Wednesday, September 24, 2008

Rewarding Bad Behavior

"In the District, officials haved identified a $131 million revenue shortfall, which will force the city to cut funding for programs in the fiscal year that begins next month." Washington Post, 9/24/08

"[Harriette Walters] watched as other workers [in the DC Office of Tax and Revenue] routinely received gifts in exchange for reducing tax liability." Washington Post editorial, 9/24/08

"The White House waged a multifront campaign Tuesday to persuade Congress to accept its vast economic bailout plan, though many in Congress...continued to push for ...stronger protection for taxpayers and impose tougher terms on financial institutions." New York Times, 9/24/08

"The bottom line is that the Planning Office, BZA, Evans, and Padro (in his dual hats) is intent on rewarding Sendar with a commercial variance so he can sell at a better price." Ray Milefsky post on ShawNeighborhood listserve, 8/24/08

Is there a connection between these quotes that I just read this morning regarding issues that range from the global to the intensely local? I think there is. Please bear with me while I try to explain.

The Bush administration, having spent the past seven years gleefully dismantling the regulatory mechanisms of the financial system, is now proposing a no-strings bailout of the same institutions that created the current economic disaster, giving the Treasury Secretary absolute control over what happens with potentially $700 billion in public funds and asking for no accountability whatever for the people who ran the financial institutions being rescued. The plan, as presented to Congress, would have the federal government take over the bad debt that Wall Street is now stuck with--debt that no one, repeat no one, knows the value of. As for how much the feds would pay for it--well, they just say "trust us." The guys who are getting your and my money can then go their merry way without even a slap on the wrist.

It's as if you had bought a Bentley and didn't insure it, then smashed it into a tree and had the brass balls to ask the government to compensate you for it without their knowing the extent of the damage. Is it repairable and still worth $100K? Or is it a worthless mass of smoking metal? "Trust me," you say, "I'll tell you what it's worth." The administration plan is really the ultimate expression of the culture of non-accountability that Bush and his cronies have fostered since they've been in office.

Let's descend from the national to the local: At the CCCA candidates forum last Thursday, DC council member Jack Evans assured the audience that the District was still in good financial shape despite the current financial meltdown. Now it looks like that may not be quite true--DC is being affected like everyone else. Obviously, what happens in the national economy is not within the control of the DC government. However, the collection of revenue to fund the city's programs is very much within the DC government's control--or at least it should be.

The trouble is that the DC government does a poor job of collecting the taxes that it is owed--particularly property taxes. The reasons for this include lax leadership and oversight, a laughably chaotic and irrational tax assessment system, lazy and self-serving employees in the agencies responsible, and good old-fashioned corruption. A shortfall of $131 million isn't all that much in a multi-billion dollar DC budget, and it could probably be made up just by collecting the taxes that the District should be getting. But will that happen? No, because no one ever seems to be accountable.

The OTR tax scandal, which bilked the taxpayers of at least $48 million, is the perfect case in point. Mother Harriette may have been the evil genius in the scheme, but the fact that no one at OTR ever noticed embezzlement on such a collosal scale bespeaks gross, if not criminal, negligence on the part of those running the agency. At the CCCA forum we asked Jack Evans (who is the Chair of the Council's Committee on Finance and Revenue) what had happened with regard to the administrative investigation and accountabity within OTR. He responded that four supervisors in Walters' department had been fired and now that the criminal trial was ended, the internal investigation could go forward. Well, the scandal came to light last November and only now there's going to be a serious inquiry into practices and accountability at OTR? I don't know if CFO Gandhi deserves to be fired or not, but failing to have a thorough inquiry into this ten months later strikes me as inexplicable. It's like disciplining a couple of enlisted soldiers over Abu Ghraib while leaving the brass who allowed it to happen untouched. More non-accountability.

Perhaps more to the point, how do we know that this sort of crap isn't still going on? The press investigation of the scandal at the time suggested that virtually everyone in the office was implicated to some degree--if not by being directly on the take then by being coopted by receiving gifts or loans from Mother Harriette's ill-gotten gains--and that they knew something was wrong but never said anything. Even if their involvement didn't rise the level of criminal charges, are these people still there?

In addition to the direct embezzlement, the Post editorial indicates that there was (is?) a corrupt culture wherein employees "routinely received gifts for reducing tax liability". I suspect that this continues to this day, and it brings me to the fourth quote above, regarding the notorious Sendar property at the intersection of Rhode Island, 9th, and Q--the "slum historique."

The issue here is whether the DC zoning board will grant Sendar a commercial variance on the properties which would significantly enhance their value as he tries to sell them. The properties in question have been vacant since 2001 and a festering nuisance long before that. (For further background see here and here and here.) Basically, granting the petition would reward an owner who has kept the property a moldering ruin. Best of all, even though the property has been vacant for the last seven years and has even been on DC's vacant property list, it has escaped being taxed at the vacant property rate, representing a enormous saving for the owner and equivalent loss for the DC treasury. Could there be a connection here? Just wondering.

I could cite other examples of highly questionable tax assessments in the immediate neighborhood. Multiply that city-wide and it amounts to a lot of money. How many of these strange assessments represent favors being granted in OTR? Isn't it worth looking into, particularly at a time when the city is facing a revenue shortfall?

When Mr. Ray, who has lived next door to the Sendar property for decades, was preparing his testimony before the BZA, I suggested that he include remarks on the tax status. He said that an Office of Planning apparatchik had told him not to bring it up because "it did not pertain to zoning." Oh really?! Basically, the zoning petition is another "trust me" plea--specifically that the owner will not allow an obnoxious "business" to open up in the property. So why isn't the tax status relevant since the petition rests on the credibility of the owner?

Okay, maybe a financial bailout needs to be done. And maybe the neighborhood would be better off with commercial activity in the Sendar property. And maybe this amounts to rewarding bad behavior. But there's a question of degree here, and we certainly have a right to demand guarantees and accountability, because the record tells us that otherwise these guys are not going to do the right thing.

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At 9/24/2008 8:00 PM, Blogger IMGoph said...

wow, great job tying the national to the local. well written!

At 9/25/2008 7:51 AM, Blogger si said...

wow that explains why the tax status was not mentioned in the hearing but you bet your sweet a$$ i brought it up in my letter of opposition.

In our nascent research into vacant property we have only scratched the surface of the undertaxation. Jemal is skating on many of his slums, on one city block alone the 3yr loss to the city is over 1 million dollars. At the CCCA forum, Jack promised me he'd look into it personally ;). I do fear that an opprtunity has been missed. the boom is over and now with the financial climate going all crappy, developers might not be able to build. The whole point was to force owners to develop or sell and its increasingly apparent that niether option may be attractive now. I do have to wonder about some of these slumbankers who held on to property before during and after the boom. wtf?

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