Testimony originally delivered at the Budget Oversight Hearing on the Fiscal Year 2027 Budget for the DC Council Committee of the Whole on May 13, 2026.
Chairperson Mendelson and members of the committee, and committee staff, thank you for the opportunity to testify. My name is Shira Markoff, and I am the Director of Economic Policy at the DC Fiscal Policy Institute (DCFPI). DCFPI is a non-profit organization that shapes racially-just tax, budget, and policy decisions by centering Black and brown communities in our research and analysis, community partnerships, and advocacy efforts to advance an antiracist, equitable future.
For years, DC lawmakers have chosen to heavily invest the District’s limited resources in tax abatements for developers, tax incentives for corporations, and other subsidies for the corporate elite—claiming that these tax breaks will benefit all DC residents through more economic growth and jobs. But these budget investments have failed to create widespread economic benefits. Instead, the gap between the wealthiest and poorest DC residents has continued unabated, more Black residents have been displaced, and the District has made no progress on chronic racial economic disparities.
With DC facing a challenging economic and fiscal environment, largely due massive layoffs of federal workers, Mayor Bowser’s fiscal year (FY) 2027 budget proposal doubles down on the same failed trickle-down strategies—without major public pushback from the DC Council. DC cannot afford another budget that squanders millions on unproven and disproven top-down expenditures while failing to invest in workers, Black and brown residents, children, and the most vulnerable residents.
My testimony highlights changes that the Council should make to the budget to redirect funds from ineffective top-down tax breaks into the hands of workers and vulnerable DC residents. Specifically, I will:
- Assess the full cost of the mayor and the Office of the Deputy Mayor for Planning and Economic Development’s (DMPED) expenditures on what they classify as economic development strategies;
- Show how the mayor and DMPED disproportionately invest in trickle-down economic strategies in this budget;
- Discuss how years of top-down strategies have not improved outcomes for Black and Latino residents;
- Describe how the mayor’s budget proposal would gut programs that address racial inequities; and
- Provide recommendations for putting some of DMPED’s misguided investments to better use.
The Full Cost of DMPED’s Expenditures Go Far Beyond the Operating Budget
Although DMPED would face a cut to its operating budget for FY 2027 under the mayor’s proposed budget, that does not tell the full story. First, the decrease in the operating budget is less drastic than it seems. In her budget oversight testimony, Deputy Mayor for Planning and Economic Development Nina Albert said that DMPED received an infusion of federal funds several years ago, which have been boosting the budget for the past few budget cycles. The last of the funds will be spent in FY 2026, so the large budget drop in FY 2027 is partially attributable to the end of the federal funds. The mayor also removed a few one-time enhancements that the Council had added in FY 2026, which explains the rest of decrease in the budget. Albert said that in terms of local funds, DMPED’s FY 2027 funding is flat from pre-COVID levels.[1] In contrast, the mayor proposed major cuts to local funding for core programming in other agencies, such as eliminating wage supplements for the Pay Equity Fund (PEF).
The budgetary impact of the mayor and DMPED’s economic development strategy also includes hundreds of millions of dollars in capital projects, tax breaks, and reductions in business fees. All told, DCFPI identified tax abatements and fee reductions totaling nearly $13.8 million in forgone revenue in FY 2027 and nearly $191 million over the financial plan (Table 1). Even if the FY 2028 operating budget for DMPED were to stay flat, the cost of these expenditures would increase by 278 percent from FY 2027 to FY 2028, with continued sizeable annual increases thereafter.
TABLE 1
The proposed capital budget for FY 2027 includes more than $394 million for Capital One Arena and RFK campus redevelopment (plus $40 million for Capital One in the FY 2026 supplemental). The mayor and DMPED argue that these costs should be thought of in a separate category from spending pressures in DC’s operating budget, because they are in the capital budget. However, capital projects have a significant impact on DC’s overall budgetary bottom line, because DC must pay annual debt service on the borrowing it incurs for these projects. Debt service for Capital One Arena and RFK campus redevelopment is projected to total $35 million for FY 2027 and nearly $350 million over the six-year capital budget.[2] Regardless of whether the debt service falls under the Local Fund budget for some capital expenses or outside the General Fund for other expenses that have special purpose revenue, such as the Ballpark Fee to pay for some RFK funding, the fact remains that the mayor and DC Council have made choices to allocate a significant amount of local dollars to the pay for the debt incurred for these large projects.
