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DC Council makes major policy changes overnight

Virginia and Maryland changed their gas taxes this year. Both proposals included weeks or months of debate, including public hearings before the legislature. DC made a similar change yesterday. The total time from the first news story about it to final vote? Less than a day.

Photo by Jenn Durfey on Flickr.

In DC's budget process, the mayor releases a proposed budget. Various council committees hold hearings over a period of weeks on their portions of the budget. Committee chairs then schedule markups, and just before the markups, release a draft of what they plan to change.

If the committee approves the changes, they all go to the council chairman, who then tries to assemble them into a budget. Habitually, the chairman releases his own budget late the night before the council is set to vote on the budget. If unexpected changes come up, that gives little time for residents to contact their councilmembers.

When then-Chairman Gray decided to cut streetcar funding in 2010, for instance, most councilmembers found out that morning. In a very short time, we, other blogs, residents using social media, and others were able to spread the word, which drove 1,000 calls to the chairman's office in just 3 hours. Even so, it wasn't in time to stop the Council from cutting the streetcar program. Instead, after lunch, they had to take a separate vote to restore the funding.

At each phase of the process, new ideas come up, and there is less time to react. There's plenty of opportunity to weigh in on the mayor's budget. But committee chairs don't publicly circulate a draft of the changes they're thinking about before any hearing. Most residents found out, for instance, about Mary Cheh's plan to extend the Circulator to the Cathedral, Howard University, and Waterfront Metro, and pay for it with a fare increase, the night before or day of her committee's vote.

Residents still had time to lobby council to reverse changes, as happened when Muriel Bowser suddenly and unexpectedly sliced funding for a Capitol Riverfront development project in favor of Ward 4 projects. After considerable pushback, Mendelson reversed part of that change yesterday.

But any ideas that come from the chairman have virtually no opportunity for public input. For some changes, those which are changes to the law to support the budget rather than the budget itself, the council has to pass its Budget Support Act twice, so the council could change things on its second reading. Still, that's more difficult; members have already voted for something by that time.

This year, Chairman Phil Mendelson's surprise budget changes went beyond just adding or removing funding for programs. He made some significant policy changes, like the gas tax. Other amendments put new requirements on government agencies' ability to execute programs that already exist. We'll talk about some of those next week.

If the Council restructured the gas tax or made other changes in a standalone bill, there would have to be a hearing, a markup, and two votes. But if the chairman slips a change into the budget the night before the budget vote, it means no hearing, no markup, and virtually no time for residents to weigh in.

Chairman Mendelson is very smart, but he can't think of every implication of a policy. The gas tax switch might be a good idea, but that's not the point. Maybe people have arguments against it that I haven't heard, or Mendelson's staff hasn't heard. Even if it's the right choice, it's dangerous to make even a good move so hastily.

There's a reason the legislative process is supposed to take some time. Residents need an opportunity to see the chairman's final proposal, plus any amendments members plan to introduce, more than a few hours before the vote.

And even a day or two still isn't the right amount for changes that go beyond simply deciding how much money to spend on what programs. Changes like the gas tax shift deserve to at least be part of a committee markup; most likely, changes of such significance ought to happen in standalone bills that get their own hearings and real deliberative thought.

David Alpert is the founder of Greater Greater Washington and its board president. He worked as a Product Manager for Google for six years and has lived in the Boston, San Francisco, and New York metro areas in addition to Washington, DC. He now lives with his wife and two children in Dupont Circle. 


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For a bunch of politicians who advocate for DC Statehood, they hardly make a convincing case through the use of back-room, non-transparent processes such at this one.

Then again, perhaps it makes the case convincingly to a Congress that often proceeds similarly.

by ah on May 23, 2013 2:49 pm • linkreport

DC Council legislates entirely anti-democratic policies, entirely aside from their un-democratic procedures. Anyone who has lived here more than five years and has the slightest interest in economic fairness has seen blatant proof that DC Council doesn't have the slightest concern about economic fairness. The RESULTS of their budgets are far more damaging than the METHODS they use to adopt them.

For example, the public has been aware for weeks that the Mayor proposed to reopen a gaping hole in our tax policy that allows wealthy residents to shelter hundreds of millions of dollars of income from any tax. That gaping hole is the tax exemption for out-of-state bonds, aka non-DC municipal bonds. By recreating that tax exemption, the Mayor and the Chairman and every Councilmember deliberately decided to allow a tiny number of millionaires (81, according to DCFPI) to shelter $162 million of tax-exempt interest on those bonds from all DC taxes.

