the DC 

Building Industry Association, to look at retaining, first, and, second, attracting businesses to the District. So certainly there are 

some employers who could benefit directly from the jobs incentives 

and were located in areas that the Economic Development Corp. 

may assist. 

But certainly some of the companies that you mentioned just 

from the description that was in the paper may not be those companies that will benefit. That’s why we have tried to stress comprehensive approaches. One of the reasons that we got involved, for 

example, with reviewing 170,000 records to improve the availability of information by lot and square for city residents and businesses is because we knew that that was something that touched 

everyone who does business—does business or lives here. 

30

Certainly, the President’s plan has a lot of those features, but it 

won’t benefit every business. I can think, for example, when the industrial revenue bond program was very strong here, and it worked 

for for-profit as well as not-for-profit businesses, that had a lot to 

do with electrical companies and certain printing companies staying in the District. So it really depends on the kind of business. 

But I think if you continue along this line of looking at comprehensive solutions, I think you will address a majority of the concerns of businesses. But certainly something has to be done to the 

tax structure as well as to the regulatory structure if you are going 

to keep the majority of businesses here. 

Ms. NORTON. Thank you. 

Mr. GREEN. I would just add that I think one of the things—

there is no sort of one approach fits every business in the city. I 

mean, we have got different businesses here. We have got a rather 

small for-profit base, a very large not-for-profit base. So the solutions will vary by sector of the business community and also within 

segments. And so I think that we need to look at the entire business base. 

Ms. NORTON. Well, the reason, you know, I would be interested 

either now or later in examples is precisely that this is fairly negative. And if you say, well, there are businesses who would profit, 

I want to know who they are, why they will. We have got to be able 

to show that we are not just shucking and jiving here. 

When we had this last hearing, it was called the Chamber of 

Commerce for DC was seen by some members of the majority as, 

you know, just another bureaucracy to throw out some tax credits 

and some loose money. 

Very frankly, I need data. I need information to show that things 

like this can have an effect because they have had an effect someplace else. 

Does anyone else want to say anything else about that question? 

Mr. BLUNT. I would say one comment, Congresswoman Norton. 

From my perspective, as having worked on one policy and structure, tax structure and tax policy, a commission for another body, 

it occurred to me that there are regressive mechanisms in some of 

the taxing policies, and it may affect the District. In fact, I am concerned that the residents don’t bear the burden of economic development. 

I also will say that businesses stay here or move not only on the 

reality of the tax impact, but sometimes the perception. And I 

think the real gold mine in this city are the people, the residents, 

who need to be retrained to get the high-tech jobs in a service economy that really represents our future. Businesses will locate and 

relocate here with certain tax credits and incentives, but they also 

need a good taxing policy with respect to their employees. And I 

say not just the high-paid employees, but basically the service employees and those at the entry level. 

So it is a complex issue that needs a comprehensive approach, 

and from an anecdotal perspective I would say those cities that 

have been successful in keeping people in the city instead of moving out, those cities created policies early on to create incentives for 

businesses to stay and preclude development outside. 

31

So I am concerned about the real estate legislation that may 

come out of this whole look, because clearly we need to make it 

possible for businesses to move back to the city, to work with all 

levels of employees. But it’s a comprehensive approach that I think 

will give us progress and retraining of people. 

Mr. TYDINGS. I will mention four cities that are worth spending 

some time understanding. Two are pretty obvious, Detroit and L.A.; 

but Atlanta, and I would also mention Buffalo as the fourth, each 

of whom has had experiences in different fashions, either with the 

State or with an economic development entity in their area that 

has been granted some authority as it relates to the ability to give 

tax credit. 

I will underscore that I am not really surprised by your reaction 

or by the reaction that the reporter got when they did the survey, 

probably within about a 24-hour or less time period, to the President’s plan. 

No. 1 is, as was said, the nature of the business. If you are a 

labor intensive business, the tax credits may have some appeal to 

you from an employment point; but if you are a capital intensive 

business, I am not so sure the tax credit is going to have quite the 

appeal. 

An example in our comments this morning, the whole issue about 

the additional expensing for up to $20,000 for the acquisition of 

equipment, that’s a component that I think is probably downplayed 

in terms of neighborhood businesses. It probably has a significant 

impact in terms of some of the businesses that are not in the downtown area but that are throughout the neighborhood. 

I think that there is a need to understand the reaction on the 

basis that the details are simply missing. A misunderstanding of 

the details from the memorandum of understanding, yet to be negotiated and released, I think might cause a lot of people to react the 

way they did. But let me underscore that the nature of the business is going to be the basis upon whether tax credits or financing 

or expensing is going to have a bearing on the longer term. 

Ms. NORTON. Well, I do think it goes to the lack of confidence 

that businesses in the city have that there are plans out there, and 

so you get people you certainly will except being negative generally. 

Do you have evidence that tax credits or business in investment 

breaks have in fact turned around neighborhoods or cities of the 

kind you mention? I would appreciate any information you could 

get for inclusion in the record. It would help us out. 

Thank you very much, Mr. Chairman. 

Mr. DAVIS. Thank you. 

My reaction, though, to the empowerment is that I think it can 

help marginally, but that the city is so hopelessly noncompetitive 

with the rest of the surrounding region that unless you do some 

other things in addition, as Ms. Norton and others have suggested, 

the empowerment zones are not going to have much effect. 

Now, if you can level that playing field a little bit and then offer 

some special treatment, then you wouldn’t even need to talk about 

the whole city, you could talk about scenarios that may be more 

competitive. But my judgment is that we are way out of it competitively at this point and that is why we are seeing such a huge 

32

flight of capital out of the city to the suburbs or in some cases out 

of the region. 

Do you agree with that substantially? Is that a fair comment? 

Mr. BLUNT. Yes, yes. 

Mr. GREEN. Yes, absolutely. 

Mr. DAVIS. I am also not sure that the Memorandum of Understanding and these things are going to satisfy me or other Members of Congress. If we are to be satisfied, then we need to see 

something else. We prefer to see it initiated at the city level, no 

question. But since we are putting an omnibus package together 

anyway and we are all in a room together holding hands and trying 

to get this through, the city government and the Federal Government and Congress and the private sector, I think we need to be 

flexible to get the end result. 

Mr. TYDINGS. I would add, Mr. Chairman, that connects with Ms. 

Norton’s comment. I think today this city is hemorrhaging as it relates to jobs and businesses. I mean, no one leaves the town following a brass band as they walk across and leave the Nation’s 

Capital. The city is hemorrhaging. And for this city not to have a 

capacity to deal with job retention today, there is no capacity in the 

Government to have anyone meet and deal with businesses who 

are here in terms of whether they are nonprofit associations or forprofit organizations. 

Now, when we talk about other jurisdictions, we know fairly 

well, as I think you know, Mr. Chairman, there are 20 jurisdictions 

in this region. All of them have a capacity within their governments to spend time, if you will, caring for and treating the local 

jobs in their marketplace. We do nothing in this city like that. 

There is a big void. I think if this city doesn’t quickly move to deploy some resources to keep what it has, the hemorrhaging is going 

to increase, and it connects with the idea in terms of who is the 

last person out. We must do something about that now. 

Mr. DAVIS. The Economic Development Corp. can be a key part 

of that. 

Mr. TYDINGS. It is a small piece of it. I think it is city government that needs to take care of that. 

Mr. DAVIS. Would you contact our staff, Mr. Tydings, and Mr. 

Blunt, to help us document the successes of other cities. I think it 

would be helpful to us. 

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Mr. DAVIS. I want to ask just a couple of other questions. The 

technology revolution that is circling the beltway right now has created an environment in the suburbs where we can’t fill the jobs 

that are available. The city is not benefiting from that at all, it 

seems to me. 

How can we get the city to help produce workers for these jobs 

and in some cases maybe to attract some of these companies as 

well? Do any of you have a strategy on that? These are companies 

that can’t pay high rent. The nature of it is that the high rents you 

pay downtown make it very difficult to operate in most cases. I will 

start with Mr. Blunt. 

Mr. BLUNT. Well, I see an alliance around the country between 

educational institutions and components that reach into the core 

cities to help to retrain, you know, the base. We are moving and 

have moved a long time ago from an industrial economy to a service and information-based economy. Those who aren’t able to move 

into the educational mainstream early from K through 12 up to an 

open admission school—— Mr. DAVIS. Where even the UDC could help; couldn’t it? 

Mr. BLUNT. UDC could help, yes. The community colleges feeding 

into other institutions can help, and access to public higher education is extremely important. 

I would say that that is a duty and a responsibility I think we 

have in the public to make sure that those who have been passed 

by are retrained. We live today in an environment, in a lifetime of 

learning and we train ourselves, but in the inner city, the residents 

who basically have been constrained by transportation policies 

have not been able to move to where the jobs are. So if a broad, 

comprehensive economic development policy creates opportunities 

for movement of corporations back into the city, they have a gold 

mine in terms of who will populate some of their businesses, and 

they are going out of the area because there isn’t enough. I think 

we should retrain the people here. 

So your point is a very good one for small businesses who have 

strategically aligned themselves with larger ones. They are not 

doing it inside the city. 

Mr. DAVIS. Your point that they are not just leaving Washington, 

but they are leaving the region is an important one for my constituents in the suburbs who are seeing jobs going to Colorado and 

other high-tech areas where the city could be part of the solution 

for keeping them in the region. 

Mr. BLUNT. Absolutely. 

Mr. DAVIS. Yes, comment? 

Mr. HOLMAN. I just wanted to add, Mr. Chairman, that some of 

our members are working with industrial space along the New 

York Avenue corridor to bring that back on line to refurbish it and 

to provide it at lower rents than you would certainly find downtown. So that helps to some degree with the space issue. 

We have been working, I am on the board of the Private Industry 

Council and we have certainly been working to retrain our residents, and we are also working to help market the city and we are 

beginning to perhaps attract a few companies. But we are going to 

need a major push to have the kind of massive impact that is really 

going to be needed to turn our economy around. 

38

Mr. DAVIS. Let me ask each of you this question. I will conclude 

with this. If we do nothing else, and I am not advocating we do 

nothing else, but if we were just to do a zero capital gains for city 

residences and city businesses, what effect would that have? 

Ms. NORTON. I will answer that, Mr. Chairman. It would create 

jobs for people in Fairfax County; if that is all you did, it would 

stimulate the economy, and according to employers in the District 

of Columbia, it would encourage them to do more hiring, and based 

on the hiring rates in place, those jobs would go overwhelmingly 

to suburbanites. That is one of the reasons why the President is 

putting his plan, something that would at least help low-income 

residents, because—— Mr. DAVIS. He doesn’t have the zero capital gains. 

Ms. NORTON. No, he doesn’t have the zero capital gains. He recognizes that if all you do is capital gains, you get to hire your constituents, because that is what we are doing now in this town. 

Mr. DAVIS. But that is not right. 

Ms. NORTON. I think on the basis of talking to employers, who 

have been the first to say, ‘‘hey, you know, fine, fine for us, but understand that who we are hiring and why.’’ Mr. DAVIS. We have 12,000 jobs in northern Virginia. We can’t 

hire people, we can’t find the people to work now. So I don’t know 

what that means, except that we get a job growth maybe inside the 

city where people who live in the city would be attracted. I don’t 

know. I am asking. We are just looking. It seems to me that maybe 

we can take that if we do that and use some other things to help 

provide jobs for people in the city. 

