Evening Star Newspaper, January 8, 1937, Page 16

A—16 THE EVENING STAR, WASHINGTON, D. C., FRIDAY, JAN ARY 8, 1937. FULL TEXT OF NEW FORMULA FOR FISCAL RELATIONS < HE conclusions and recommen- dations of the report on fiscal relations between the United States and the District of Columbia, prepared by J. L. Jacobs and his advisory committee follows: Proposals developed in this fa finding survey are intended to sy tematize the fiscal relationships of the United States and the District of Columbia Governments. Narrowly interpreted, the problems of fiscal re- lations involve only direct interrela- tions of the public treasuries of the Federal and local Governments and might be defined and solved largely on an administrative level. How- ever, the questions which require set- tlement go much deeper than this. In a broader sense, fiscal relations between the two Governments com- prise all policies, operations, and ar- rangements affecting the distribution | of costs of government between resi- [ dents and property owners of the Dis- | trict of Columbia and residents and | taxpayers_of the country as a whole. | Any policies or arrangements which; place part of the cost of local govern- | ment service upon the National Gov- | ernment are within the subject of fiscal relations. Likewise, any poli- cies or arrangements which place part of the cost of the National Govern- ment upon the local government or discriminatingly upon the local popu- | lation are within this subject. | A study of the fiscal relationships of the two Governments could be made without considering such prob- lems as local suffrage, local adminis- | trative techniques and organization, | or the details of financial procedures, but it would be incomplete. These questions must be distinguished in order that the main problem may be resolved into its essential elements and treated dispassionately, but these matters merge with questions of fiscal | relationships and are so bound up with them in popular discussion that | they cannot be ignored. It there- | fore becomes necessary to consider their significance and to develop sound and workable suggestions for the solution of these problems. As these borderline points of irritation are clarified and settled, the central fiscal problems will be solved more readily, equitably, and finally. | Legal and Political | Status of District. | A clear conception of the legal and political status of the District gov- ernment must underlie any proposals for adjusting the fiscal relations of the local and National Governments. Legally. the District is neither a State nor a territory of the United States, though for certain purposes it is treat- ed like one or the other. It is a pe- culiar type of municipal corporation charged with duties performed in other communities by the State and local governments and enjoying by virtue of | its position as the national seat of gov-| ernment certain of the constitutional fmmunities and privileges of the Fed- | eral Government. States and cities outside the District, for example, may not impose income taxes on the sal- | aries of Federal employes nor does the | ordinary city enjoy as a matter of right tax exemption on property which | it may own in another State. The | District of Columbia, by virtue of its Federal status, may be authorized by Congress to tax the salaries of Federal employes. By the same token it holds property in other States free from State and local taxation. Its Federal status makes the District of Columbia subject to congressional | control in a degree that is unique in | American government. The territories, such as Alaska and Hawaii, occupy | -much the same legal status as the Dis- | trict in the Federal system, but in the | territories Congress may divert itself | of its authority whereas in the District i it may not. Without constitutional amendment Congress may not grant to residents of the District suffrage | in national affairs or voting represen- tation in Congress nor may it abdicate .its own position of authority over local | affairs. It may delegate administra- tion and may permit local self-deter- ; mination even upon matters of oper-' ating and fiscal policy, but no par-‘ ticular Congress may bind its succes- i sors or even itself to refrain from | overriding local decisions and actions. | The local government of the Dis- trict was established and is controlled | ‘by acts of Congress. Local govern- mental operations have been subject | to congressional control in detail al- | most since the District was organized. | Before 1874, however, the irhabitants were permitted to exercise limited suffrage in local affairs. Since 1874 they have had no suffrage whatever. Essential Objectives Of Settling Question. The essential objectives to be sought | by any proposals for settling the fiscal relations of the United States and Dis- trict governments are as follows: 1. In most general terms, to pro- vide Congress with an adequate and permanently applicable guide for de- termining annually what is a fair and equitable amount, if any, to be paid from the United States Treasury to- ward the expenses of the District government. 2. To simplify the legislative prob- lem by rendering unnecessary the per- ennial controversy over the form and amount of Federal allotment to the District government. This should make it possible to concentrate in the hear- ings and congressional debates on the relative merits of the proposed appro- priation items, rather than upon ques- tions of the relative legal and moral rights of the District or outside tax- payers. 3. To simplify Federal budget prob- lems by defining for the Federal budg- etary authorities the role of the Na- tional Government in financing the District, by giving them a guide or working rule by which to gauge the net amount of Federal payment, if any, to be recommended for any par- ticular year. 4. To define the respective roles of Federal budgetary authorities and Dis- trict budgetary authorities with regard to the detalled items comprised in District estimates. 