Our government nakedly panders to and pays off the wealthy minority. That is the corrupt RESULT. They accomplished that result out in the open, with weeks of advance warning. That result matters far more than other minor policy changes achieved by secret or corrupt methods. The tax shelter was re-established publicly, in our face, without a single dissenting voice on Council.

(The special wrinkle snuck into that tax shelter by Jack Evans, which may allow the millionaires to demand a REFUND of any bond tax they paid, is an egregious abuse of both process and policy -- but all of Evans's committee members voted for that stealth amendment, when they could have stopped it.)

by Green Eyeshade on May 23, 2013 2:50 pm • linkreport

True, after much of the outright stupidity in the Va. transportation deal it can be tempting to be relieved that DC just went ahead and did something at least rational (while the benefits of the new policy are certainly up for debate). But you had me convinced once you said "can you imagine if Virginia did it this way?"

by drumz on May 23, 2013 2:58 pm • linkreport

FWIW, it's why you should be advocating for planning and a more formal planning and budgeting process in DC. In other jurisdictions such policy proscriptions are covered by planning. For example, look at the City Manager's report to the Toronto City Council on various transit funding options. Granted the Mayor there ignores planning, but that's a different issue. DC lacks a transpo plan and many other plans and doesn't have a structured capital budgeting planning process comparable to other jurisdictions. This leaves great opportunity for mischief.

OTOH, DC is a unitary government and in good ways it means that theoretically we could do really great, innovative stuff, because we don't have to get permission from a state legislature first. (That's the problem in Virginia and New York State for example. In NYS, for NYC to test congestion pricing, they needed state legislative approval and they couldn't get it.)

by Richard Layman on May 23, 2013 3:11 pm • linkreport

This is not a problem of citizen input. Citizen input should be constant. Citizens can react to the Mayor's proposal, and to the deliberations of the Council as various parts move through the system.

These last-minute changes are a problem for the Council. They should not accept from their chairman that he makes such large and sudden changes overnight. In fact, they should not accept that that they can be confronted with such sudden changes and demand more time to review his proposal.

by Jasper on May 23, 2013 3:31 pm • linkreport

@ drumz:can you imagine if Virginia did it this way?

If I'm not mistaken, VA did. The gov proposed a bunch of nonsense, everybody freaked out, his plans were changed, and in the end a whole lot of it passed anyway.

VA has a similar problem. They convene only a month of two a year, and then need to ram through a year's worth of laws. Every time this leads to a whole lot of messy law-making with many surprised and disappointments.

DC may be corrupt, but VA lives four centuries in the past, and thinks it can manage a state of 8 million the way a bunch of rich slave-owning farmers ran their agricultural commonwealth.

And democracy has not gained a whole lot either in those 400 years, because they just eliminated the primaries by reducing the number of participants to one. And it's not they came up with nice reasonable candidates.

by Jasper on May 23, 2013 3:36 pm • linkreport

Re: Green Eyeshade. Leaving aside the special wrinkle (which sounds ridiculous), I had a different reaction to the muni-bond change. I think it's good, because DC only sells it's bonds through favored brokers (the same corruption?) that seem to make it very difficult for small investors to get that exposure in their portfolio.

But I don't actually disagree with your post, which raises good points. Just another way to see the same issue.

by John on May 23, 2013 3:40 pm • linkreport

The gov proposed a bunch of nonsense, everybody freaked out, his plans were changed, and in the end a whole lot of it passed anyway.

VA has a similar problem. They convene only a month of two a year, and then need to ram through a year's worth of laws.

Fair enough, a lot of stuff can pass without people noticing if they aren't paying attention. The transportation bill did take a lot of time though. And its much better than what was proposed (but not nearly enough for what's actually needed).

by drumz on May 23, 2013 3:43 pm • linkreport

I'm somewhat neutral on the change itself. I mean harmonizing with MD and VA taxes isn't on its face a bad idea. I definitely find the way it was made alarming if not surprising. The question is why couldn't it be done more transparently? Was it just last minute inspiration? Fear of some coordinated lobbying? There really needs to be some explanation.

by Alan B. on May 23, 2013 3:44 pm • linkreport

Actually, I'm pretty sure it CAN'T be done like this in VA or many other states. The head of the legislature can't just rewrite pieces of the bill without resubmitting it through a bunch of process. Not to mention that other states have multiple houses that provide checks against this behavior.

