<DOC> [105th Congress House Hearings] [From the U.S. Government Printing Office via GPO Access] [DOCID: f:42192.wais] 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 42-192 U.S. GOVERNMENT PRINTING OFFICE WASHINGTON : 2002 ____________________________________________________________________________ For Sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpr.gov Phone: toll free (866) 512-1800; (202) 512ÿ091800 Fax: (202) 512ÿ092250 Mail: Stop SSOP, Washington, DC 20402ÿ090001 COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT DAN BURTON, Indiana, Chairman BENJAMIN A. GILMAN, New York HENRY A. WAXMAN, California J. DENNIS HASTERT, Illinois TOM LANTOS, California CONSTANCE A. MORELLA, Maryland ROBERT E. WISE, Jr., West Virginia CHRISTOPHER SHAYS, Connecticut MAJOR R. OWENS, New York STEVEN H. SCHIFF, New Mexico EDOLPHUS TOWNS, New York CHRISTOPHER COX, California PAUL E. KANJORSKI, Pennsylvania ILEANA ROS-LEHTINEN, Florida GARY A. CONDIT, California JOHN M. McHUGH, New York CAROLYN B. MALONEY, New York STEPHEN HORN, California THOMAS M. BARRETT, Wisconsin JOHN L. MICA, Florida ELEANOR HOLMES NORTON, Washington, THOMAS M. DAVIS, Virginia DC DAVID M. McINTOSH, Indiana CHAKA FATTAH, Pennsylvania MARK E. SOUDER, Indiana TIM HOLDEN, Pennsylvania JOE SCARBOROUGH, Florida ELIJAH E. CUMMINGS, Maryland JOHN SHADEGG, Arizona DENNIS KUCINICH, Ohio STEVEN C. LaTOURETTE, Ohio ROD R. BLAGOJEVICH, Illinois MARSHALL ``MARK'' SANFORD, South DANNY K. DAVIS, Illinois Carolina JOHN F. TIERNEY, Massachusetts JOHN E. SUNUNU, New Hampshire JIM TURNER, Texas PETE SESSIONS, Texas THOMAS H. ALLEN, Maine MIKE PAPPAS, New Jersey ------ VINCE SNOWBARGER, Kansas BERNARD SANDERS, Vermont BOB BARR, Georgia (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 ELEANOR HOLMES NORTON, District of ILEANA ROS-LEHTINEN, Florida Columbia STEPHEN HORN, California 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 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 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 Self-Improvement 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:] [GRAPHIC] [TIFF OMITTED] T2192.001 [GRAPHIC] [TIFF OMITTED] T2192.002 [GRAPHIC] [TIFF OMITTED] T2192.003 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 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 Booz-Allen 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. 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 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 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:] [GRAPHIC] [TIFF OMITTED] T2192.004 [GRAPHIC] [TIFF OMITTED] T2192.005 [GRAPHIC] [TIFF OMITTED] T2192.006 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 responsibilities 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, 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 approach 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:] [GRAPHIC] [TIFF OMITTED] T2192.007 [GRAPHIC] [TIFF OMITTED] T2192.008 [GRAPHIC] [TIFF OMITTED] T2192.009 [GRAPHIC] [TIFF OMITTED] T2192.010 [GRAPHIC] [TIFF OMITTED] T2192.011 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 manana 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---- 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. 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. 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 direction, 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. 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. 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 empower-ment 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 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. 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. 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 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 for-profit 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. [The information referred to follows:] [GRAPHIC] [TIFF OMITTED] T2192.012 [GRAPHIC] [TIFF OMITTED] T2192.013 [GRAPHIC] [TIFF OMITTED] T2192.014 [GRAPHIC] [TIFF OMITTED] T2192.015 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. 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 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 9\1/2\ 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 revenue structure for the District of Columbia, based on the assumption 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 budget-neutral. 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 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. The new fiscal relationship would cost the average American annually 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:] [GRAPHIC] [TIFF OMITTED] T2192.016 [GRAPHIC] [TIFF OMITTED] T2192.017 [GRAPHIC] [TIFF OMITTED] T2192.018 [GRAPHIC] [TIFF OMITTED] T2192.019 [GRAPHIC] [TIFF OMITTED] T2192.020 [GRAPHIC] [TIFF OMITTED] T2192.021 [GRAPHIC] [TIFF OMITTED] T2192.022 [GRAPHIC] [TIFF OMITTED] T2192.023 [GRAPHIC] [TIFF OMITTED] T2192.024 [GRAPHIC] [TIFF OMITTED] T2192.025 [GRAPHIC] [TIFF OMITTED] T2192.026 [GRAPHIC] [TIFF OMITTED] T2192.027 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 cost-sharing, 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. 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 cost-sharing 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:] [GRAPHIC] [TIFF OMITTED] T2192.028 [GRAPHIC] [TIFF OMITTED] T2192.029 [GRAPHIC] [TIFF OMITTED] T2192.030 [GRAPHIC] [TIFF OMITTED] T2192.031 [GRAPHIC] [TIFF OMITTED] T2192.032 [GRAPHIC] [TIFF OMITTED] T2192.033 [GRAPHIC] [TIFF OMITTED] T2192.034 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 high-quality 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? 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. 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. 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 notion 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:] [GRAPHIC] [TIFF OMITTED] T2192.035 [GRAPHIC] [TIFF OMITTED] T2192.036 [GRAPHIC] [TIFF OMITTED] T2192.037 [GRAPHIC] [TIFF OMITTED] T2192.038 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:] [GRAPHIC] [TIFF OMITTED] T2192.039 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:] [GRAPHIC] [TIFF OMITTED] T2192.040 [GRAPHIC] [TIFF OMITTED] T2192.041 [GRAPHIC] [TIFF OMITTED] T2192.042 [GRAPHIC] [TIFF OMITTED] T2192.043 [GRAPHIC] [TIFF OMITTED] T2192.044 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. 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 city. We know from New York that drastic reductions in crime require 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:] [GRAPHIC] [TIFF OMITTED] T2192.045 [GRAPHIC] [TIFF OMITTED] T2192.046 [GRAPHIC] [TIFF OMITTED] T2192.047 [GRAPHIC] [TIFF OMITTED] T2192.048 [GRAPHIC] [TIFF OMITTED] T2192.049 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 revenue-raising 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 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 in addressing some of the structural deficiencies created by Congress 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:] [GRAPHIC] [TIFF OMITTED] T2192.050 [GRAPHIC] [TIFF OMITTED] T2192.051 [GRAPHIC] [TIFF OMITTED] T2192.052 [GRAPHIC] [TIFF OMITTED] T2192.053 [GRAPHIC] [TIFF OMITTED] T2192.054 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 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. 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. 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:] [GRAPHIC] [TIFF OMITTED] T2192.055 [GRAPHIC] [TIFF OMITTED] T2192.056 [GRAPHIC] [TIFF OMITTED] T2192.057 [GRAPHIC] [TIFF OMITTED] T2192.058 [GRAPHIC] [TIFF OMITTED] T2192.059 [GRAPHIC] [TIFF OMITTED] T2192.060 [GRAPHIC] [TIFF OMITTED] T2192.061 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 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:] [GRAPHIC] [TIFF OMITTED] T2192.062 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 agreed to the changes that are being made in the police department. 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 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? 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. 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. You are stakeholders in this city. You and the groups that you represent 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 have called for it. Again, getting it through the conference and everything 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 third-party 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 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. 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 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 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.]