5. To simplify the District budget- |in its Capital require that local gov- | Federal and of District interest in each | ernment by the other. Appropriations | government caused by statutes provid- <* ernment has a special obligation in! providing local governmental services | —an obligation which it does not have in the several States and local | communicies. With control, the Na- | tional Government assumes ru-pon-} sibility for filling the place filled in other communities by State, county, city, and other local governments and for the form, scope, and efficiency of local government within the District. | This is, however, a responsibility | toward the Nation for which the Dis- trict is the seat of government. It is not a special responsibility to the | residents of the District. Flowing as they do from constitutional provisions, | the legal and political status of the District and the consequent special immunities and disabilities are an elementary condition of residence or property ownership as much as the climate or topography. The consti- tutional provisions may be changed but not by local action or by con- gressional decision alone. Conse- quently, it must be said that their choice of residence gives inhabitants of the District no claim for special benefits or concessions from the Na- tional Government. They stand en- titled to share equally with others the benefits and costs of congressional action. If Congress has an obligation to provide local governmental services at the seat of government and to pro- vide and control the machinery of administration it has an obligation also to determine how the cost of local services shall be met. Legally, Congress is authorized to place this entire cost upon the national reve- nues or upon distinctively local reve- nues of the District or it may adopt some intermediate course. The par- ticular course to be adopted should be determined by a balancing of the equities between the population and taxpayers of the District and those of the Nation as a whole. ‘The special interests of the Nation ernmental services shall be at least | equivalent in scope and standards of quality to those rendered in other comparable American communities by | the State and local governments. In ordinary cities these matters are sub- ject to State and local determination, and therefore the residents and tax- payers may be expected to pay the en- tire cost of the services. Their obli- | gation to pay is measured by the cost of the services rendered. In the Dis- trict, with the scope and character of | service subject to cOngressional con- | trol, the actual cost is not necessarily | a measure of the amount which resi- | dentsand taxpayers may be expected to pay for local governmental services. It is reasonable to assume that in the absence of Federal control the resi- dents of the District would choose to have services equivalent to the average in other comparable communities. | Thev may be expected, therefore, to provide revenues sufficient for normal local governmental purposes as do | citizens of comparable cities. Observations Suggest Definite Principles. Considered in the light of experl-l ence and practice in fiscal planning | and control in public agencies through- | out of the country and of the conclu- sions presented in previous reports upon Federal-District fiscal relations, | the foregoing observations suggest defi- | nite principles or guides for determin- ing the equitable obligations of the ' Federal and District governments. These principles are stated in the recommendation below. i The jollowing principles are recom- mended for adoption as the basis upon | which relative Federal and District | obligations shall be equitably deter- | ned : (1) District residents and tazpayers should provide sufficient revenues for normal local governmental purposes, ' as do citizens of comparable cities. (2) Until District residents have @ direct and formal part in determining | the character and extent of local services and expenditures, they should not be expected to bear costs in ex- cess of those borne mormally by resi- dents of other comparable communi- ties for similar services. (3) As long as congressional control | is direct and exclusive, the National | Treasury should bear any costs in | excess of those borne normally by taz- | payers in communities comparable | with the District. Considered in the light of factual | findings detailed in later sections of | this report, the foregoing guides lead to a definite, workable formula for | future fiscal relationships of the Fed- eral and District governments. This formula has three elements, as follows: (1) Extension of the present system of contractual reimbursement to cover the entire field of intergovernmental operating services; (2) Establishment of a continuing method for determining the extent of | public permanent improvement within | the District and for fixing the amount to be pald by each government in each instance; and (3) Comparison of the average cost per capita of supplying normal State and local services in a group of com- parable communities with the cost per capita of supplying similar services in the District, and payment of any ex- | cess from the Federal Treasury as long as Congress exercises direct and posi- tive control over the District govern- ment. Provisions Urged Enacted Into Law, It is recommended that the pro- visions of this formula be embodied in a bill or bills for enactment at the present session of Congress. Provisions should be made as follows: I Intergovernmental contractual services: Contractual arrangements shall be established for the reimburse- ment of the cost of specific intergov- ernmental services supplied either gov- therefor shall be included in the re- spective annual departmental budgets. Pending the grant of broader powers of local control over