The difference is that the Council Chair can basically rewrite what he wants and then submit it as the same bill, without going through a committee or amendment process.

by MLD on May 23, 2013 3:47 pm • linkreport

DC did not raise or lower it's taxes on gas. It just changed the way they are implemented I believe. 8.3% on wholesale gas is about 23.5 cents.

Also DC's population is 1/10 the size of Maryland or Virginia. MD and VA are also more diverse.

by Richard Bourne on May 23, 2013 3:49 pm • linkreport

Part of the problem is that the council is small and relatively friendly with one another. They’re often happy to go along with what their buddies are suggesting for fear of rocking the boat. One of the things you often hear is that no one likes Tommy Wells, as if he’s not with the council’s in-crowd. A larger council that encourages more factions might help (not that it will ever happen).

And I agree that the municipal bonds tax cut (the only place in the country where they’re tax free!) is a disgusting giveaway to millionaires.

by Chatham on May 23, 2013 4:50 pm • linkreport

Nah. The gas tax is a bitter pill that we know is good for us. No need to debate it. I wish Congress would follow DC's lead and pass a federal gas tax change in the middle of the night sometime. Instead, we are stuck with rapidly diminishing transportation revenues and a political hot potato that no one wants to touch.

by aaa on May 23, 2013 4:54 pm • linkreport

@John, your notion that "DC only sells it's bonds through favored brokers" is not true to the extent that any DC resident with an account at any brokerage can buy DC bonds in the primary or secondary market, and to the extent that DC gives its residents first priority on certain bond issues a year.

DC's Office of the CFO (OCFO) Office of Finance & Treasury (OFT) actually enforces and tracks a "designation policy" for what it calls "negotiated bond transactions. As part of that policy OFT created a category called "DC Retail," by which it gives first dibs on certain bond issues to DC residents.

OFT has not published the tracking data on its website yet, but govt sources made it available during the current budget cycle. In the past two most recent years, OFT reported that the volume of orders with DC zip codes was $288 million and the volume of allotments with DC zip codes was $250 million. It's not conclusive, and it's based on certain loose assumptions, but the data shows that there is a deep supply of DC-issued tax-exempt bonds, and implies that most DC residents who want to are able to purchase them.

To the extent there is a true unsatisfied demand by DC residents for DC bonds, OFT could be required to allot all bonds only to DC residents until the unmet demand is filled.

Check out OFT's segment of the OCFO website here:

OFT links to the "Buy DC Bonds" site which provides a detailed explanation of the "Retail Order period" which gives priority to DC residents: (first graf under "How to Buy DC Bonds - Primary Market")

by Green Eyeshade on May 23, 2013 5:03 pm • linkreport


Another dollar onto the federal gas-tax would be an absolute god-send.

We must be the only first-world country in the world where we still have to subsidize roads, as opposed to roads subsidizing other things.

by Kyle-W on May 23, 2013 5:09 pm • linkreport

What they had is the FIRST reading of the FY 2014 budget. There will be a second reading June 18, which will be the final version of the budget (unless the Mayor vetoes). While council almost certainly not hold hearings, the public can still voice its opinion about the changes either through the committee or the council member offices. I'm not justifying anything, just saying that it's not a done deal.

by Randall M. on May 23, 2013 5:09 pm • linkreport


Agree with Green Eyeshade. I just logged into my Vanguard account and would have been able to buy DC Munis with no hoops to jump through.

by Kyle-W on May 23, 2013 5:11 pm • linkreport

Remember, this is a Council which overrides popularly-passed referendums. Sometimes the facade of democracy is too cumbersome.

I suspect this tax has a lot to do with Mamo since it will now be on his monopoly wholesale business.

by Tom Coumaris on May 23, 2013 5:39 pm • linkreport

@Kyle-W, that's very cool, thanks for the intel on ease of access.