To understand the full scope of DMPED’s expenditures, it’s also important to bear in mind that DMPED has a history of spending beyond its budgetary authority. The DC Auditor found that DMPED exceeded its Council-approved budget in 13 out of 20 years examined, including spending more than double the approved budget in FY 2024.[3] Given this history, DMPED’s budget proposal should be viewed with a healthy dose of skepticism, as the agency may be looking at its budget as a rough guideline rather than a set amount.
The Mayor’s Budget Invests Scare Resources in Disproven Trickle-Down Strategies
In the FY 2027 budget, the mayor and DMPED are continuing to largely bank on disproven trickle-down strategies to grow DC’s economy, diverting millions in tax expenditures to attract businesses or spur business activities that typically don’t result in better outcomes for residents. For example, they are focused on increasing the sports and entertainment industries in DC—including massive capital investments in RFK stadium and Capital One Arena—but the preponderance of economic research shows that stadiums do not drive significant local economic activity and that subsidies generally cost more than the economic benefits created.[4],[5] Plus many of the jobs generated by sports facilities after construction concludes, such as food service, cashiers, security, and janitors, typically pay low wages that would not be enough to afford the cost of living in DC.[6]
The mayor and DMPED want to significantly ramp up investments in tax abatement programs for developers without demonstrating—at least not through any information released publicly—that these incentives are necessary to achieve the desired outcomes and aren’t instead subsidizing development that may have taken place absent the abatements. In the Budget Support Act (BSA), the mayor proposes three new property tax abatement programs—Workforce Housing Opportunity, WMATA Joint Development Properties, and Federal Property Development Tax Incentives. The Workforce and WMATA abatements would cost $12 million over the financial plan, according to the Fiscal Impact Statement (FIS) for the BSA.[7] While the FIS does not provide an estimate for the federal property tax abatement because these properties had not been subject to property tax before, given the extensive footprints of these properties, it is clear that the District would be forgoing a significant amount of potential new property tax revenue through these abatements.
DMPED also plans to put significantly more resources into the Housing in Downtown (HID) abatement program over the financial plan, including increasing the abatement cap eight-fold from $5 million in FY 2027 to $41 million in FY 2028 and 4 percent each year thereafter. This increase is happening despite DMPED conducting no third-party assessments on whether the abatement is primarily subsidizing activity that would have happened regardless of the incentive, nor evaluating the overall impact of the program on DC’s economy.[8] The mayor and DMPED are also proposing changes to HID in the BSA that would weaken requirements for property owners to contract with Certified Business Enterprises (CBEs), which are businesses located in the District and either primarily owned or staffed by District residents. The mayor often touts investments in CBEs under her administration, yet this change suggests that she is willing to put the interests of HID developers above those of DC-based businesses.
While directing significant resources toward corporations and developers, DMPED is simultaneously weakening policies that support DC workers. In the BSA, DMPED proposes stripping First Source requirements from both the Office to Anything (O2A) program and the Vitality Fund, which provides grants to incentivize companies to relocate to or expand within the District. First Source sets requirements for hiring District residents in government-supported projects or contracts above $300,000; for contracts from $300,000 to $5,000,000, 51 percent of new hires must be District residents. DMPED has not had any take-up so far for O2A, which provides tax abatements for developers to convert downtown office buildings into commercial, entertainment, retail, or other non-residential spaces. DMPED received only two applications as of December 30, 2025, and one of the applicants declined to participate after DMPED conditionally approved it.[9]
Instead of admitting that O2A is an inefficient and ineffective use of funds and redirecting funds toward a more impactful program, the mayor and DMPED want to change program rules in the BSA to try to entice take-up at the expense of DC workers. Removing First Source requirements sacrifices potentially high-quality jobs for DC residents in the construction and development of O2A projects and gives some indication that this program is designed for the benefit of developers, not DC residents. Given DC’s chronically high unemployment rate for Black residents and significant racial disparities in wages, DC’s limited economic development resources should be used for policies that promote inclusive and equitable growth and high-quality jobs.[10]
Years of Trickle-Down Investments Have Failed to Produce Widespread Economic Benefits
Years of top-down investments pushed by Mayor Bowser and DMPED have not resulted in widespread economic benefits for DC residents. In fact, by multiple measures, DC’s economy is highly unequal:
