D.C. estimates flat tax revenue

Washington, D.C., heads into the new year with expectations for flattened revenue due to disruptions to the federal work force and uncertain data, a trend reflected in the last estimate.

"The revenue estimate for the fiscal year 2025?2029 District of Columbia Budget and Financial Plan is unchanged from the September 2025 revenue estimate," said Glen Lee, the city's chief financial officer.

"Federal job losses have occurred more gradually than previously projected due to court challenges and other implementation difficulties," he said.

"With the removal of many of these obstacles and the October resignations under the federal Deferred Resignation Program, we anticipate that federal workforce cuts will align with the financial plan forecast."

The comments come from a letter from the Office of the Chief Financial Officer addressed to the City Council chairman and mayor.

"As we await more data on the impact of federal job losses, we already know that our continued growth requires us to stay focused on diversifying our economy," said Mayor Muriel Bowser.

"In 2026, we will continue to lean into what D.C. does well, from sports and tech to health care and hospitality."

In November Bowser announced that she will not be seeking a fourth term as mayor but will remain in office until next year's election.

The CFO's report cites recent cuts to the federal funds rate, rising unemployment figures, and the loss of 6,700 federal jobs in November coming on the heels of 161,300 less federal workers in October.

Total sales tax collection for November was down by .6% while income tax withholding was off by 1.5%.

Tax revenue flowing from the city's hotels, restaurants, and retail are all showing a downward trend.

Financial risk is also rising from tighter immigration policies that is reducing tourism and impacting the hospitality workforce.

In November the city released a Long-Range Capital Financial Plan Report, which laid out an asset management-based strategy for dealing with falling revenues attributed to the downsizing of the federal workforce.

In April Moody's Ratings downgraded its Washington D.C.'s general obligation bonds and income tax secured revenue bonds to Aa1 from Aaa, with a negative outlook.

S&P Global Ratings and Fitch Ratings both have the city's general obligation bonds rated at AA+. S&P rates the income secured revenue bonds at AAA while Fitch has them at AA+.