@Randall M. this will sound like I am nit-picking, which I regret. You are half correct. There will in fact be a second vote on one of the budget bills, which is called the Budget Support Act (BSA) (this year's BSA is Bill B20-199). The BSA contains a great deal of policy meddling, including the repeal of the tax on non-DC munis, the offsetting of traffic fines by online sales tax revenue, the dedication by Jack Evans of a portion of sales tax revenue to the DC Arts Commission, and many other changes in substantive law and the DC tax code.

But the actual appropriations for next fiscal year (FY 2014), i.e., the actual designation of dollar amounts to specific functions and specific agencies, were executed by the Budget Request Act (BRA) (this year's BRA is Bill B20-198). The BRA is done. It gets only one "reading" and one vote. That single vote was yesterday (May 22). The BRA now goes to Congress for its review. There will not be a second vote on the BRA. There are a few changes to substantive law in the BRA, in addition to the appropriations, such as Council's declaration of budget autonomy, and Council's refusal to allow the Mayor to dodge payment of overtime that firefighters already earned.

Council could, if a super-majority were moved to do so, take emergency action to supplement the BRA for FY 2014 at any point during next fiscal year. They just did that for the FY 2013 budget request on May 7, i.e., passed supplemental appropriations mid-way through the fiscal year.

by Green Eyeshade on May 23, 2013 5:40 pm • linkreport

Re: tax cuts - the most fair implementation would be a lowering of the sales tax. That is something the counsel should look at seriously, asap.

by h st ll on May 23, 2013 7:19 pm • linkreport

Re gas tax: I wonder what will happen when the price falls to $2.80 (20% decrease) and consumption increases 1%. Do they raise the rate?

by goldfish on May 23, 2013 7:36 pm • linkreport

@green eyeshade

Not to re-argue the whole municipal bond issue, elements of the DCFPI blog were erroneous.

Beyond that, while there were a few millionaires whose investment income is sheltered, there are over 11,000 bond holders in the city. Why is it fair to prosecute the other 10,900 at the expense of the 100 who really benefit?

Further, the issue of bond funds, and the proposed threshold differences made the entire issue much more complicated, by treating people differently based on ambiguous rules.

Ultimately, as I have suggested previously, the whole question of taxes and policy for seniors needs to be examined comprehensively. Councilmember Bonds floated one proposal, which has been discussed here already. They District needs to determine if it wants to be a jurisdiction that attracts and retains seniors and empty-nesters, or if it wants to be a jurisdiction hostile to such residents.

I believe New York City learned a long time ago that the positives of having this demographic in their city far outweighed the negatives. After all, this is generally a group of people that are not a burden on city services, yet contribute significantly in property, sales and other income taxes.

by Andrew on May 23, 2013 8:38 pm • linkreport

A lot of the comments are missing the point that these are policies that should be passed through legislation and then implemented through budget processes, rather than being policies passed not through legislation but the budget.

FWIW, Chairman Mendelson is not the only one doing this. So are other councilmembers. But the general point pertains, that new policies should be passed through legislation, not the budget.

FWIW/2, this was the same process followed by then CM M. Brown, and his legalization of "online gaming" with no originating legislation or public hearing process.

And these kinds of new policies should not be able to be enacted without hearings, even if, in the case of the gas tax change, it's actually a good way to do things.

by Richard Layman on May 23, 2013 9:54 pm • linkreport

@Richard Layman: even if, in the case of the gas tax change, it's actually a good way to do things.

I take exception to this. The gas tax is a perfect example of the very worst of this broken process, the same process you are complaining about. The tax is inserted without hearing, with CM Mendelson explaining that it will be revenue-neutral and stabilize the receipts. In fact, the opposite is true: the receipts will fluctuate tremendously, and in the likely event that the price declines due to decreased consumption or increased supplies, the revenue will decrease.

This would be obvious to anyone that has actually looked at the data: the gas price fluctuates dramatically, while consumption is very steady. Obviously our esteemed City Council Chair did NOT look at the data.

The rash action of discarding a tax that has worked well since the 1930s, replacing it with something that without deliberation, is foolhardy. Mendo lost my vote for this sort of behavior.

by goldfish on May 24, 2013 12:49 am • linkreport

Gasoline consumption broken link:

by goldfish on May 24, 2013 12:51 am • linkreport

@by Kyle-W

We must be the only first-world country in the world where we still have to subsidize roads, as opposed to roads subsidizing other things.