purely local affairs, unusual costs of the District tween the United States and the District relating to fiscal responsibility and representa- tion in District affairs follows: Interwoven with the problem of fiscal relationships is that of local control of purely local affairs and the suffrage of District residents. In public hearings, in conferences, and in written briefs and state- ments presented by local public officials, individuals and represen- tatives of civic agencies, emphasis has been placed on the important bearing that the granting of suf- frage would have on District resi- dents both in matters of equitable fiscal arrangement and in local ad- ministrative and fiscal planning and controls. In any other American city which is subject to ordinary State con- trol and supervision, the duly elected city council has the duty and responsibility of dealing with problems and policies of adminis- trative organization and methods of operation and fiscal planning, of providing for the nacessary gove ernmental services, and of deter- mining the level of expenditures and the means of distributing and collecting the necessary taxes. When expenditures for ordinary services or capital outlays necessi- tate higher rates of taxation than are acceptable to the people, the least urgent requirements must be reduced or postponed for future consideration. The determination of local governmental policies, actions amd results are definite duties of the locally elected repre- sentatives, who are responsible to the electorate. Self-Government Would Not Bar Federal Financial Aid. Were the District of Columbia to manage its own affairs like any other American city, with the Fed- eral Government reserving to itself only the power of vetoing municipal acts and decisions in order to safeguard national interests in the Capital City, the people in the Dis- trict would be free to legislate for themselves in purely municipal af- fairs, to determine the kinds and extent of taxes, and to use local funds for such purposes as they might decide upon. Such an ar- rangement would not prevent the Federal Government from ap- propriating whatever amounts it deemed advisable for improvements and capital outlays in the Capital City that, from the national point of view, it might wish to see made. These ideas have been repcated- lv expressed by residents of the District as well as by representa- tives of District and Federal Gov- ernments. The following state- ment presents them in an able and clear-cut way: “Congress should cease making children of us. Congress should assume we are full-grown men and women, with just as much pride in our home city and the Capital as the National Congress or the people at large have. We are Americans and want to be allowed to act like Americans. “Congress should be glad to get local advice. not from a few self- appointed citizens, but from all in- habitants, by ballot, in regular official form, upon all questions of local interest. We do not ask to be independent of Congress. We pre- fer to feel that Congress is finally responsible. And we prefer not to get what we think we want or would like to have when Congress may think otherwise and deny us. But when large majorities call for anything it is most sure to be the best thing. Congress is supreme and must be the final judge. But Congress can spare itself and let us worry with details of purely local matters. “When, therefore, Congress comes to deal with this community as other Awerican communities are dealt with, we do not promise to do as Senator Root said in a speech last Winter we would be willing to do, namely, ‘pay four times as much tax,’ but we would smilingly pay our full share of tax, or neces- sary share, to maintain our part in Capital upkeep. ine Congress Has Power To Confer Local Suffrage. As far as local suffrage is con- cerned, there is apparently no question that the Constitution gives Congress broad powers to legislate for the District and to set up any form of elected local government 1t sees fit. Clause 17 of section 8, article I, of the Constitution ex- tends to Congress the power “To exercise exclusive legislation in all cases whatsoever over such District (not exceeding 10 miles square) as may, by cession of par- ticular States and the acceptance of Congress become the seat of the Gcvernment of the United States.” Section 3 of article IV gives Con- gress the power “To dispose of and make all needful rules and regulations re- specting the territory and other property belonging to the United States.” The United States Supreme Court has, in & number of in- stances, recognized that Congress has plenary and exclusive power to legislate for the District of Colum- bia. In a decision involving a local assessment, the Supreme Court said: “The legislation in question in the present case is that of the Con- gress of the United States, and must be considered in the light of the conclusion, 5o often announced by this court, that the United States possess complete jurisdiction, both of a political and municipal nature, over the District of Columbia.” HE section of the Jacobs re- port on fiscal relations be- Similarly the court has said: “There is in this District no division of powers between the gen- eral and State (local) government. Congress has the entire control over the District for every purpose of government. “Within the District of Columbia, and the other places purchased and used for the purpose above men- tioned (forts, etc.) the national and municipal powers of government, of every description, are united in the Government of the Union. And these are the only cases, within the United States, in which all the powers of government are united in a single government, except in the cases already mentioned of the temporary territorial governments, and there a local government exists.” In an opinion rendered May 11, 1936, upon an appeal from the Supreme Court of the District of Columbia, the United