Finance

Shutdown Taking Its Toll in Lost Revenue for Washington, D.C., Region

For the Washington metropolitan area, more than two weeks of federal government shutdown has meant millions in lost tax revenue that local governments say is eating a hole in their already fragile budgets.
October 16, 2013
Washington, D.C., Mayor Vincent Gray and other regional leaders detail the federal government shutdown's impact on local revenues. Gray is joined by Montgomery County, Md., Executive Ike Leggett  (left); Fairfax County, Va., Board of Supervisors Chair Sha
Washington, D.C., Mayor Vincent Gray and other regional leaders detail the federal government shutdown's impact on local revenues. Gray is joined by Montgomery County, Md., Executive Ike Leggett (left); Fairfax County, Va., Board of Supervisors Chair Sharon Bulova (center left) and Prince George's County, Md., County Executive Rushern Baker (right). Liz Farmer

For the Washington metropolitan area, more than two weeks of a federal government shutdown has meant millions in lost tax revenue that localities say is eating a hole in their already fragile budgets.

“We made extreme sacrifices over last few years to place our financial house in order, and having done so at a time that at least in Montgomery County (Md.) we thought that we’d see a light at the end of tunnel,” County Executive Ike Leggett said Wednesday, referring to Montgomery’s 10 percent cut in its workforce and budget cuts. “[Instead], the light that we see is an oncoming train by way of the sequester, by way of the shutdown and by way of a huge debate about the debt limit. All of those things adversely affect our communities.”

The blow has primarily been to the tourism and hospitality industries in Washington, D.C. and its surrounding counties. The shutdown has not only stalled spending by furloughed workers; potential visitors to the region have cancelled trips. In D.C., hotel bookings are down 8.3 percent compared with the first week of October 2012, a loss of about $2 million in potential revenue, according D.C. Mayor Vincent Gray. Restaurant receipts are also down by around 8 percent, largely due to declines in breakfast and lunchtime business. The city’s burgeoning food truck industry has been especially hit hard.

More coverage of the shutdown's impact on state and local governments.

“In some instances they’ve seen their business drop to nothing because they serve areas where there are federal buildings … where there are virtually no workers,” Gray said.

In Montgomery County, home to 70,000 federal workers, Leggett estimates the county is taking a $500,000-a-day hit in potential income tax receipts and notes hotel tax and sales tax revenue collections are expected to be down. In Prince George’s County (Md.), Executive Rushern Baker said 16 percent of the county's workforce is made up of federal workers, many of whom are furloughed. Many of the county’s small and minority businesses that directly serve the federal government are dealing with lost business. Those shops now have to start considering laying people off because they don’t know when the uncertainty will end, Baker said.

That uncertainty has plagued the region this year as Congressional stalemates have repeatedly stalled business in the metropolitan area. Fairfax County (Va.), home to about 25,000 federal civilian workers, faces a $25 million shortfall in its 2015 budget, said Board of Supervisors Chairman Sharon Bulova. Meanwhile the sequester has already skimmed revenues in the county (which has the region’s largest concentration of defense contractors) and the shutdown could push a $20 million shortfall in sales and licensing tax receipts into this year’s budget.

The leaders stressed that the losses they have seen in the last two weeks are unlikely to be made up before the end of the fiscal year.

“Lost revenue is lost revenue,” Bulova said.

The officials addressed reporters after meeting Wednesday morning in D.C. City Hall to discuss how the shutdown has been affecting their bottom lines. One mile down Pennsylvania Avenue, Congress scrambled to take up a bill that would reopen the federal government and push the debt limit debate to next year and prevent (at least for now) the U.S. from defaulting on its debts. To local leaders, however, such a solution prolongs their problem.

“I think the best thing that all of us can do and have done today is to demonstrate the real impact of what’s going on, what the impact is on local governments, what the impact is on real people who are living in the metropolitan area,” said Bulova. “This is irresponsible and it needs to end not just in the short term but there needs to be a resolution in the long term as well."

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