- The Gini coefficient for DC—which is a measure of income inequality where zero means perfect equality (everyone has the same) and one means total inequality (one person has everything)—was .52 in 2024. This figure is statistically tied with Puerto Rico and New York for the highest in the nation.[11]
- The top fifth of earners in the District receive nearly 55 percent of aggregate household income, while the lowest fifth of earners receive less than 2 percent of aggregate income.[12]
- Black and Latino DC residents have chronically worse outcomes by every employment measure, such as wages, unemployment, and underemployment, due to systemic racism.[13]
- In 2024, child poverty spiked by 11.2 percentage points in DC.[14]
High inequality is not only a matter of unfairness. It hampers economic growth and mobility, and as some research indicates, can destabilize democracies, as the wealthy amass undue power over policy decisions. This means that the highly uneven distribution of income and wealth in DC is a drag on the economy, at the least, and potentially impedes the ability of workers and residents with low and middle incomes to shape their future.[15],[16]
While the harm federal layoffs are causing to DC’s economy is outside of the mayor’s control, the economic disadvantages facing Black and Latino residents are not new. These are chronic disparities, and the mayor’s policies have not closed these gaps. It’s clear that the mayor’s trickle-down economic strategies have not actually trickled down to DC’s Black and Latino and lower-income residents.[17]
The Mayor’s Budget Cuts Proven Programs That Boost Incomes and Address Racial Inequities
Mayor Bowser and DMPED acknowledged DC’s deep racial disparities and how they hamper both individual economic mobility and overall economic growth in the 2023-2027 economic development strategy, known as the Comeback Plan. The plan laid out three sets of economic goals for DC—fostering successful businesses, creating opportunity-rich neighborhoods, and supporting thriving people.[18] Over the past few years, however, the focus on thriving people has fallen by the wayside, while the mayor and DMPED have doubled down on business attraction.
The Comeback Plan set a goal of increasing the median household income for Black residents by $25,000 to $78,000 by 2028 (from nearly $53,000 in 2021).[19] However, since then, DMPED has been quiet about this goal and has not publicly announced a plan to reach it. The median income for Black DC households was $59,285 in 2024 according to the American Community Survey. This amount is not statistically different from the median household income in 2021, meaning that Black household income was essentially stagnant at the three-year mark of this goal.
In addition to not having a clear plan to make progress on the racial equity goals in the Comeback Plan, the mayor is proposing cuts in the FY 2027 budget that would undermine progress the District has already made to improve racial equity. For example, the mayor wants to eliminate the wage supplement portion of PEF that boosts wages for primarily Black and Latina women who make up the bulk of the child care workforce. She also proposes cutting DC workers off from accessing paid leave benefits if they or a loved one has a serious medical condition in FY 2027, even though Department of Employment Services data shows that Black workers disproportionately use the District’s paid medical and family caregiving leave.[20] The mayor’s proposal would also permanently end annual inflation adjustments for paid leave benefits—meanwhile the abatement caps for HID and O2A increase automatically by 4 percent a year.
The mayor’s budget also includes cuts that would decimate income support programs that help households with low incomes—who are disproportionately Black and brown because of systemic racism—make ends meet. Among many other cuts, the mayor is severely reducing Temporary Assistance for Needy Families benefits, failing to fund any new housing vouchers for unhoused individuals, and cutting Rapid Re-Housing for individuals. To tackle the underlying disparities in DC’s economy, DC needs a budget that fosters inclusive growth and grows worker, family, and small business income. DC also needs policies that deconcentrate wealth, including improving the way the District taxes its outsized concentration of wealth. Instead, the mayor is asking DC’s lowest wage workers and most vulnerable residents—who are already struggling to absorb cuts in the FY 2026 budget along with federal cuts to food assistance and Medicaid—to bear the brunt of budget cuts, while funneling millions toward corporate interests.
The Council Should Reconsider Poorly-Targeted BSA Subtitles
The economic development section of the BSA includes two poorly designed subtitles—Workforce Housing Opportunity Amendment Act and Supermarket Tax Incentive Amendment Act—that will cost DC millions without addressing equity, access, and affordability. The Workforce Housing Opportunity Act would create new 10-to-20-year property tax abatements for residential developments of at least 40 units, with projects required to have at least 20 percent of units affordable at 80 percent median family income (MFI) and 20 percent affordable at 100 percent MFI. This abatement purports to solve a problem that largely does not exist. Research shows that the primary gap in DC’s rental housing market is for households that fall below 50 percent of Area Median Income, rather than in the income ranges targeted by this abatement.[21] The Workforce Housing Opportunity abatement is an inefficient use of resources that would essentially subsidize units likely to be created by the market without government intervention.