So the Dulles Toll Road users who are paying 52% of the cost of building the Silver Line are "being subsidized instead of subsidizing other things"

Thanks for clearing that up.

by ceefer on May 24, 2013 6:44 am • linkreport

goldfish -- of course I agree with you that making these kinds of changes through the budget rather than through legislative and planning processes is wrong/shouldn't be countenanced.

2. WRT your point about gas price fluctuation, you are more right than wrong. However, I think it's fair to expect that gas prices will remain at a floor price in excess of $3 per gallon, so that it is likely that this method of pricing will collect more revenue. To ensure it will, it should be set at the right percentage.

Although I tend to believe that with increased oil (and natural gas) production in the US and Canada as a result of fracking that prices are likely to stabilize. BUT they probably won't decrease all that much because prices are set according to global demand which is still steady.

3. And with your point and the general argument, e.g., did the right kind and depth of research get done before this change was enacted, again this is an illustration of why these kinds of changes shouldn't be enacted through the budget process.

by Richard Layman on May 24, 2013 7:00 am • linkreport

@RL: more to the point, the old gas tax was justified as a use fee to build and maintain the street network. The cost to do this depends on the total miles driven, NOT on the price of fuel.

The new tax is more like a sales or income tax; it is not a use fee. This way of financing maintenance is just all wrong.

by goldfish on May 24, 2013 8:09 am • linkreport

Maryland raised their gas tax the right way - raise the tax and index it to inflation. When time comes in the future that the tax has depreciated on a per-mile basis due to fuel efficiency increases, then bump it up some more and keep the indexing going.

by MLD on May 24, 2013 8:29 am • linkreport

goldfish, it is well documented that the gasoline excise tax is significantly less than it needs to be in order to act as a "use tax" on the basis of per mile driven.

It's a long time since I've looked into it. To maintain the system, the charge should be about 10 to 15 cents per mile. To expand the system it should be more.

Granted you have to combine the federal and state tax. Say it's 50 cents/gallon. If you get 24 miles to the gallon, then the tax should be at least $2.40 to pay for adequate maintenance of the system.

So you can see why I favor (even though when I drive it would cost me more money) a higher tax.

by Richard Layman on May 24, 2013 8:49 am • linkreport

@RL: more to the point, the old gas tax was justified as a use fee to build and maintain the street network.

The gas tax may have been rhetorically and politically described as a user fee, but it is and always has been a tax. And, as Richard notes, for it to really cover costs, it would have to be a lot higher.

by Alex B. on May 24, 2013 9:01 am • linkreport

@RL: yes the current tax is too low. The reason for this is that the Council doesn't have the courage to do right.

At a certain point of density in a city-state like DC, fuel tax receipts won't cover the total transportation network, with so many using metro. Alternate revenue sources are needed; this does not mean that the gas "use fee" should be abandoned.

by goldfish on May 24, 2013 9:09 am • linkreport


Of course, no sense abandoning this "use fee"

The issue is, to raise the appropriate amount of money would mean raising the DC gas tax by a dollar. If gas in DC is $1.30 (instead of just .30$) more than in MD and VA, our gas sales go down to next to nothing. We will need revenue from other sources, but they also need to try and optimize gas tax revenues to maximize revenue.

by Kyle-w on May 24, 2013 9:28 am • linkreport

"For a bunch of politicians who advocate for DC Statehood, they hardly make a convincing case through the use of back-room, non-transparent processes such at this one."


If back room dealing was a disqualifier for statehood, we'd have a lot fewer states. Stop applying an unfair double standard to DC. There are plenty of places as corrupt as DC that have the privileges that statehood affords. There are also plenty of upstanding citizens here who deserve the privileges that statehood affords.

by Alan Page on May 24, 2013 9:56 am • linkreport

@Andrew on May 23, 2013 8:38 pm

The notion that requiring all income to be reported as ordinary income is would "prosecute" anyone is laughable and defines you as a millionaire-coddler. The millionaires always hide behind the fake argument that innocent retirees and "seniors" will be hurt when in fact the greedy millionaires believe they have a moral right not to be taxed, ever, and that any increase in taxes is a punitive "prosecution."