I am confused over the chicken and the egg here. Do businesses 

bring people to the city or do people in the city bring business? I 

think we could argue this ad nauseam, and they are probably both 

important. But from a political vantage point here at this point, 

doing the business side of it is politically palatable. The residential 

tax, which Ms. Norton also advocates and which I think has a lot 

of merit, looks to me to be a tougher sell on the Hill at this point 

talking to other Members. 

So I would throw that out and see if there are any final comments on that before I conclude. 

Mr. TYDINGS. I have a comment on your previous question. 

Mr. DAVIS. Please, please, John. 

Mr. TYDINGS. Regarding the technology sector. I think we ought 

not to lose sight that there is a connection between the city and 

the technology sector, and it simply is that to a degree both the 

professional and financial service firms are rooted in the District 

of Columbia as it relates to the connection in terms of the technology community. While you may have representatives of some of 

the firms physically located outside of the city, the roots still to a 

degree have their basis within the District of Columbia. 

No. 2 is that I leaned back to Mr. Green when he was leaving 

to say I think he is an example that people forget that we do have 

technology businesses here. Health care is an extraordinarily technology-focused business. You can narrowly view Mr. Green’s firm 

in terms of treating the sick. But they are doing other things that 

have a significant implication off which you could gain leverage, 

and the same is true as it relates to the universities. There are lots 

39

of leveraging opportunities that could take place in this city. We 

simply don’t take the time to think about them with the other 

issues that are going on. 

But I would not want us to leave here with the belief that the 

city, although not housing a great number of technology businesses, 

does have leverage opportunities to participate over time. 

Mr. DAVIS. We just need to expand the disparity in terms of how 

it is growing in the suburbs and how it is growing here. It just 

jumps out at you. Certainly the city is not devoid of that, and MCI 

and other companies here are utilizing this every day. 

Mr. Repp. 

Mr. REPP. As we testified, we certainly support Delegate Norton’s 

bill for the residents. With respect to the business, I agree there 

is tremendous opportunity here with the combined Federal-State 

tax in the District with the 91⁄2 percent franchise tax, and the District of Columbia is far in excess of what it is in Virginia, and I 

think there is tremendous opportunity with very little revenue loss 

to reduce taxes and stimulate business. Because the business activity is so low to begin with, the revenue loss would be minor. 

Mr. DAVIS. OK. Thank you very much. Thank you. We will go to 

our next panel. 

Mr. DAVIS. Next we have Mrs. Carol O’Cleireacain, director, 

Brookings Institute, and Dr. Steve Fuller, professor of public policy, 

George Mason University. 

[Witnesses sworn.] 

Mr. DAVIS. We will begin with Ms. O’Cleireacain. 

Ms. NORTON. I think Ms. O’Cleireacain had to laugh when you 

asked her to hold up her hand and say the truth, the whole truth 

and nothing but the truth, because she is an economist. 

Mr. DAVIS. Economists are people who like to work with numbers 

but didn’t have the personality like accountants did. 

STATEMENTS OF CAROL O’CLEIREACAIN, BROOKINGS 

INSTITUTE; AND STEVE FULLER, GEORGE MASON UNIVERSITY 

Ms. O’CLEIREACAIN. I don’t know how you would like me to proceed here. I would be quite willing to take my time to answer questions. 

I have submitted into testimony to you what is basically the executive summary of the study I did, ‘‘The Orphaned Capital: Adopting the Right Revenues for the District of Columbia.’’

The book will be coming out next Tuesday, on April 1st, and, apropos of the conversation you were having with the panel before us, 

it will have an entire chapter on the business climate and the relationship between the tax structure in the District—the tax rates 

and the tax burdens—and business activity. So that I think some 

of it can address the questions that Delegate Norton raised, we survey the literature on empowerment zones and what the impact 

seems to be on that. We look at what economists say about the impact of taxation on local economic activity. Actually, over the last 

15 years economists have become quite convinced that differences 

in tax burdens affect levels of economic activity locally, in small 

enough areas. 

But the project I did at Brookings was looking at a sustainable 

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sumption that a sustainable revenue system is the key to the survival of the Nation’s Capital. I recognize that the revenue issues 

were not going to be the first thing anybody was going to look at: 

that services have to improve dramatically here and that public officials have to show the District can live within its means. But, as 

that takes place and as painful management reforms are made, the 

District’s residents and its employees and its leaders should expect 

a tangible tradeoff. They should expect a rational and stable revenue base on which the District’s budget will rest. 

I did a thorough examination of the revenue side of the budget 

over time and have come to the conclusion that the existing revenue structure is not sustainable. It is, for sure, uncompetitive with 

the surrounding region. By my calculation, per capita State and 

local taxes are $4,168 in Washington, compared to $3,105 in Boston, $2,429 in Baltimore. For households, the tax burden, which becomes progressively higher as the income level rises, is, according 

to the District’s own data, the highest in the surrounding area at the $100,000 income level. 

For businesses, the District tax bill is at least 25 percent greater 

than elsewhere in the region, according to Coopers & Lybrand’s 

study for the Greater Washington Board of Trade. 

Now, that is part of the problem. It is not all of the problem. 

Another part of the problem with the revenue structure is that 

the tax base is severely restricted by Federal law. In effect, thus 

is an economy here where the hometown industry is tax-exempt, 

also, the tax-collecting entity is not working. The District’s tax collection system is broken. After 9 directors in 20 years and staff reductions of 20 percent since 1990, the city’s revenue department 

lacks the capacity to enforce and to fairly collect the more than 20 

different taxes and 115 different fees and charges that are now on 

the books. 

External audits point to serious deficiencies in the accuracy of 

the tax collection numbers and in the accountability for money received. Voluntary tax compliance in the District is languishing, 

evasion is significant, and business tax revenues derived largely 

from audits. This is neither a fair nor an efficient way to collect 

taxes. And without an internal auditor or resident Inspector General watching over the collections or the assessments of property, 

the possibilities for corruption need to be recognized and corrected. 

Given that information, what I proposed was that for a sustainable revenue structure for the District of Columbia and to make it 

competitive with the surrounding area, two things must happen. 

Some actions have to take place at the District’s own level; that is, 

a number of taxes should be eliminated and the remaining taxes 

should be cut and dramatically simplified. Second, we needed to 

find, getting to the title of my study ‘‘The Orphaned Capital,’’ we 

needed to find a parent for this orphan. And for cities in this country, their parents are their States. So we needed to find for the District a missing State, and I propose that that missing State must 

be the Federal Government. 

So, I proposed a revenue structure here that would be budgetneutral. I took the District’s budget as presently authorized and approved by the Congress of the United States, and I restructured it 

to make it look more typically like an American city. I eliminated 

41

four business taxes—the corporate income or franchise tax; the unincorporated franchise tax; the personal property tax, which in the 

District is only a business tax; and the professional license fee, 

which would take a big burden off of the District’s tax collectors. 

I proposed that the real property tax and the personal income tax 

be cut close to a third, each of those, and dramatically simplified. 

For the real property tax, I recommend moving from five categories of property to two and for rates to be dramatically cut for 

those. This actually pertains to the literature which shows that the 

most significant tax that affects local economic activity is the commercial property tax rate; and, I would change that in the District. 

For the income tax, I would simplify it to make it look pretty similar to the tax in two small East Coast States, Vermont and Rhode 

Island, which is just a percent of Federal liability. I would also let 

the Internal Revenue Service collect it. 

To make up for this loss in discretionary revenues, I would substitute a new fiscal relationship with the Federal Government. It 

would have three elements, and each would address a particular 

part of the District’s revenue shortage that results from the unique 

status of being the Nation’s Capital. 

The first is that the Federal Government should make a payment 

in lieu of taxes to fully cover the services received by the 41 percent 

of the District’s tax base that is, by Federal determination, exempt 

from taxation. This would allow property taxes to be reduced for 

all property owners. 

Second, the Federal Government should provide State aid of an 

amount similar to that received from their State governments by 

cities of similar size. This would simply provide parity for the District compared to other American cities. 

Third, there should be a 50/50 sharing of State-type spending, including the State share of Medicaid and welfare. This would not be 

discretionary revenue, but this would be categorical aid to the District. It would partially compensate the District for the fact that it 

has no State to provide a range of State services, and it would provide an incentive for efficient service delivery. 

None of this third element would of course have to happen if, in 

its role of acting like a State, the Federal Government would actually provide the State service instead. But this is really to cover the 

places in which the Federal Government doesn’t provide the service. 

The total Federal resources in my proposal which would be committed to this new relationship amount to about $1.2 billion, based 

on present spending patterns. Some of that aid would be discretionary, that is, the payment in lieu of taxes (PILOT) and the State 

aid; and some would be categorical aid and tied in quite typical 

ways and only be spent on the services and subject to oversight. 

Based on my study then, the Federal payment at the moment 

currently falls about $535 million, or 45 percent, short of fully compensating the District for being the Nation’s Capital. Increasing the 

resources, basing them on the logic of the burdens borne by the Nation’s Capital and making them predictable, I believe, would help 

to provide ongoing budget balance for the District of Columbia. It 

would also, importantly, allow the District to simplify and lower its 

taxes on its residents and on its businesses. 

42

The new fiscal relationship would cost the average American an- nually about $4.50. This is the price for a capital city that is, in 

the Nation’s founders intention, separate from any State government; and it reflects the national purpose. 

Thank you. 

Mr. DAVIS. Thank you very much. You finished right on time. 

[The prepared statement of Ms. O’Cleireacain follows:]

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Mr. DAVIS. Dr. Fuller, thank you very much for being here. 

Mr. FULLER. Good afternoon. It is a pleasure to be here. 

Over the years, I have been involved in a variety of studies on 

the District of Columbia’s economy and the Washington area; and 

from that work I have drawn several conclusions. I will start with 

my conclusions and then give you a few comments. 

First, the District economy is substantially underperforming its 

potential. Second, the District’s economic recovery depends, among 

other actions, on reducing the cost of living and the cost of doing 

business in the city by reducing the local tax burden and by implementing a carefully crafted economic development program. Third, 

the economic revitalization in the District would generate substantial benefits for both District and suburban economies. 

There are many reasons to explain why the District’s economy is 

weak. These include a negative business image, high tax rates, 

high operating costs, high prime rates, poor quality infrastructure, 

poor quality public services, deteriorated physical environment, 

physical conditions and ineffective public leadership. All of these 

conditions, to differing degrees, have taken their toll on the District’s economy. 

Success in building the District’s economy will depend on reducing the counterproductive costs of doing business or of living in the 

District. Bringing the District’s local tax burden into line with 

other cities is important. The President’s proposal provides a partial solution to the District’s uncompetitive tax environment. However, it is only a partial answer, as it ignores important fiscal inequities. 

The President’s proposal is a significant step in the evolving solution. I applaud the administration for its recognition that the Federal Government must be a partner with the District’s taxpayers 

in funding basic, State-level public services. The Commonwealth of 

Virginia is a partner of its cities and counties. 

I could argue with some of the funding levels proposed for costsharing, but I won’t at this point. I will leave that to others. However, I will argue that the reasoning is flawed behind the proposal 

to trade the Federal payment for this Federal commitment to share 

in the costs of State-level public services. Whether it is called a 

Federal payment or not, the Federal Government’s responsibility to 

the District extends beyond fulfilling its cost-sharing duties as the 

District’s parent jurisdiction. 