The mayor and DMPED also propose changes in the BSA to the existing Supermarket Tax Incentive program that would cost DC nearly $6.6 million over the financial plan. The Supermarket Tax Incentive has been in place for many years, yet communities East of the River (EOTR)—which are predominantly Black—still lack adequate access to grocery stores. Councilmember Frumin asked Deputy Mayor Albert at the budget oversight hearing how the proposed changes in the BSA would address the barriers to attracting grocers to high-need areas that she identified in her performance oversight testimony. These barriers included available land, appropriate-sized retail spaces, and population and income diversity. She said that the incentive wasn’t designed to address those barriers and that she mainly sees the incentive as a “conversation starter” with grocers that helps to introduce them to opportunities to locate in DC.[22] Her response did not provide an adequate justification for these costly changes, nor did she explain how they would improve the track record of the program in attracting and maintaining grocery stores EOTR. If the District is going to expend more money on this tax incentive, the Council must push DMPED to provide a specific, workable strategy for improving grocery access EOTR and an explanation of how the BSA subtitle accomplishes that. Otherwise, the changes in the BSA would simply sink more money into a program that has failed to produce the desired results for years while proven programs with demonstrated job growth and equity gains, like PEF, are being cut.
The Council Should Reallocate Several Wasteful Top-Down Expenditures to Help Close Critical Budget Gaps
As the Council reviews and makes changes to the mayor’s budget proposal, DCFPI urges Councilmembers to focus the District’s limited resources on proven programs that invest in workers, support the most vulnerable residents, and address economic and racial disparities. Specifically, DCFPI urges the Council to consider the following:
- Eliminate the failed O2A program and reallocate funds. Rather than loosening program requirements in ways that harm workers to try to make this wasteful program work, the Council can pull $27.3 million in tax expenditures over the financial plan from a program that is not working and put it toward proven programs. Potential savings: $27.3 million over financial plan.
- End new HID approvals and reallocate funds. HID will cost the District nearly $133 million in tax expenditures over the financial plan at the current abatement cap levels, even though DMPED has not given proof that this program is needed or cost effective. While not all that money can be recouped, since DMPED has already approved some abatements for future years, pausing new expenditures under HID could save the District a significant amount of money. Potential savings: at least $48 million over financial plan.[23]
- Remove the WMATA Joint Development Properties abatement from the BSA. Mayor Bowser is trying to create a new policy through the BSA without providing a full rationale or explanation of its merits. Council should thoroughly vet this proposal to determine if it is an effective and cost-efficient use of limited resources that will spur inclusive economic growth before allowing it to remain in the BSA. The public should also have the opportunity to debate its merits once the mayor shares more information. Potential savings: $3.1 million over financial plan.
- Strike proposed fee reductions from the BSA. The proposed reductions to corporate fees in the BSA are small compared to the cost of doing business and are unlikely to impact companies’ bottom lines or decisions around doing business in DC. For example, the cost for a corporation to change its registered agent would drop by only $15 from $50 to $35. Despite the minimal impact to businesses, all the fee reductions in the BSA would cost the District $12 million over the financial plan. Potential savings: $12 million over financial plan.
Making these changes could free up a total of at least $90.4 million over the financial plan, which can be used to close gaps in the budget, particularly in critical DHS safety net programs. In addition, if the Council removes the Workforce Housing Opportunities abatement and expansion of the Supermarket Tax Incentives, that would save an additional $15.5 million over the financial plan. Although these budget shifts will help address some budget gaps and lessen the top-down nature of the budget, they alone will not be enough to close the large gaps in DC’s budget, particularly for housing, paid leave, PEF, and safety net programs. The Council must also enact revenue raisers, such as a Wealth Proceeds Tax, that will bring in more revenue to meet critical needs, as well as begin to address DC’s outsized concentration of wealth.
DC will never achieve transformational growth by doubling down on ineffective, inequitable, and disproven economic development strategies. We urge the Council to redirect millions in trickle-down tax breaks and fee reductions toward reversing significant cuts in DHS programs, early education, or housing programs. We also urge the Council to rethink the District’s economic growth strategy and invest instead in inclusive economic development strategies that will grow DC’s economy from the bottom up and the middle out.
Thank you for the opportunity to testify. I am happy to take questions.