States Court of Appeals for the District of Co- lumbia made the following state- ment: “In legislating for the District of Columbia, Congress acts with sub- stantially the powers that a State legislature has in legislating for a State. Congress ‘has the entire control over the District of Co- lumbia for every purpose of gove ernment, national or local. It may exercise within the District all legislative powers that the legis- lature of a State might ex- ercise within the State .. . so long as it does not contravene any pro- vision of the Constitution of the United States.' Capital Traction Co. vs. Hof, 174 U. S. 1, 5. See also District of Columbia vs. Kraft, 35 App. D. C. 243." Intention to Deny Control by Residents Disputed. Congress took over the governe ment of the District in 1801, and since then has provided for local representation for the people of the District according to con- gressional enactments. Municipal governments elected by popular vote existed from 1801 to 1871, and & territorial government with a non- voting delegate in Congress from 1871 to 1874. Since 1874 the Dis- trict residents have not had suf- frage in local affairs. Much support can be found for the contention that the framers of the Constitution did not intend to deny residents of the seat of gove ernment a controlling int@est in their local affairs. The contem- porary writings of James Madison are frequently quoted to indicate that it was assumed, when the Con- stitution was drawn up and before details regarding the seat of gov- ernment had been decided upon, that citizens living in the selected district would have the same po- litical rights granted all other Americans under a representative form of government. Among other things, Madison wrote that “* * ¢ as the State [ceding the territory] will no doubt provide in the compact for the rights and the consent of the citizens inhabiting it, * * * as they will have had their voice in the election of the govern- ment which is to exercise authority over them, and as a municipal legislature for local purposes de- rived from their own suffrages will of course be allowed them: * * ¢ every imaginable objection seems to be obviated.” Local Representation Frequently Debated in Congress. Other contemporary evidence also shows that the existence of political rights in local as well as national affairs was not considered incompatible with exclusive Fed- eral jurisdiction. ‘The question of local representa- tion for the District has been con- sidered frequently in Congress, in writings, in debates, and in numer- ous meetings and discussions in the District and throughout the country. Some of the arguments of those opposed to such repre- sentation have been given as fol- lows: “Many of them [residents of the District] hesitate to join in the de- mand for the ballot, which just now is once again agitating the minds of the people. The Federal Capital, they believe, should be forever free from the strife, the turmoil, and struggle .of political campaigns, its atmosphere forever undisturbed by the quarrels of po- litical partisans.” Little that is new can be added to previous summaries of the situa- tion, of which perhaps the follow- ing is especially clear: “It seems reasonably certain, from the absence of contrary evi- dence, that the Constitutional Con= vention did not seek to deprive the people of the District of Columbia of their political privileges. The sole aim of that body was to secure the national Government from State interference. In view of cer- tain alleviating circumstances, more potent then than now, the convention felt itself justified in sacrificing some of the political privileges of the people to the se- curity of the national Government, but certainly this sacrifice was any- thing but an end sought. It was found necessary to sacrifice partici- pation in national affairs, since the machinery for it apparently could not be placed in operation under the peculiar plan whereby the Capital was separated from the States; but the convention certain- ly did not contemplate the irre- vocable perpetuation of this sac- rifice if some means of placing that machinery in operation should ap- pear in later years under changed conditions. The case of the exercise of the method originally deemed expedient was still less contem- plated. “The matter of local government however is quite different. There was no apparent obstacle to the operation of self-government, even under the peculiar system estab- lished for the Capital, and con- sequently, as is amply shown by the interpretation of the Federalist and of early Congresses, no anom- aly whatsoever was here contem- plated. It may be inquired: How, then, did the well-established idea of consitutional prohibition arist? In the early days of the Capital the reproaches of ‘tryanny’ and ‘slavery’ occasioned by the denial to the District of anything like State government, were frequently met by citing the Constitution, as ‘was the case in the House of Rep- resentatives in 1803; and it is prob- able that an extension and per- version of the idea is the cause of the attempt to make the Constitu- tion cover the additional ‘tyranny’ and ‘slavery’ of non-representative government in local affairs. But such an attempt involves the as- sertion that all the popular gov- ernments of the District, municipal as well as territorial, until the in- stitution of the commissioner sys- tem in 1874, were unconstitutional; and in view of the conclusive sanc- tion of the signers of the Constitu- tion themselves such an assertion is obviously an absurdity. The con- stitutional argument for a benevo- lent despotism in local affairs is quite untenable, and that system must rest on purely practical argu- ments or fall.” In large measure, many of the irritations and annoyances of resi- dents of the District over the problem of fiscal relationship be- tween the Federal and District Governments spring from the fact that the District