The District is unlike any other city to the extent to which its 

property tax base is constrained as a consequence of hosting the 

Federal Government. Where in other large central cities tax-exempt properties account for approximately 15 percent of the land 

normally subject to property taxes, in the District this percentage 

is three times greater. 

This large proportion of tax-exempt land includes not only land 

owned and occupied by Federal facilities but also property, international organizations, embassies and other properties owned by 

foreign governments and property owned by organizations granted 

tax-exempt status by the Congress, such as the National Education 

Association and the National Geographic Society. Studies have put 

the value of these lost real estate taxes in the neighborhood of $300 

million annually. 

56

This amount could be accurately calculated each year and used 

to determine a Federal payment in lieu of taxes. This payment, in 

combination with the Federal Government’s participation in costsharing in the provision of State-level public services as proposed 

under the President’s plan, would enable the District’s local tax 

burden to be reduced, making it more similar to those of other 

major cities. This would substantially increase the District’s 

attractiveness as a place within which to live and to do business. 

Reducing the local tax burden, targeting tax incentives and establishing an administrative vehicle to initiate and manage an economic development program in the District are ideas that have 

substantial merit. I support them fully. 

Still, even if the playing field is leveled by a reduction in local 

tax burdens and incentives are available for business development, 

economic growth in the District will not be automatic. The District’s competitive advantages that should be the basis for formulating effective economic growth strategies need to be fully understood. 

Formulating economic development strategies around the District’s core businesses offers it the greatest opportunity for early 

success. Strategies that build on the District’s inherent economic 

strengths will yield better and faster results than strategies designed to compete head to head with suburban economic development programs. 

My research has shown that the healthier District of Columbia 

economy will pay substantial dividends to the Washington area’s 

suburban economies. Because of the strong interdependencies within the regional economy, economic growth in the District spins off 

benefits to the suburbs. 

While the suburban economies have performed well in recent 

years compared to the District, the suburban economies can’t grow 

much faster than they are now, unless either the national economy 

performs better than is expected or unless the District’s economy 

is strengthened. In fact, the easiest way for the suburbs to promote 

their own faster economic growth in the short term would be to 

find ways to accelerate the District’s economic recovery. 

The District’s economic base has inherent advantages in growth 

potentials. These must be understood and built on. Only then will 

the incentives and support proposed by the President’s package 

have a chance to stimulate long-term economic development in the 

District of Columbia. 

If successful, the revitalization of the District economy will generate substantial benefits throughout the metropolitan economy. 

Thank you. I will be happy to answer questions. 

Mr. DAVIS. Dr. Fuller, thank you very much. 

[The prepared statement of Mr. Fuller follows:]

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Ms. O’CLEIREACAIN. You have two economists here who came in 

under time and under budget. 

Mr. DAVIS. And I substantially agree. I mean, there are a number of issues that I think you agree on. 

Dr. Fuller, you stated in your testimony that the cost of doing 

business in Washington, DC, has to be reduced by, ‘‘reducing the 

local tax burden in an economic development program.’’ Why do 

you think the local tax burden is so important? How do you compare the importance of local to the Federal tax burden? Do you 

have any specific ideas or reactions to the President’s economic development package, the elements of the President’s proposal? Do 

you think they will work? Do you think they are not enough? 

I will ask Carol the same thing. 

Mr. FULLER. I focus on the local tax burden because the Federal 

tax burden is consistent, regardless of what jurisdiction you do 

business in. 

As we look at the District economy, I see it as having enormous 

growth potential. It is different than central cities anywhere else 

in the country inasmuch as the economy of this region is geographically tied to the central city. The core businesses of this region— the Federal Government, international business, the hospitality industry, even the technology industry, as we spoke earlier—all have 

strong connections physically, physically fixed to the District of Columbia. 

I see that efforts to make doing business in the District of Columbia more cost competitive with the suburbs will allow those 

businesses that would more efficiently operate in the District, 

would choose a District location, want to be in the District to make 

a decision unencumbered by this tax differential. 

So reducing high costs in the District and improving the quality 

of services at the same time I think go hand in glove. Most businesses won’t complain, actually, about high costs if they get highquality services in return. So it is not just reducing the cost of tax, 

it is the other costs of doing business in the District. 

Any of these proposals, those in the President’s plan, which are 

not a complete package, or others I think need to be balanced very 

carefully against each other so that as we look at the revitalization 

efforts in the District, that all of the—as I call them—push factors 

are actually dealt with. The factors that attract business and people to the District are really quite persuasive; and, right now, they 

are being undercut by these push factors that can be easily corrected. 

Mr. DAVIS. Carol, do you want to respond? 

Ms. O’CLEIREACAIN. I substantially agree with that. 

I would also cite the economics literature, frankly. That makes 

it really clear that the tax costs of doing business, as the other 

costs—I mean, the panel that came before us talked about unemployment costs, other insurance costs here, regulatory costs, whether they are direct financial costs or indirect. In terms of time consumption, all of those matter for location decisions; they matter, in 

terms of the smaller the space within which you are trying to make 

this decision. 

Mr. DAVIS. And particularly when there is no value added is 

what I gather? 

65

Ms. O’CLEIREACAIN. Absolutely. The literature says that this 

stuff is important and that the most important tax rates in particular are the commercial property tax rates. And when you look 

at the District, those commercial property taxes are—they are 45 

percent out of line with the next highest region, which is a very 

tiny little core of Bowie; you know, part of one county in one surrounding area. 

So you can’t look at the literature and not be warned. And then 

you look at what is happening on the ground and you talk to people 

and you see that this is basically a small, open economy, where location is—you can do the same business in a number of different 

locations. 

Mr. DAVIS. There are class A office buildings, for example, in the 

suburbs now. There weren’t 25 years ago. 

Ms. O’CLEIREACAIN. That is right. That is right. And there is a 

lot more of the work force out there, too. 

Mr. DAVIS. One thing that neither one of you mentioned, and 

that is transportation in and out of the city is really better than 

in most metropolitan areas, isn’t it? At least with Metro and everything. Or how would you describe it? 

Mr. FULLER. I don’t think transportation is really the problem in 

this discussion, whether it is better or not than other places. We 

know that people move long distances to seek jobs, and the job 

growth in the suburbs is definitely attracting residents from the 

District who live in the District and now work in the suburbs and 

vice versa. This is what makes economic development opportunities 

within the District quite attractive, that they can attract the resource base necessary to support them. 

I have written in my longer statement that, in fact, the suburban 

work force that works in the District is actually quite an asset for 

the District. It provides labor resources that supports and helps 

grow this economy. The idea of only trying to create jobs in the District for District residents would actually be counterproductive. 

I think the sooner we begin to think of this economy as a regional economy and that the benefits are shared around the Beltway and among and between jurisdictions, the easier it will be to 

sell the idea that this is a good investment, building up the District’s economic capacity. 

Ms. O’CLEIREACAIN. And that is true. As an economist, I know 

that is true. 

But it seems that when you look at the political reality that the 

District faces, you are talking about an entity that is small compared to the region. You are talking about an entity that doesn’t 

have a State government to protect it. 

When you look, for example, at the economic development programs in the State of Maryland, the entire strategy is set by the 

State. It is a biotech, a health-sector, strategy. The State of Maryland bears half of the cost of property tax incentives that localities 

in Maryland give for businesses to locate. 

You don’t have a State to do that for the District. 

Mr. DAVIS. Although Virginia is little bit different, I know Fairfax spends more in economic development than the State of Virginia itself. 

66

Ms. O’CLEIREACAIN. Right. But it is a two-tier system. I mean, 

there are Virginia incentives and then there are local incentives. 

Here in the District, it all has to come out of the same pocket. 

Mr. DAVIS. Right. Although now with the Board of Trade they do 

have a regional group that Fairfax contributes to, so there is a recognition. I agree with you in terms of it being a regional economy 

and being interdependent. 

Let me just ask a couple of other questions. Which comes first, 

the business growth or the residential growth? If you attract more 

businesses, does this bring residents in? Any thoughts on that? 

Mr. FULLER. If I were organizing economic development strategy, 

I would approach both. We need more residents because they support the retail base. They support the local-based economy, which 

is different than the kind of economic actors that we attract 

through business incentives and through a well-heeled economic 

development program. 

Employees in the District, whether they live here or just work 

here, also constitute a market. So we have to buildup the market 

base that supports local businesses. I think doing one without the 

other will not be successful. 

Ms. O’CLEIREACAIN. I would also like to point out that I think he 

is absolutely right. Much of what I dealt with in my tax proposal 

gets at that, because it gets at both households and also small business. It seems to me this is a very tough town for small business. 

I also think, coming from New York, and this is just my way of 

looking at it, but I was also raised in Chicago, that this is a central 

city that because of the way it has been planned and the structure 

of its buildings and the height of its buildings, this is not a terribly 

dense central city. It does not have the level of density that other 

central cities have, so that a lot of both the negatives and the 

positives of central city location are not as vigorous here. 

Mr. DAVIS. OK. Let me ask, what could zero capital gains do for 

the city if you were to bring that down for both business and residents? 

Mr. FULLER. Do you want to start on that one? 

Ms. O’CLEIREACAIN. No. I don’t have a clue. 

Mr. FULLER. I don’t think that is where to start in helping the 

city. I don’t think it would have much effect at all. 

Mr. DAVIS. Where would you start? If you could outline it just 

at different tiers, if you could work on a program to bring the city 

back on a tax-incentive basis, recognizing that regulations are part 

of that? 

Mr. FULLER. Well, to say it needs to be a comprehensive solution 

sounds oversimplistic, but I can’t point to one area that will 

achieve the results. There are many things that have to be done. 

Most important, as an economic development agency comes into 

being, if that is what happens, they need to understand the 

strengths of the District economy so they go with that strength 

rather than trying to look at what other jurisdictions are doing and 

copying them, or trying to go head to head with what sounds popular at the time. 

The District is fortunate that it has a substantial economic base 

to build off of, and in large part it has ignored it, because it is either old hat, or it isn’t as sort of attractive as high technology. 

67

Technology may not be—I don’t think it is the District’s future. I 

don’t think the economy should be built around that, not that it 

can’t be a part. But it is losing its economy to the suburbs by default, and I think it can work to retain and grow some of its inherent strengths and then start looking for new activities or different 

sectors to stimulate. 

Ms. O’CLEIREACAIN. Representative Davis, let me support something that the previous panel said. Here I am going to put on my 

hat as somebody who spent 4 years in New York City government. 

Of all of the things that I said to you about what is broken in 

the Department of Finance and Revenue, you could say double that 

for economic development in the District of Columbia. There isn’t 

an entity, there isn’t a focus; there is a tool box of policies, but 

there is no strategy to which that policy is addressed. So as somebody who has been in government, I come here and I look and I 

listen to what business people are saying, and I can see it, and it 

is a place where they simply have abdicated policy. 

Mr. DAVIS. This is not brain surgery then, is it? This is just basic 

blocking and tackling and executing the fundamentals. 

Ms. O’CLEIREACAIN. Absolutely. 

Mr. DAVIS. And it is not happening, is it? 

Ms. O’CLEIREACAIN. It is not noticeable. 

Mr. DAVIS. But the irony is that the city is doing reasonably well 

in spite of—it shows the underlying strength of the city. 

Mr. FULLER. That is why I am so hopeful. The District economy 

is actually doing quite well in spite of all of the negatives. So with 

a little bit of help, it is bound to start growing and, in fact, picking 

up, helping to boost the entire region and the national economy. 

