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Fenty budget raids Anacostia fund, breaks Council's word

Mayor Fenty's proposed FY2011 budget reprograms the revenue from the Anacostia cleanup fund, generated by the 5¢ bag fee. The Council should quickly reject this approach.

Photo by mmmcrafts.

During the original bag debate, many naysayers said that this was just an attempt to raise some revenue through a hidden "tax." Supporters argued that this wasn't the purpose.

Instead, it aims to create an economic incentive for people to use reusable bags, taking advantage of the very high elasticity of bag demand based on price. And it's successfully reduced bag use by 50-80%.

It also raised $150,000, and the Mayor wants to redirect that money. Tommy Wells has already vowed to fight the effort, and the Council should back him up. Their actions on this matter will determine whether the Council can ever pass behaviorally-targeted fees with a straight face.

Economists often recommend such measures, knowing that people's behavior is far better influenced by prices than by public service announcements or even laws against certain actions. Pollution, in particular, is a classic example of a public good affected by private actions.

If law can turn the externality of pollution into an internalized charge specifically on polluters, we can reduce pollution most effectively. And dedicating the revenue to programs that counter the effects of that pollution ensures that the law addresses the problem directly whether people choose to pay or to change behavior.

The success of such approaches, however, depends on the political will to maintain them. It's always tempting to just use the revenue for other purposes. The Mayor tried to do the same with the performance parking revenue, which has to go to local neighborhoods to get support for the policies in the first place.

Likewise, municipalities across the nation come to depend on traffic camera revenue, which would likewise ideally disappear entirely if people simply followed the laws. Some jurisdictions ended up with big budget holes after enforcement revenue dropped due to compliance, and a few even shortened yellow light cycles to try to catch more drivers. That's the wrong approach.

One solution is to create special authorities to manage the money, limited by statute in how they can spend it and relatively inaccessible to political bodies. But those are complex to set up and administer. The better solution is simply for good elected leaders to recognize that they can't ask voters to support something if they don't keep their word.

The Council should reject the Mayor's attempt to raid the fund and keep its own promise to the people of DC.

Update: Wells Chief of Staff Charles Allen pointed out that because the law set up a special "Fund" for the bag fee revenue, the Mayor had to specifically call out the rearrangement of revenue in the budget and seek an "Intra-District Transfer" to reuse it. That calls attention to the move, making it easier for the Council to refuse.

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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Look up "hypothecated tax" sometime to see why it is a bad idea. Next thing you know, you are going to say the gas tax should just be for roads....

The lovely irony, of course, is the bag fee is generating so little revenue that it might not be worth Fenty's time to take it.

by charlie on Apr 2, 2010 1:05 pm • linkreport

No to new "special authorities" to manage the bag money. The revenue from the bag tax is FAR too small to warrant expansion of the size of government.

by Paul on Apr 2, 2010 1:27 pm • linkreport

How about making a law that states " funds of XX can only be used for XX with no exceptions at all"

How many people will say I told you so : every single person that has purchased a bag

by kk on Apr 2, 2010 1:30 pm • linkreport

I think Vincent Gray just won some votes...

by David C on Apr 2, 2010 1:44 pm • linkreport

@David C


by Adam L on Apr 2, 2010 1:49 pm • linkreport

I think this post should have included a good response to the superficially plausible argument that street cleaning does clean the Anacostia, since trash from the streets goes into the river.

by KCinDC on Apr 2, 2010 2:47 pm • linkreport

Do folks realize that a whole lot of special purpose revenue accounts are being re-routed into the city's general fund in order to close budget gaps?

And, if all those re-routings are allowed, then isn't the Mayor and the Council "breaking their word" on how those funds would be spent? What makes this specific fund special and not the dozens of other funds that are getting the exact same treatment?

Realistically, the $150k that the Tommy Tax has brought in is really meaningless. Rejecting the re-routing of this money won't have much impact.

Except, that the CFO's revenue estimates for this tax are quite significant over the next several years. Which means that if Tommy wants to keep his bag tax revenue in its current account, he's going to need to find a way to make up the resulting revenue shortfall in the general fund. But to do that, he's going to have to get the support of other council members b/c the bag tax transfer isn't under his committee's jurisdiction.

I chuckle at Wells' sudden realization that, in a major budget crunch as the city finds itself in these days, he's now aware that money is money to the city budget folks. It doesn't matter what special purpose account it lives in. It can be re-routed into the general fund by simply adding a sentence or two to the budget bill. And if it's not re-routed, then it's on Wells to figure out how to plug the resulting budget hole.

Or did you all actually think the Tommy Tax was really about cleaning up the river and not raising revenue?

by Fritz on Apr 2, 2010 3:00 pm • linkreport

If Vincent Gray was accountable to balance a budget project for a 500+ million dollar shortfall he'd make many of the same decisions Fenty has. He may utter lip service otherwise but talk is cheap.

by Paul on Apr 2, 2010 3:07 pm • linkreport

@Fritz; I think the CFO projected $10 million for clean-up over 4 years. Straigh line, that comes to about 200K a month, which isn't that far off from the actual revenue. They didn't think bag use would drop so quickly, so perhaps the first year projections will be frontloaded. However, I suspect the revenue will pop up a bit as people get used to it.

The real saving will come if less plastic bags get into the storm drains and block them up. When it rains, the sewage goes into the Anacostia and the city gets fined. Not sure how that would show up in the budget.

I think David's pursuit of externalities is a bit backwards. It is not about how the money is spent -- if you CLAIM that the fee is for a specific purpose it might be easier to swallow.

After all, we don't elect leaders because they say "we won't do evil." We design system so evil leaders can only do so much damage.....

by charlie on Apr 2, 2010 3:28 pm • linkreport

@ Fritz I thought (and think) that the Tommy Tax was about reducing bag use, and is working well. The extra revenue is just gravy, as far as I'm concerned.

by jcm on Apr 2, 2010 3:33 pm • linkreport

Look up "hypothecated tax" sometime to see why it is a bad idea.

OK, I did look it up, and I still think it's a good idea.

by David desJardins on Apr 4, 2010 1:06 am • linkreport

Did anyone not see this coming? Fenty has repeatedly tried to get get out of having to admit that he broke his campaign promise not to raise taxes by pretending that new taxes were actually "user fees" and anyone who didn't expect from day one that the bag tax money would be diverted to something other than river cleanup is either foolish or delusional.

by Jacob on Apr 6, 2010 1:51 pm • linkreport

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