You also said this wrong thing: "Further, the issue of bond funds, and the proposed threshold differences made the entire issue much more complicated, by treating people differently based on ambiguous rules." There were no written, formal "proposed threshold differences" offered by any Councilmember. Nobody debated it. There was no hearing. There was no discussion of the bond tax repeal when Jack Evans marked up the finance & revenue title of the budget support act. He even made the repeal of the bond tax RETROACTIVE with not a peep of protest from any other Councilmember on his committee (May 8 markup).

Even if "threshold differences" had been introduced, they would not have been unprecedented or shocking. They are known as "income tax brackets." We have several of them (not enough). For example, the cap on deductions starts at the "threshold" of $200,000 of AGI. Is that "ambiguous?" Funny you should imply that tax brackets are too ambiguous to be enforced, OCFO refutes that every time they issue a revenue estimate.

And if you meant that the "grandfather" clause introduced ambiguous "threshold differences," i.e., the cutoff date for which bonds would remain exempt, well the defenders of the tax shelter are the ones who created those ambiguities. Grandfathering previously purchased bonds was purely a fig leaf. Now you are wringing your hands over that fig leaf being too "ambiguous" (unless it was just the tax brackets that you were whining about).

by Green Eyeshade on May 24, 2013 11:47 am • linkreport

A previous version of this is stuck in moderation. This is Part One of the data from OCFO and IRS Historical Statistics for tax year 2010 on tax-exempt interest paid to DC filers, analyzed by OCFO and DCFPI. If this is accepted by the moderator, I will cross my fingers and post Parts Two and Three.

Incidentally, @Andrew on May 23, 2013 8:38 pm, whichever "blog" by DCFPI you were referring to, nobody disputes the following data. No Councilmember or member of the press challenged this data after it was presented in DCFPI's testimony to Council prior to the May 7 vote on the FY 2013 supplemental budget.

In 2010, Adjusted Gross Income (AGI) did NOT, by definition, include any tax-exempt interest because it was excluded from ordinary income under DC tax law.

Federal Tax Returns Reporting Tax-Exempt Interest

all taxpayers, 327,755 returns, total AGI $23.8 BILLION

filers with tax-exempt interest, 18,048 returns, total AGI $5.7 BILLION (5.5% of filers but 24% of total AGI)

by Green Eyeshade on May 25, 2013 6:59 pm • linkreport

Part Two:

Tax-Exempt Interest Filers by AGI

$0-50K........3,020 filers (16.7%); total AGI negative $152 million, $21 million tax-exempt interest (average $7K/filer)

$50K-200K.....8,692 filers (48.2%); total AGI $990 million, $69 million tax-exempt interest (average $8K/filer)

$200K-500K....4,183 filers (23.2%); total AGI $1.3 BILLION, $114.5 million tax-exempt interest (average $27K/filer)

>$500K........2,153 filers (11.9%); total AGI $3.6 BILLION, $170.5 million tax-exempt interest (average $79K/filer)

by Green Eyeshade on May 25, 2013 7:01 pm • linkreport

Part Three:

Filers With at Least One-Third of Income from Tax-Exempt Interest (By AGI)

$0-50K: 338 filers (51.5%); total AGI $3.5 million; tax-exempt interest $12.6 million (avg. $37K/filer)

$50K-200K: 237 filers (36.1%); total AGI $23.9 million; tax-exempt interest $27 million (avg. $114K/filer)

$200K-500K: 57 filers (8.7%); total AGI $17.3 million; tax-exempt interest $74.8 million (avg. $1.3 MILLION/filer)

>$500K: 24 filers (3.7%); total AGI $22.8 million; tax-exempt interest $87.4 million (avg. $3.6 MILLION/filer)

What the above data reveal: of the 18,048 filers in Part One, Part Two shows that only 35% of them had AGI of $200K or more, in ADDITION to their tax-exempt interest income. That minority of 35% collectively received $285 MILLION in tax-exempt interest in 2010, which would have generated tax revenue at current rates (8.95%) of $25.5 MILLION. Also, only a very tiny minority of all filers receiving tax-exempt interest (only 656 out of 18,048, or 3.6%) received a significant portion of their income (one-third or more) from tax-exempt interest in 2010. In that year, an even tinier minority (only 81 out of 18,048, or four-tenths of one percent) received an astonishing $162 million in tax-exempt interest, which would have generated $14.5 million in tax revenues.

by Green Eyeshade on May 25, 2013 7:08 pm • linkreport

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