Ms. O’CLEIREACAIN. But not its tax base, because you have to 

have a phenomenal amount of growth to get something out of the 

tax base, because it is severely limited. You can’t run a local government without a tax base. It is derivative of the private sector. 

Mr. DAVIS. OK. Ms. Norton. 

Ms. NORTON. Mr. Chairman, I don’t have any questions for these 

witnesses. I would like to thank them for very thoughtful testimony 

and for the time that they have given to studying the problems of 

the District of Columbia. 

If I could say to Dr. Fuller, I know a straw man when I see one. 

Your notion that only trying to create jobs for DC residents doesn’t 

make a lot of sense is astonishing in its lack of generosity. The fact 

is that employers tell me that 8 and 9 jobs out of every 10 go to 

suburban residents. 

We are not trying, and we have never tried, to exclude suburban 

residents from jobs here. I spend a lot of my time trying to keep 

Federal jobs in this city, and those jobs overwhelmingly go to the 

suburban residents. 

This city has shown no hostility to the suburbs, but we do think 

that the turnover in residency is a disaster for this city, and we do 

think we are within our rights to try to create some jobs, at least 

of the jobs that go here, for DC residents. 

So do understand that nobody here is advocating that those of 

you who live in Virginia and Maryland not get any jobs; you already have the lion’s share of jobs in the DC government, and certainly in the economy. We are not advocating, and I resent the noVerDate May 23 2002 18:33 Jul 08, 2002 Jkt 079471 PO 00000 Frm 00071 Fmt 6633 Sfmt 6602 W:\DISC\42192 pfrm17 PsN: 42192
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tion that the point was only trying to create jobs for DC residents. 

We are saying DC residents surely deserve some of the jobs that 

the economy produces in this city. The economy is going well, and 

you know what? Unemployment in this city is going up. The economy is going very well, but it is not profiting the people who live 

here. It is not profiting the people who pay for the services that 

residents of Virginia and Maryland use. It is not profiting the people who pay the highest taxes, combined Federal and local, in the 

country. 

So yes, you are going to find that we want to make some jobs 

for residents of the District of Columbia, and we are not advocating 

that those jobs only go to residents of the District of Columbia. It 

is so lopsided the other way, we should think that the region would 

want also to stand up and say, help these folks who live in this city 

to get some jobs, because we are getting our share. 

I can’t say that we are getting our share in Fairfax and Montgomery, however. I appreciate that the chairman understands that 

there are jobs out there to be gotten, and keeps talking about ways 

like UDC to help match those jobs out there with the skills needed 

for those jobs. 

Ms. O’Cleireacain is an old friend. Occasionally we disagree. I 

note that she has a few paragraphs on my tax plan that were gratuitously added to her own study. I want to note for the record that 

those paragraphs look like they track the work of Citizens for Tax 

Justice, and I don’t think it was her intention to do a study of my 

own plan. This does not involve an independent study of our plan, 

but since she has seen fit to toss in a few paragraphs against my 

plan, I ask permission to put into the record a rebuttal of what is 

there, because it is a rebuttal I have already done in relation to the 

Citizens for Tax Justice. 

Mr. DAVIS. Without objection. 

[The prepared statement of Hon. Eleanor Holmes Norton follows:]

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Ms. NORTON. Mr. Chairman, I ask for permission to place into 

the record the Washington Times article from which I quoted for 

the last panel. 

Mr. DAVIS. Without objection. 

[The information referred to follows:]

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Mr. DAVIS. Just a couple of other questions. First of all, Carol, 

if we could get that book as soon as possible, we would be very 

eager to look at that. 

Ms. O’CLEIREACAIN. It would be my pleasure. 

Mr. DAVIS. Second, I think we can fall very quickly into going in 

the wrong direction as we take a look at the unemployment rate 

in this city versus the suburbs of trying to do things. Where the 

city can benefit is appropriate training and education for its people 

for jobs that are here and to adjust an economic development strategy. 

For example, on the tourism side with the MCI Arena and the 

new convention center coming down, the city can adjust to that. We 

just need to be smart about a strategy. That can increase—the city 

can be the greatest beneficiary of the jobs that are created into hospitality industry, it seems to me. What I like about both of you, is 

your straightforwardness. We may not agree on every single piece 

of the plan, but you have been, I think, very straightforward, laying out the facts as you see them, some economic realities here regarding where the marketplace is, where we are likely to score 

gains and where we aren’t. 

I think that if we handle this correctly, and we look at the city 

in a couple of years, we are going to see some significant progress. 

If we go back the other way, though, and overreact to this and try 

to structure jobs and try to structure an economic development program that doesn’t fit the cloth of the marketplace, we will be wasting time with another generation not benefiting from that. 

So I appreciate very much each of your comments, and the ability to put those markers out here for us to follow. I hope that we 

will benefit from them and take them accordingly. 

Ms. O’CLEIREACAIN. We will be happy to help in any way that 

we can. 

Mr. DAVIS. I appreciate that. Thank you both very much. 

Mr. FULLER. Thank you. 

I see the vice chairman of the subcommittee has just arrived, our 

Representative from Maryland, Mrs. Morella. We are happy to 

have you. Would you like to make an opening statement? 

Mrs. MORELLA. Mr. Chairman, in the interest of time, I would 

like to submit an opening statement for the record. 

Mr. DAVIS. Without objection, it will be submitted for the record. 

[The prepared statement of Hon. Constance A. Morella follows:]

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Mr. DAVIS. We move now to our last panel. I appreciate those on 

our last panel for bearing with us. We have been looking forward 

to your comments and to taking questions. 

We have Joslyn Williams, president, Metropolitan Washington 

Council AFL–CIO; Ms. Kathryn Pearson-West, executive co-chairperson, Coalition for Political and Financial Accountability, Inc.; 

and Joseph Daniels, Washington Interfaith Council. 

We look forward to your comments today. 

[Witnesses sworn.] 

Mr. DAVIS. We will go in this order, just the way I scripted. Mr. 

Daniels, why don’t we start with you and go straight down the row, 

unless the four of you have agreed to something else. 

Mr. DANIELS. No. That is fine. 

Mr. DAVIS. Try to stay to 5 minutes. We want to get into the 

questions as much as possible. Thank you for being here. 

STATEMENTS OF JOSLYN N. WILLIAMS, PRESIDENT, METROPOLITAN WASHINGTON COUNCIL AFL–CIO; KATHRYN PEARSON-WEST, EXECUTIVE CO-CHAIRPERSON, COALITION FOR 

POLITICAL AND FINANCIAL ACCOUNTABILITY, INC.; MARK 

THOMPSON, PRESIDENT, DC BRANCH, NATIONAL ASSOCIATION FOR THE ADVANCEMENT OF COLORED PEOPLE; AND 

REVEREND JOSEPH DANIELS, WASHINGTON INTERFAITH 

COUNCIL 

Reverend DANIELS. Sure. 

My name is Joseph Daniels, and I am the pastor of Emory 

United Methodist Church on Georgia Avenue in Northwest Washington, and I am a member of the strategy team of the Washington 

Interfaith Network. We are an organization of 50 congregations of 

all denominations created with the assistance of the Industrial 

Areas Foundation. 

I know the purpose of this hearing is to solicit reactions to the 

President’s proposals for the fiscal restructuring of the District. I 

thank the committee, Chairman Davis and Representative Eleanor 

Holmes Norton for the opportunity to speak on behalf of the Washington Interfaith Network. 

Let me begin by saying that the President’s proposals, along with 

the proposals and initiatives suggested by the Financial Control 

Board, the Brookings Institution, and Representative Norton, provide a wide array of responses to the current fiscal and structural 

mess that the District finds itself in. 

We in WIN are encouraged that so many powerful institutions 

and impressive minds are grappling with these matters. We believe 

that constructive change in this area of the city’s life is critical. The 

best thing that we can do is to encourage you to see our representative as a reliable and knowledgeable player in these negotiations, 

someone whom we will count on to sort out the wheat from the 

chaff and present to the city the best options that emerge. 

A few words of warning, however, from the Washington Interfaith Network. 

First of all, we ask that you be like the best of doctors and do 

no harm. Even the most powerful institutions and supple intellects 

can create damaging policy, like the recent welfare reform bill. 

82

And please don’t use your distaste for an individual or several individuals as a reason to delay or derail constructive change. Imagine the overwhelming majority of decent citizens who make up this 

city and region. I invite you to come to my church this Sunday or 

any WIN congregation this Sunday to get a healthy picture of the 

city in your mind’s eye. We ask that you make policy for the whole 

of the city. 

As important as the fiscal restructuring of the city is, it is necessary, but not sufficient, to transform this city. There are two 

other kinds of change that must also take place. The second kind 

is the long-term and incremental improvement of the city’s public 

schools. And the third kind is the shorter-term, visible and tangible 

gains in the construction of affordable homes, the lowering of the 

rates of crime, and the upgrading of streets, parks and other recreational facilities. 

WIN applauds the action of the Financial Control Board in taking charge of the public schools and installing a new leadership 

team. Our opening assembly of 2,200 delegates on May 28 last year 

committed itself to participating in a long-term effort to change and 

improve the culture within the city’s public schools. WIN has already started one after-school effort, funded privately by the 

Fannie Mae Foundation, in J.O. Wilson Elementary School, which 

is in Northeast Washington, and intends to begin at least nine 

more over the next several years. The purpose of these efforts is, 

of course, to provide quality extended-day activity to as many as 

2,000 youngsters in our city. Equally important to WIN is the goal 

of training and developing parent leaders in each of these schools— parents capable of addressing the issues that affect their children’s 

education and other issues that destroy the quality of life in the 

communities surrounding these schools. 

A third kind of change, shorter-term, dramatic, and highly visible, must take place in the District, we believe. To that end, WIN 

has raised $2.5 million in church financing to serve as a revolving 

construction fund for the construction of more than 1,000 new, affordable, Nehemiah townhomes in the District. Washington, DC, 

has the lowest homeownership rate of any city of its size in the Nation, it is 38 percent, and one of the highest rates of population loss 

at the same time. These two facts are connected. Decent working 

families who wish to remain in the city or move to the city have 

very little in the way of quality affordable housing to buy. WIN will 

build critical masses of 250 to 300 such homes on any sizable site 

in the city. After 9 long months of negotiation, Mayor Barry has 

recently signed an agreement with WIN that will lead to the construction of the first 250 homes on the Fort Lincoln site in Northeast. The city needs to be rebuilt, on a large scale, with great impact, in a number of locations, and WIN is ready to do what its sister organizations in Brooklyn, NY, and Baltimore, MD, have already done. 

Another tangible gain can be registered in the reduction of the 

rate of crime. We believe that the Financial Control Board did only 

half the job when it intervened in the issue of police management. 

The Board, we believe, should have removed Chief Soulsby and replaced him with a top-flight, proven police manager from another 

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quire professional leadership, tight accountability, and effective 

community participation. WIN stands ready to hold up its end, as 

soon as the right leadership is in place. 

Other physical improvements, in streets, parks, recreation centers, are critical. They signal to those already here and those who 

are considering following their job to the city that the city is on the 

mend. The money set aside in the President’s plan for improved infrastructure could prove very useful. 

None of these more immediate changes are easily accomplished. 

We in WIN deal daily with a political culture that features bureaucratic obstructionism, gross incompetence, low-level thuggery, and 

occasional corruption. These features are not unique to Washington, although at times they seem present in a more distilled 

form. We are ready to confront these conditions, and, like the Old 

Testament leader Nehemiah, we will rebuild the old charred walls 

of our great city with a trowel in one hand and a sword in the 

other. 

But to do this tough work, we must count on you, ladies and gentlemen, to handle your part of the rebuilding project. Work closely 

with our representative, we ask, and come to a fair and responsible 

conclusion, and then reinforce WIN and all of the other good citizens of Washington, DC, in the two campaigns that we suggest 

that are already now underway. Thank you very much. 

Mrs. MORELLA [presiding]. Thank you, Reverend Daniels. 

[The prepared statement of Reverend Daniels follows:]

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Mrs. MORELLA. Now I would like to recognize a good friend, Mr. 

Williams, for his statement. 

Mr. WILLIAMS. Thank you very much, Congresswoman. 

Let me say at the outset, my comments are not the complete 

comments of this organization, and unfortunately, we did not receive our invitation until yesterday. So I am going to—in the great 

tradition of the Congress, I am going to ask the chairman’s permission to revise and extend my remarks prior to the close of the 

record. 

Mrs. MORELLA. Without objection, that will be the case, Mr. Williams. The record will be open also for 10 days. 

Mr. WILLIAMS. Thank you very much. 

Members of the subcommittee, my name is Joslyn Williams, and 

I am president of the Metropolitan Washington Council, AFL–CIO, 

which is made up of 175 local unions with 150,000 union members. 

I am happy to be here representing the working people of the District of Columbia and the Maryland suburbs of Montgomery, Prince 

George’s, Charles, Calvert and St. Mary’s Counties. Our members 

in both jurisdictions, as well as working families in northern Virginia, have been impacted by the financial decline of the Nation’s 

Capital and will stand to benefit by its resurrection as a model capital city. 

We believe the President’s plan in general is a good one. It focuses on the key causes of the District’s current financial problems; 

namely, the basic structural defects built into the District by Congress. These defects have unduly restricted the District’s revenueraising abilities thereby undermining its tax base, have saddled it 

with an enormous pre-home rule pension liability, and have overburdened it with city and State functions without providing it with 

a State. 

Study after study looking into the District’s financial crisis has 

identified the same structural defects. The Rivlin Commission, of 

which I was a member, the McKinsey report to the Federal City 

Council, a report by the Appleseed Foundation, and the recent 

Brookings Institution Policy Brief for the DC Control Board, have 

all laid the District’s basic problems at the feet of structural defects. 

The President’s plan addresses two of these three defects. Relative to the unfunded pension liability, which was accrued prior to 

home rule when Congress was in charge, it is only fitting and proper that Congress should reshoulder this burden. Two of our affiliated unions represent workers affected under this pension plan 

and, therefore, we would be interested in ensuring that upon closure of the current plan, future workers would not find themselves 

in an inferior plan. We look forward to labor participation in the 

development of any new plan. 

The second structural defect addressed in the President’s plan is 

the District’s lack of a State. Takeover of certain functions which 

are normally under the purview of States, or fuller Federal funding 

for these functions, is key to helping the District stabilize its financial situation. As the Brookings Institution Policy Brief points out, 

other comparable cities like Boston, Memphis, and Baltimore receive 28 to 38 percent of general revenues from State aid. The current Federal payment represents only 19 percent of the District’s 

90

revenues, leaving a shrinking tax base, which is restricted by Federal law, to make up the difference. It hasn’t. 

Medicaid is clearly an area where the District has suffered 

through lack of a State. The District has been paying 50 percent 

of costs while cities in like circumstances have been paying 25 percent with the State and Federal Government together picking up 

the remainder. When the large percentage of DC residents below 

the poverty line is factored in, it is not hard to see why social services expenditures have been one of the biggest culprits in busting 

the District’s budgets. 

There is a part of the President’s plan with which we take exception, and that is the wholesale elimination of the Federal payment. 

This payment has not been made to the District to take the place 

of a State nor has it been a gift from the Congress to the District. 

It represents lost revenue due to the 41 percent of District land 

that is unavailable for property taxes due to the presence of the 

Federal Government. It also represents payment for the additional 

expenses the city has had to bear because of the Federal presence. 

The AFL–CIO has taken the position the Federal payment has 

been inadequate as it is. It has not kept pace with inflation, nor 

has it represented realistically the revenue lost to the District. 

Our belief is that the Federal payment should be viewed separately. The District needs a rational and stable revenue base and 

the Federal payment should be a part of that base. The Brookings 

Institution estimates that this payment in lieu of taxes, which 

should be nonnegotiable and based on property assessments and 

the commercial property tax rate, would currently be about $382 

million. 

Additionally, to help stabilize the revenue base, we feel that the 

President’s plan should make it clear that there is a preference for 

the location of the Federal Government in the District. We cite the 

recent study by George Mason University. 

Notwithstanding the tremendous job being done by our current 

incumbent in the House of Representatives, the District’s lack of 

representation in the Congress undermines its ability to make its 

case regarding efficiencies, impact on the community, and other 

cases cited by Congresspersons for relocation. 

The President’s economic development component is rather vague 

but is a key ingredient to the future success of the District financially. No District revenue issues are addressed, save the takeover 

of tax collection by the IRS. Unless the District’s tax structure is 

streamlined, even the IRS may have trouble administering it. Collections and enforcement have clearly been a severe problem. While 

the District of Columbia’s Tax Revision Commission, on which I 

serve, will be looking at recommending a tax overhaul, this in itself 

does not stimulate economic development. 

Congresswoman Norton’s Economic Recovery Act, which we support, addresses another required segment of a stable tax base, and 

that is individual taxpayers. In addition to jobs fleeing, individuals 

have fled to the suburbs, taking with them their incomes and their 

revenue-generating potential. Middle and upper class taxpayers 

must be lured back, and this bill will help do that. 

In summary, we support most of the President’s plan. Its focus 

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gress is correct. Its requirement that the District manage itself acceptably is correct. It is not, however, complete in its approach, as 

we have outlined. 

As representatives of many of the workers to be affected by the 

Federal takeover of several agencies, we have one final concern and 

that is the potential displacement of a large number of workers. 

The prison takeover, for example, requires all employees to reapply 

for their positions. We requested the plan addressing this potential 

displacement be developed with the input and involvement of labor 

representatives. 

Thank you for your consideration of labor’s position. We look forward to working with the committee, especially Congresswomen 

Morella and Norton and Congressman Davis, more closely as you 

work on plans to revise our Nation’s Capital. Clearly, the interests 

of your respective constituencies are also at stake. With Professor 

Fuller pointing out that for every $1 of additional economic activity 

generated in DC, the suburbs realize $1.50 in new growth, it is 

clear that our region must work together for the benefit of all. 

Thank you. 

[The prepared statement of Mr. Williams follows:]

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Mrs. MORELLA. Thank you, Mr. Williams. 

We will now hear from Ms. Pearson-West. 

Might I ask you, Ms. Pearson-West, if you could summarize. 

Your written testimony in its entirety will be in the record. 

Ms. PEARSON-WEST. Good afternoon. I’m Kathryn Pearson-West, 

executive co-chair for the Coalition for Political and Financial Accountability. I have summarized, made some points, and I would 

like to enter my testimony into the record. 

Mrs. MORELLA. Without objection, it will be entered. 

Ms. PEARSON-WEST. I’m so disappointed that Mr. Davis had to 

leave because I especially wanted him to hear some of the concerns 

of some of our citizens in the Nation’s Capital. But I am glad to 

have you here. 

Mrs. MORELLA. He will be right back. We will make sure that he 

hears them. 

Ms. PEARSON-WEST. Thank you very much. 

The Coalition had written to Congressman Davis because we 

were quite concerned that DC residents were not being heard on 

this plan, so that is why I am especially pleased that this hearing 

is being held today, so in bullet fashion, I will just highlight some 

of my points. 

DC is unique and takes on burdens that other cities don’t have. 

We have $19 billion going out of this city every day by commuters 

returning to the suburbs whose income we cannot tax. $730 million 

could be raised through taxing income of commuters at 2 percent. 

As it stands, 48 States are actually subsidizing Maryland and Virginia. The first call must be for a commuter tax or for an adjusted 

annual Federal payment that adequately compensates for that loss 

of income. 

DC is home to over half a million people. The city is more than 

just the Federal enclave. This is a place for people who reside in 

well-established communities. There are taxpayers here and families and any proposals must address those issues. 

We also have a large contingent of poor people whose interests 

must be addressed as well. There are some people that must count 

on government. We can support the President’s plan with some 

modifications and clarifications as long as it does not amount to 

government rearranging our lives and priorities without our involvement. 

Therefore, we have to take this discussion and others all the way 

to the grass-roots level where we can include elected advisory 

neighborhood commissioners, civic associations, other community 

residents, and definitely our council members. And I see our Shadow Representative is in the audience as well. We need people like 

that involved. 

We support the continuation of the annual Federal payment; that 

is a must and that has been described enough today. We must recognize that there is nothing that need be done autocratically that 

cannot be done democratically. We call upon Congress to adhere to 

the democratic principles. We understand that the status quo is not 

working and we are committed to change. However, it is imperative 

that those who will be affected by that change be involved. 

Thus far, most proposals and ideas have been imposed upon us. 

In fact, we tend to be treated like an urban laboratory. There has 

98

been a loss of power within the unions and efforts appear to be 

union busting. Unions have played a great part in this country and 

they are needed more today than ever. 

There was an article in the paper today that I found most distressing. Union participation is essential in negotiating any proposals in DC. But unions must really represent their workers. 

Americans don’t know what is being done to the citizens of Washington, DC. Americans don’t know that we are being 

disenfranchised. Some of us wonder whether people in other States 

are electing their Representatives just to come to the Nation’s Capital to disenfranchise us. 

Another bullet. It is important that before this summer we begin 

to restore a sense of accountability and stability and a sense of involvement. At this point, all DC residents can do is sit on the sidelines and watch various forms of government arrange our lives. Racial tensions are being exacerbated. Many of us recognize that we 

are losing control of our city. 

In Communist countries or dictatorships, the Communists take 

over education and then the media. The military is also taken over. 

We know that we have lost the media which relentlessly describes 

the negative about DC. We have recently seen the takeover of the 

schools. The police force is the equivalent of the military, and we 

are fighting desperately to hang on to the police and avoid another 

hostile takeover. 

I hope the President will give more funds and Congress will give 

more funds to our police instead of any attempts to take it over. 

I hope that the Board of Education wins its lawsuit. That case is 

desperately needed to remind us of the validity of our vote, and I 

think it is important that education and democracy can coexist. 

The struggles by our forefathers and mothers to achieve the vote 

has been lost as home rule and democracy are diminished in the 

Nation’s Capital. That particular case might need to go to the Supreme Court, but it is one that we must win. There must be as 

much support and involvement in the formulation and implementation of public and social policy. Democracy is not an observers’

sport. 

We need to focus more on education. Our school board must be 

restored so that we can have the necessary input to guide our 

young people. Just think about this new emergency board of controllers, they are closing schools like McKinley High School and 

Taft when a better approach would be to talk to citizens and look 

at possibly a school like a Banneker or a communications school or 

another magnet school, but instead we have closed door meetings. 

This is where my own Congressman gets a little annoyed with 

me on this. We have disagreements with the flat tax. There should 

be other types of tax incentives. I do understand what she is trying 

to achieve, but I think we need to be clear about the ramifications 

of this type of tax. Would the flat tax, coupled with the possible 

loss of rent control and other things, accelerate the exodus of lower 

middle class and low-income people? And we need another approach to maintaining and attracting residents and businesses. A 

better focus might be to improve schools and make the streets 

safer. 

99

The Economic Development Corp. should consist mostly of DC 

residents and must assist small minorities’ and disadvantaged 

businesses. There must be an aggressive effort to target and improve New York Avenue, Georgia Avenue, Rhode Island Avenue, 

Ivy-City Trinidad and Anacostia. At the same time these areas are 

improved, we cannot force out the people that have made those 

areas their homes or current places of business. Before we drastically change welfare in DC, we had better get some jobs or crime 

is going to increase as well as the pain and suffering on our young 

people. 

We must also avoid displacement of people and social dislocation 

and alienation, and we must be careful about establishing super 

agencies out of the reach of local government and taxpayers and 

voters. 

While the Federal Government is to assume the financial role of 

assuming some State functions, the control and implementation of 

policy must remain with the DC government and local residents, 

at least with certain functions. In that light, the Federal Government needs to give more financial assistance to the University of 

the District of Columbia in order to make it a flagship institution 

and not a community college. There also needs to be money for the 

schools to make them state-of-the-art facilities and to construct 

new schools. 

We support the efforts to reduce DC’s Medicaid payments. We 

are happy to see DC will be relieved of the unfunded pension liability. There is much too much talk of mismanagement in DC, as if 

Congress had no part. That has to stop. The DC bashing must stop, 

and we must move on to accomplish our goals. 

The President and Congress must join in helping to promote the 

positive aspects of DC. I invite you all to come to North Michigan 

Park and Lamond Riggs, which a lot of people refer to as Precinct 

66, where Ms. Norton has really been a friend to us, so that you 

can see that people believe in civic responsibility and they maintain 

their homes and they send their children to school. We in DC have 

dreams and aspirations just like those in other jurisdictions. 

I am coming to an end. 

We should not try to privatize all of government because once we 

downsize we still have people looking for jobs. We have to create 

jobs. DC should be able to restructure and refinance its debt. It 

should not be required to balance its budget early because Congress and the Federal Government have yet to balance the Nation’s 

debt, and we figure we should at least get the same amount of 

time. The infrastructure fund must look at residential communities 

and not just the thoroughfares to the suburbs. 

The President’s plan should not be viewed as a bailout. It is still 

inadequate to truly transform this city to its intended greatness. A 

bailout is what we have given to other countries throughout history, and is what we gave to Russia. We don’t seem to have that 

much interest in our own cities. Cities across the Nation for many 

years have needed help in revitalization and the failings of DC are 

not an isolated phenomenon. Fortunately, help is beginning to go 

to cities, and I am glad there is attention focused on the Nation’s 

Capital. The President’s plan should include an extension of Metro 

to connect Georgetown with Fort Lincoln and New York Avenue. 

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Finally, the President’s plan should address full voting representation and empowerment of the citizens. Our vote has been nullified with the existence of the control board and the citizens got 

a slap in the face when the school board was rendered powerless 

on Election Day. 

The President in concert with Congress should call for the repeal 

of Public Law 104–8, which created the control board and robbed 

DC residents of the power of a vote. We need votes in the House 

and the Senate, not this dictatorship that dictates public policy and 

ignores the will of the people. This plan should have been presented long ago and there would have been no need for a control 

board. This plan is going to help give us a level playing field. 

It is important to note, and I am glad to see that there was no 

imposition on DC residents on the type of governance. The President did not address that. In my opinion, we need to maintain the 

strong mayor form of governance but that choice should remain 

with the people, and just wanted to let you know that since there 

has been a discussion on DC governments, the DC Democracy Initiative, which is a nonbiased group but which I attend, will look 

at the various forms of government and DC financial issues, and 

it will be held on Saturday, April 5, from 10 to 2 at Martin Luther 

King Memorial Library. 

Thank you for the opportunity to speak this afternoon. 

Mrs. MORELLA. I thank you. You almost covered it all. 

Ms. PEARSON-WEST. I tried. 

Mrs. MORELLA. Thank you, Ms. Pearson-West. 

[The prepared statement of Ms. Pearson-West follows:]

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Mrs. MORELLA. It is a pleasure now to recognize Mr. Mark 

Thompson. 

Mr. THOMPSON. Thank you. To Congresswoman Norton, Congresswoman Morella and the staffs and to our Congresswoman 

seated in the audience, Congresswoman Sojourner, it is an honor 

to be here with you. I am literally pinch hitting for the president 

of our branch, Reverend Morris Shearin, who was unavoidably 

called to another meeting, hence the brevity of my written and submitted statement. I would ask the same indulgence of our elder 

statesman, Mr. Williams, that I submit further comments. 

Mr. WILLIAMS. As a point of service, not age. 

Mr. THOMPSON. Of course, certainly. I did not mean that chronologically. That I would submit further comments within the 10-day 

period and also I may depart and very briefly extend my comments 

here now. 

Mrs. MORELLA. Indeed, without objection, you may do so and 

submit extended comments for the record. 

Mr. THOMPSON. Thank you. 

The NAACP welcomes the initiative taken by President Clinton. 

However, we have some very specific concerns about several provisions within the President’s plan. First of all, we believe that the 

criminal law and the sentencing code should remain in local control. Consistent with the Home Rule Act and the long-standing 

independence in the nature of District law, the DC Criminal Code 

should not be required to comply with Federal standards. Any 

changes in District law should come from DC voters and should 

emanate as well from elected officials. 

We also feel that District prisoners should be kept close to home. 

As it is according to the President’s plan, District prisoners will be 

held in the Federal prison system and they are then subject to assignment anywhere in the country. 

This can be addressed by keeping our prisoners within a certain 

radius of the District of Columbia, but this is important because if 

we are talking about any kind of rehabilitation or any kind of transition back into normal life hopefully once prisoners are released, 

it is important that they maintain some family relationships. Those 

family relationships and community ties for that reintegration cannot take place if people are spread out all over the country. 

Also, it is high time in the District of Columbia that we look at 

alternative sanctions for nonviolent offenders. Many nonserious or 

nonviolent offenders can be sentenced to intermediate sanctions 

without imperiling public safety. The District should be free to expand pretrial diversion, probation, drug treatment centers, halfway 

houses, and other sanctions. The President’s plan, as it currently 

exists, restricts such options at exactly the time when they should 

be expanded. 

We do not support the removal of the Federal payment in exchange for the resolution of the unfunded pension liability. Both 

the resolution of the unfunded pension liability and the Federal 

payment are owed to the District. The Federal payment is wholly 

inadequate, but it is some form of payment in lieu of what we lose 

when almost 70 cents on every dollar earned in income in the District daily leaves the city and the $2 billion cost of the Federal 

presence annually. The unfunded pension liability is owed. It is 

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time that that be taken care of. By the year 2000, the amount of 

money that the District budget has paid to the unfunded pension 

liability will have quadrupled since the year 1980. 

Also, we feel that there is a need for more local representation 

on the new Economic Development Corp. Some of the President’s 

plans with this corporation are, indeed, visionary but we want to 

ensure that there is more local representation there. 

Also, we would like to see the President’s plan reflective of an 

interest in the maintenance of the University of the District of Columbia, our only urban land grant institution. 

Last, any changes to the governing structure, whether proposed 

by the President or the Congress, should not be enacted without 

ratification through a ballot initiative or referendum. It is no secret 

that there are many discussions about changing the governing 

structure in Washington DC, whether that is through a city manager or moving the council to a more advisory role. We say that 

any changes should not take place without first being placed on the 

ballot so that the voters themselves might ratify those changes directly, any changes in the governing structure. 

I know I do not need to recite the history of the NAACP to this 

panel, but we feel that these recommendations are consistent with 

our long history of social justice. We would hope that the panel will 

reflect some of our concerns and would also uphold that spirit. I 

thank you very much. 

[The prepared statement of Mr. Thompson follows:]

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Mr. DAVIS [presiding]. Thank you very much. Thank you all for 

your testimony. We will open it for questions at this point. 

Ms. Norton, would you like to start? 

Ms. NORTON. Yes, I would, Mr. Chairman; and I appreciate that 

these witnesses have testified today. It is very important testimony. 

May I acknowledge what two of the witnesses referred to, our 

Statehood representative, Sabrina Sojourner, is here and who I 

know would support particularly what Mr. Thompson had to say; 

and there are other activists from the DC community who are here. 

I would like to ask the chairman if he would leave the record open 

for 30 days so that we might insert testimony from other groups 

and leaders and residents in the city. 

Mr. DAVIS. Without objection, it is so ordered; and their statements will be part of the permanent record. 

Ms. NORTON. Thank you. 

To these four witnesses I have—I do have one question; but I do 

want you to know, Mr. Chairman, that this is a very diverse representation of residents from the District. 

I want to commend Reverend Daniels for what you have done in 

this city in a very short time. This is a city where, too often, there 

is a lot of talk and very little action. A lot of folks are walking 

around with a microphone or even without one, frankly. And what 

the Washington Interfaith Network has done is unprecedented in 

my time, to see some folks coming into this town, then do an extraordinary grass-roots job. I don’t know if people were in that 

church on two occasions but to see that this was not top down. 

When they talk about $2.5 million, is it? 

Reverend DANIELS. Yes. 

Ms. NORTON. The reason that the folks on top of the religious hierarchy came up with that money is that the organizational work 

had been done in the congregations, and it was a sight to behold. 

It has attracted the attention of the First Lady, of Mr. Cisneros, 

and now you have gotten, after a long struggle, the appropriate 

land from the city so we’re going to see houses built in this city for 

people of moderate income, the very people who cannot possibly afford to live in this city anymore. Sixty-three percent of the taxes 

are paid by people making $30,000 a year or less; and they are the 

ones fleeing the fastest because there is so little housing, because 

the cost of living is so high. 

I know, Reverend Daniels, that you will accept from me the notion that your concern to have the police department shook up, as 

it has been, and the schools shook up need not involve the control 

board or can be done by the city. The city could have, and the 

school board agreed to turn over its power to Mr. Becton to allow 

him to do what had to be done. 

And shame on the control board for insisting that it be done the 

way it has been done. I will never forgive them for it. Because the 

school board was willing to do the right thing the right way. 

As to the police department, the Control Board did that one the 

right way. They did a memorandum of understanding that involved 

the Police Chief, the Mayor, the City Council; and everybody 

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ment. So I think we have demonstrated there are ways to do what 

has to be done in this city consistent with home rule. 

Mr. Williams, I just want to note what has happened to DC 

workers. We have a very sophisticated trade union movement in 

this town that knows how to sit down and bargain, and I think the 

workers in this city have been put to needless suffering—absolutely 

needless. You don’t take people and go for 5 years, and not only 

don’t give them a raise but insist upon give-backs each of those 5 

years and then complain that your work force is not productive. 

That’s not the way it’s been done in other places. 

Now we have people coming forward, saying, we will give a raise 

to the police department and to the teachers. Yeah, give them a 

raise, but sit down and figure out how to do your reductions so that 

everybody gets some raise. 

How are you going to have a work force where you selectively 

give raises? Who ever heard of such a thing? Unknown in the history of mankind. 

There is a way to sit down and do it the way every business does 

it and the way every city has done it. If you have to do your layoffs, 

you do your layoffs. Then you begin to give increases to your workers, and you do it across the board. Maybe some get more than others. But you won’t say, ‘‘You field Negroes, you’re not going to get 

nothing; but you people who we need, we’re going to give raises.’’ I’m opposed to that. Because I think there’s a way to do it for 

everybody, so the workers begin to know that they will be rewarded 

for the productivity we are asking from them. 

All I can say about this labor movement is I know them and I 

know them well, and I know they know how to sit down and bargain. They are tough bargainers, and they are as sophisticated 

labor leaders as there are anywhere in this country. I just regret 

the way this has been done, because I regret needless suffering. 

There is a lot of suffering we all have to do. This was unnecessary 

and continues to be unnecessary. 

Ms. Kathryn Pearson-West, who always offers constructive and 

principled criticism, you have done so again today; and I salute you 

for it. 

I do want to correct for the record that my progressive flat tax 

involves no loss of rent control. I stood up here by myself on rent 

control, and I think the Congress got——

Mr. DAVIS. She is right about that. 

Ms. NORTON. I think the Congress got the message. You’re not 

going to lose rent control. 

I do want to say for the record what many Washingtonians may 

not realize, even though my bill has overwhelming support in this 

city, that the bill contains many protections against increases, unnatural increases in the cost-of-living or justification; and I worked 

on that part at least as hard as I worked on the tax cut part. I do 

know where I come from, and where I come from is wanting a 

broad tax base. I’m not putting a tax cut in to chase out the very 

people I’m trying to help. 

Finally, Mr. Thompson, first may I put on the record that the 

Court of Appeals of the District of Columbia has overturned your 

conviction for standing up for statehood, and I congratulate you for 

standing up. We entered an amicus brief in your behalf in the 

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Court of Appeals as well, but I’m not sure we anticipated what has 

happened. You have served time in jail, so I’m not sure what it 

does when they overturn it after you’ve done your time. What it 

will remind us of is your leadership on statehood and your unbending principle that this city not be reformed at the cost of home rule. 

Only in America and only for the District of Columbia would anybody dare claim there is a tradeoff of democracy for efficiency. I 

would daresay that 95 percent of the governments in the world are 

inefficient; and if that is a standard we are going to apply, there’s 

not going to be a lot of democracy left. 

I commend you for standing tall and standing up for it and not 

letting people forget, that just because we’re in trouble, that we’re 

pulling ourselves out. We’re not about to give up anything that any 

other American has. 

We do have to keep reminding people, because people are so glad 

to see that a little bit of efficiency happens here or there. And it 

is a little bit, not a lot. It’s certainly not a lot so that we want to 

give up anything for it. 

There seem to be whole groups of Washingtonians that are willing to trade in their God-given rights. Well, I’m not trading in 

mine. If y’all want to trade in yours, go do it, but they’re going to 

have to roll over me to get to mine. 

That is why I want to commend the people who came up here 

to see Senator Faircloth; because when they came up here to see 

him, he listened. You don’t have to sit down there and let people 

say anything they want to say up here or do anything they want 

to do to you up here, and you don’t have to tradeoff anything you’re 

entitled to. And you are entitled to a whole lot more than you have 

gotten in terms of democratic rights in this country. 

I want to ask you a question now that I have said that. I want 

to ask you a question about what for you—just for the record, given 

the fact that you come from different perspectives, if you can say 

so—what for you would be the most important part of the President’s plan to be enacted. I would just like each of you in whatever 

order it occurs to you to indicate your views on that. 

Ms. PEARSON-WEST. If I may? 

Ms. NORTON. Go right ahead, Ms. Pearson-West. 

Ms. PEARSON-WEST. I didn’t get out of my place, did I, Congresswoman? 

I like the fact that the President is going to take over financial 

responsibility of these State functions. I think that’s going to help 

the District of Columbia quite a bit. 

My only concern is what role will the Federal Government play 

once they have assumed the finances of these functions. I know 

they’re taking over Medicaid, Lorton. I am just concerned overall. 

There are State functions, and they will be taking over the financial aspects, but I would still like to see the District government 

still maintain some control over some of these. 

Ms. NORTON. The District is going to continue to run everything 

except Lorton. 

Ms. PEARSON-WEST. I wanted to make sure that was clear. 

Thank you. 

Ms. NORTON. Is there any other part of the plan that particularly 

appeals to any of the rest of you? 

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Mr. DAVIS. Excuse me, but with regard to the Lorton issue, we’re 

trying to work a way where the city will still have a say over sentencing and those kind of issues. We’re very sensitive to that. That 

has come through loud and clear from Ms. Norton and city residents. 

Ms. PEARSON-WEST. Are we going to get any money when they 

take over Lorton? Are they going to sell Lorton or something like 

that? 

Mr. DAVIS. Let me just say there is a huge cost avoidance right 

now where the city should have been putting money into infrastructure, that in my judgment has not been put in. You lose; you 

won’t have to put that money in now. Hopefully, we’ll be able to 

come up with savings through each of these. I don’t know what it 

will be yet, there are a lot of negotiations, but if I have my way, 

there will be a little bit there for you. 

Reverend DANIELS. For our network, we’re happy with the infrastructure funding that will hopefully help our streets, our parks, 

our rec centers. Our kids have nowhere to play. Lord knows we 

know the pothole problem in DC. The street leaving our congregation is full of potholes. We have tried to get it refilled on numerous 

occasions, only to be unsuccessful. 

However, I would hope that somewhere in the President’s plan 

there would really be a strong commitment to the issue of critical 

mass housing in the city. The fact that we are the Nation’s Capital 

yet have the lowest home ownership rate just to me does not make 

any sense at all. And the way you really rebuild a city and bring 

families back into the city is that you have affordable places for 

them to live. It all begins with the family and the family having 

a place where they feel good and comfortable and responsible and 

accountable to live in. My hope is that there will be significant attention somewhere within the plan given to that reality. 

Ms. NORTON. Mr. Williams. 

Mr. WILLIAMS. Congresswoman, the thing that strikes me about 

the President’s proposal is the clear recognition that there is a relationship between this city and the Federal Government as that of 

a city and a State. And, finally, the Federal Government is recognizing and assuming many of those responsibilities that a State assumes elsewhere which the Federal Government should have assumed some time ago. 

Particularly, of course, I think the relief of the unfunded pension 

liability is a key factor. It is the most burdensome and has been 

the most burdensome part on the District government and one 

which was not of the District’s making. There is, I think, in the 

proposal a clear recognition that this was not of the District’s making. It is the Federal’s responsibility. It is a burden that was imposed on the city by the Federal Government. It did not ask the 

city whether it wanted to take it over or not. 

That recognition, to me, is a very, very significant one. I just 

hope, without any disrespect to the Reverend to my right, I would 

court someone and say that, of course, the devil is in the details. 

We have not seen the details yet of the proposal. I would certainly 

hope that as details are worked out there is a clear recognition that 

workers in this city need to be at the table when those details have 

been worked out and not be asked for comments after the fact. 

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Mr. THOMPSON. Congresswoman Norton, thank you for your compliments; and thank you for your own eternal vigilance. 

There are three aspects that I find—or two, rather—that I would 

highlight as being positive in the President’s plan. However, they 

do have asterisks beside them. 

First of all, the unfunded pension liability. It is about time for 

Congress to take that over. However, much of the context in which 

we have discussed this unfunded pension liability is as though it 

is some kind of a tradeoff with the Federal payment; and that is 

the only reason I place an asterisk there. I think one is an apple 

and the other one is an orange. However, an orange that is somewhat spoiled. The Federal payment must continue. The unfunded 

pension liability must not. I would hope that this Congress would 

be firm on seeing to it that one does not necessarily have a relationship with the other. 

The new Economic Development Corp. as well is quite intriguing. 

I think that in Washington, DC, it is high time that there be economic development; and even in the President’s plan there is an 

emphasis on developing those areas that have not been heretofore 

developed. There has been a lot of attention on downtown K street, 

et cetera, but there is some indication of interest in other areas. 

An asterisk is there only to ensure that that kind of attention is 

given to other areas of our community. There should be a broader 

local representation on that NEDC. 

I know I said two, but actually three. The admission of the Federal Government that there is some need for a greater role since 

we do not have a State is fine; but I’m certain I speak on behalf 

of a number of my colleagues who have been vigorously involved 

in the statehood movement, which we have not surrendered by any 

means, that there is some trepidation. 

Let me just put those of you on notice that just because there 

will be some financial takeover of some State-like functions, we by 

no means see this as any argument whatsoever for us to surrender 

our cause for full self-determination for District residents in the 

form of statehood. 

With all due respect to you, Chairman Davis, and Congresswoman Morella, it will come the time very, very soon where some 

generation of this House will have to admit that the District can 

no longer afford to subsidize Virginia and Maryland. That is only 

addressed through us having our full autonomy and our right to 

work out some kind of reciprocal arrangement that we lose with 

that relationship and with that subsidy. 

Thank you. 

Ms. NORTON. Thank you very much, Mr. Chairman. 

Mr. DAVIS. Thank you. 

Kathryn Pearson-West, I apologize for being out when you testified. I had two groups of kids to get photographs with. It was the 

only time I could meet with them; but I have read your whole 

statement. 

Ms. PEARSON-WEST. Maybe we’ll get another opportunity to talk. 

Mr. DAVIS. I would be happy to. 

Let me just say to all of you—and I have read everybody’s statements that have been submitted. I appreciate you being here today. 

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resent are going to have to live with whatever comes out of this 

Congress as we work together with the administration. I am hopeful to keep you and the elected city leaders involved as we move 

through this process. 

As I look at you out there—I don’t consider you part of the problem—I consider you part of the solution. So I’m interested in what 

you say, although I have to tell you there are some things I disagree with that you’re saying that come from my perspective. But 

it’s important for me and other Members to hear your perspective 

and to weigh that in the mix. 

I think if we keep looking for people to blame for this city’s 

plight, nobody is going to be left standing at the end of this. 

There’s plenty of blame to go around. There’s no question about 

that. We can all share some of that. 

This Congress is certainly close to the top of that list, in my judgment, not just in regard to the Home Rule Act but for failing to 

exercise appropriate oversight over the last 20 years and to instill 

in the city leaders a culture of accountability for decisionmaking. 

We make it harder to do that when decisions the city makes are 

not final, where they are constantly questioned by Congress and 

overturned in appropriation bills or by other threats out there. It 

makes it harder for city leaders to get up and make tough decisions 

when they are subjected to that. 

I think that was one of the reasons that we didn’t want the Federal payment to be part of the President’s plan. So we try to make 

it up by relieving the city of certain services that they now have 

to provide under the Home Rule Charter. 

But, regardless of that, we are at a historic moment where we 

have the President, city leaders and Republicans and Democrats in 

Congress engaged in the issue and focusing and recognizing that 

the city needs a new deal, that the one that was fostered in the 

early 1970’s of statehood really no longer applies, given what has 

transpired in the meantime. 

And the unfunded pension liability is just the tip of that iceberg. 

Each of you alluded to some of the other areas. I just hope you will 

continue to work with us, meet with us, and be involved. 

Ms. Norton and I also talked about rent controls. I’m philosophically opposed to rent controls; but I also recognize the city is entitled to make its own decisions and, in some cases, make its own 

mistakes as is Congress and everybody else; we need to respect 

those rights as we work forward with this. 

So if we can continue the dialog, recognize we are at a historic 

time, and work with what the President, Ms. Norton, and others 

have put on the table. We can do nothing but improve the city’s 

plight over the next few years. 

I yield now to Mrs. Morella. 

I would be happy to let you respond, of course. 

Ms. PEARSON-WEST. Mr. Davis, could you at least try to come out 

and meet with more of the residents, and could you take it upon 

yourself to call for a vote for Ms. Norton? She has worked so hard, 

she really deserves it, and this city deserves it. 

Mr. DAVIS. She’s tougher than a lot of members up here who 

have the full vote. I think she ought to have the full vote and I 

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erything else is a little more complicated. We’ve talked about that. 

But I support that, I think Mrs. Morella does, and I think the 

Speaker does. It’s a question of how you move that through at this 

point in an appropriate fashion. I look forward to working with you 

and her to do that. 

Mrs. Morella. 

Mrs. MORELLA. We are all here on this subcommittee for the betterment of the District of Columbia. As you have all mentioned in 

your statement, it helps the entire region. 

I did notice that nobody truly talked about job retraining. I 

would guess, Mr. Williams, as you read the Williams v. Williams 

article in today’s paper, that we would be looking to the role of 

unions in the revitalization. But I guess you would all agree that 

retraining has got to be an important part of filling those jobs that 

are available and to lure more companies into the District. 

Ms. Pearson-West, in your statement you talk about school renovation and having the schools wired for state-of-the-art computer 

telecommunications and Internet technology. I just want to make 

sure that you are aware that the FCC is going to be coming up 

with a decision on May 8, which will deal with affordable access 

to the Internet for all schools and libraries. We think the District 

of Columbia would be eligible for that if they are ready for it, and 

I think they will be. So it is something to consider. 

Ms. PEARSON-WEST. I’m so glad to hear that, because our children need so much, and they are really our future. If we’re going 

to stop crime and make this a positive city, we’ve got to concentrate 

on the schools. 

Mrs. MORELLA. I could not agree with you more. 

Reverend DANIELS. Could I just address the job retraining, 

please? 

Yes, job retraining is necessary. One of the concerns that we 

really have, and this extends into Maryland as well, is what is taking place with the whole welfare reform bill. Yes, something had 

to be done about welfare, but what has been done has brought on, 

we are seeing—has brought on worse problems than before. 

What we are seeing happening is that, particularly in Maryland, 

but we know the District is going to need to address this issue, too, 

is that people making a livable wage are being pitted against welfare-to-work persons. You have got the poor pitted against the poor. 

Then you also have the middle class pitted against the middle class 

when it comes to bidding for contracts, and those middle-class 

small-business owners and other business owners who have a 

moral sense and believe that their employees ought to have a livable wage are losing out contracts to other middle-class businesses 

who hire welfare-to-work people. 

This is an issue that is really going to need to be addressed. The 

churches are saying that we are not going to participate in a thirdparty situation. So that is something, not only job retraining, but 

that whole issue of subsidizing corporations so that welfare-to-work 

people can be hired, and there are not enough jobs to fill needs to 

be addressed. 

Mrs. MORELLA [presiding]. I appreciate your mentioning that, 

and I know that you sense it through WIN, obviously. You really 

do get the people who are in search of guidance. But I submit from 

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the jobs we know are available, and if you read the paper you will 

find on top of that companies that have many jobs available, but 

they can’t find the people. It may take a while, but I think this is 

where the challenge of retraining, we can do it. We have to rise 

above it. I just think we can do that. 

We also did not mention, as an aside, something that I think we 

will have to look at on this subcommittee, and that is the University of the District of Columbia as well as St. Elizabeth’s. These are 

two situations, one is mental health and education, that we’re 

going to have to find some resolution. 

I don’t really have any questions. I just appreciated your testimony. Stay tuned. I know you will. 

Mr. WILLIAMS. Mrs. Morella, I cannot let the opportunity go. I 

am sorry that Congressman Davis is not here. 

Mrs. MORELLA. He always seems to go out at the right time. 

Mr. WILLIAMS. You were not here earlier this morning, Congresswoman Norton was, when the Board of Trade and the Chamber of 

Commerce testified. Some of your comments, I think, also is reflective of something that I think I see wrong with our approach here, 

and that is that there seems to be a rush to try and solve these 

things by piecemeal approaches. Everybody seems to have a solution to one little piece. It seems to me we need to take a look at 

the whole problem and come up with a comprehensive approach 

rather than piecemeal. 

This morning the business community took the opportunity to 

come up, to do a little piecemeal legislation on unemployment compensation, workers’ compensation, the problem with inspection, the 

problem with licensing. These are all little pieces of the puzzle. By 

merely putting all these little pieces on the table, and by getting 

them addressed, we’re not going to solve the larger piece of the 

puzzle. 

I just wanted to go on record, and I hope that Congressman 

Davis ultimately reads this, and I know that I can count on Congresswoman Norton to certainly reflect our views, is that by merely 

talking to public workers, you are not solving the problem, and you 

are not doing our government any service. There seems to be an 

attempt around here on the part of politicians, on the part of several people, to blame District workers and their, quote/unquote, inefficiency as part of the problem that we have here. I just wanted 

the record to indicate that we believe that the District workers are 

some of the best that we have anywhere around, and we are certainly proud of the work that they do around here. If there is a 

problem with inspection, if there is a problem with licensing, it is 

not the rank-and-file workers who are on the front line every day 

that you should be blaming. It is that there is something structurally wrong with our system and that what we ought to be doing 

is addressing the problem and not looking for scapegoats, as many 

politicians and sometimes business leaders seem to want to do. 

I am glad that Congressman Davis has just arrived back in, because I hope that he gets a chance to look up the record and read 

what I have just indicated here. I do not want this record to reflect 

that our silence, the silence of the AFL–CIO, is in any way an 

agreement with the attacks that seem to be made upon District 

workers and people who work for the District of Columbia. 

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Mrs. MORELLA. This subcommittee is not making any attack on 

the District workers. 

Mr. DAVIS [presiding]. Which attacks are we talking about? 

Mrs. MORELLA. Just in response to something the city had mentioned, Mr. Davis. I just want you to know that we are hoping to 

not do patchwork quilt, but to look at the various facets of the plan, 

to listen to everybody, and then to craft one piece that we think 

addresses most of the situation. 

Mr. WILLIAMS. Congresswoman, when politicians complain about 

the fact that it takes so long to get a license or it takes so long for 

inspectors to come across, what you have done is you leave the impression that the problem rests with the workers, and I do not 

think that it is fair. If one is going to complain about how long it 

may take for someone to get a license to do a repair, if it takes a 

year for a Congressperson to get it, if it takes a while for someone 

to do it, it is not necessarily the fault of those employees who are 

out there working and working very, very hard. What we have seen 

here is a takeoff and an attack upon workers, but it is the ones 

who provided the licensing and the inspection who are at fault because it takes so long to get a license to do repair work. 

Ms. NORTON. Mr. Chairman, I know you may want to respond, 

but I wonder if you would excuse Mrs. Morella and me, who are 

due at the House press gallery. 

I just want to say one thing. What was said about workers, I’m 

sure the chairman agrees with actually, because of his concern for 

management and operational problems in the District. What you 

have said—what you have spoken is the truth, and I know it up 

close. When I came to the EEOC, every worker was being castigated. It is because there was a system in place that did not allow 

people to process cases in a timely fashion. The same workers, 

given a new system, then processed cases in one-third of the time 

it had taken. 

There is no question that these are management problems, these 

are operational problems that start at the top. Workers don’t come 

to work and say, let me do this job. They come to work and they 

are supervised and managed. That is the problem, and I know that 

is the view of the chairman. 

I do want to go on record as saying, among the several things 

you have said, it needs to be reiterated that the District of Columbia must retain a 4-year university if there is to be any hope that 

what the chairman has spoken about, that these excess jobs out in 

Fairfax and elsewhere in the region can be filled. You will really 

keep that from happening if we end up with less than a 4-year college where many of our students must get their education or find 

no place to get an education. 

I would ask the chairman if he would excuse Mrs. Morella and 

myself. 

Mr. DAVIS. I will be happy to. 

I will sum up quickly two things. 

Ms. NORTON. First may I acknowledge that in the back row there 

are a number of DC residents who had come today in order to visit 

their Capitol and their Congresswoman, and may I thank you for 

coming and apologize that I was in the hearing. After you go to 

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visit the Capitol, perhaps you can stop back and I can have a few 

words with you. 

Mr. DAVIS. Thank you all for being here. 

Let me say two things. I think that a 4-year university with the 

right mission makes a lot of sense. The problem is that in so many 

cases, for the city, as we heard from Dr. Fuller and other economists, it is the wrong mission. We have a lot of city employees, as 

I said earlier, Mr. Williams, that are working hard every day, but 

in some cases they are performing tasks that don’t need to be performed, working under regulations that shouldn’t have been written, and filling out forms that shouldn’t have been printed. That’s 

not the workers’ fault. Nobody’s accusing the workers of that. I 

don’t know why you’re so sensitive about that. But the reality in 

some of these cases is that they are not focused on the appropriate 

mission, and that is a management and political leadership responsibility that has to be changed. I have said that. 

If you sat through the hearings earlier, I wasn’t trying to snub 

you in any way by leaving the hearing. I have been at this hearing 

as long as anybody. However, the reality at the end of the day is 

that over time the city has made some management decisions that 

have not been in the interest of workers. You have been silent during some of those times; during some other times you have spoken 

out; and as a result of that, we are at the situation today where 

Congress is now sitting with the President trying to help the city 

recover. It didn’t have to be this way. I think if a lot of us had earlier on tried to engage in this process, maybe we could have intercepted this before we are where we are today. 

My point is, let’s quit putting the blame on workers or managers 

or Congress or city leaders. Let’s focus. We have an opportunity 

with the President and with Members of both parties of good will 

engaged in this process to move ahead and try to solve it. We welcome you as part of this solution. You represent a lot of people from 

a very important perspective to the city because the city voters, the 

city residents, are the stakeholders who need to be involved in this. 

We don’t want to dictate this from outside. It’s not going to work 

without some buy-in. 

We appreciate all of you being here today. Without objection all 

written statements are ordered to be included in the record. As Ms. 

Norton noted earlier, we have 30 days for opening the record for 

other comments that you or other groups may want to supplement. 

Ms. PEARSON-WEST. A point of information. After you’ve made 

changes, do you come back to the community? Or is it a done deal 

after Congress has gone over the President’s plan and made the 

recommendations? 

Mr. DAVIS. What do you mean? 

Ms. PEARSON-WEST. You’ve asked us our comments. Then you’re 

going to, I guess, do some revisions or alterations to have a chance 

to add to the plan. Then do you come back and say to the DC residents, this is what we have on the table, is this OK? 

Mr. DAVIS. I don’t think we’ve determined exactly how we’re 

going to proceed at this point, Kathryn, but you can stay in touch 

with our office and Ms. Norton’s. This is not a secret what we’re 

trying to do here. But, we’re not going to go through a lengthy public hearing process after we have the key political leaders agreeing 

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to it. We’ll never get anything done that way. But we will welcome 

your comments at any time in the process. 

Ms. PEARSON-WEST. I would love to stay involved. Thank you. 

Mr. DAVIS. The meeting is adjourned. 

[Whereupon, at 2:10 p.m., the subcommittee was adjourned.]

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