government jtself and the citizens have had little control in the determination of local administration and fiscal af- fairs. The granting of broader control over such purely local af- fairs would clear up these difficul- ties, would place the responsibility definitely upon the residents ard local officials, and would provide for more effective means of ad- ministration and fiscal planning. and operation. Stages for Granmting Powers Urged. ¥ It is believed that the graniing of broader powers over local af- fairs should be awarded in two major stages. Pending the grant- ing of the right of local suffrage, there should be created immedi- ately an advisory council consist- ing of representatives of the Fed- eral and District Governments and representative citizens of awic groups appointed by the President, such council to advise on the pian- ning of municipal services and im- provements, the original prepara- tion of the District budget, the determination of tax and revenue sources, and the improvemen: of administrative organization and procedures and continuing consul- tation on other matters affecting local governmental operations, ex- penditures, and results. The exist- ence of such an advisory council will immediately have the effect of giving the local residents more direct voice in local affairs and would place greater responsibility upon local public officials. By the same token, the advisory council would be in position to furnish to the Federal Bureau of the Budget and to Congress important supple- mentary information which would help in better administrative snd budgetary planning and continu- ing improvement in the adminis- tration of local affairs and in pub- lic_expenditures. Either in the act establishing the Advisory Committee or in a sep- arate congressional enactment, pro- vision also should be made for the granting of local suffrage to District residents subject to referendum upon the question. In order that the residents may have adequate opportunity to pass upon this ques- tion this provision might well be phrased to give District residents the right to vote on the question not oftener than once in four years, at & speclal election called by the District Commissioners upon the petition of a specified percentage of legal residents. Municipal Council For Certain Legisiation Suggested. The section of the statute grant- ing local suffrage to the Distriet residents might include the power to elect a municipal council to legislate on matters concerning the plan and structure of local admin- istrative organization, authority for the formulation and administration of the operating and capital im- provement budgets, revenue and expenditure control and the enact- ment and enforcement of local reg- ulatory ordinances. By these means, control and responsibility for serv- ices and costs would be squarely upon the District government it- self and the power and right to maintain or change the govern- ment would be in the people of the District. The legal residents of the Dis- trict, of whom more than 400,000 are estimated to be of voting age, have no vote in national affairs be- cause the District is not a State. ‘Under Article III, Section 2 of the Consttiution, the Federal courts are open for the adjudication of controversies between citizens of different States and in other cases when a State court might not be presumed to be impartial. However, as the District is not a State, Dis- trict residents cannot sue or be sued in a Federal Court, but are Tequired to apply to State courts in their litigations with residents of other States. Comments on this \ Fiscal Responsibility and Suffrage situation is made in various trea- tises. The point is weli presented in the following: “It 1is extraordinary that the courts of the United States, which are open to aliens and the citizens of every State in the Unilon, should be closed to them.” - Only Capital in Werld Discriminating Against Citizsens. ‘The District of Columbia and the ‘Territories are considered as States in treaties with foreign powers con- cerning ownership, disposition, and inheritance of property. The Dis- triet of Columbia is not merely the only community in this ecountry that has neither national nor local representation, but it is the only capital in the world where the resi- dents have no voice in the affairs of their own city and where they are treated differently from resi- dents in other cities in the country. In sectisns dealing with represen- tation in national affairs, the Con- stitution uniformly relates such representation to the existence of the several States. With respect to election of the President. it pro- vides that “Each State shall ap- point & number of electors . . . (art. 11, sec. 1). With respect to Congress, it provides as follows: “The House of Representatives shall be composed of members chosen every second vear by the people of the several States (art. 1, sec. 2). “The Senate of the United States shall be composed of two Senators from each State (art. I, sec. 3).” Amendment te Constitution Needed te Confer Representation. To obtain Federal suffrage or national representation for the Dis- trict of Columbia will require amendment of the Constitution to empower Congress to give the resi- dents of the District the same frac- tional participation in the control over the seat of the Federal Gov- ernment which is possessed by the citizens of the various States. Territories or dependencies do not have this right, and all Con- gress could do at present would be to allow for a nonvoting delegate from the District of Columbia 10 the House of Representatives, as was the case from 1871 to 1874, and perhaps one such delegate to the Senate. More than a hundred years ago sentiment on this point was expressed by President Monroe in his second annual message to Congress in 18 “In the exercise of this power (of legislation), in which the people have no participation, Congress legislates in all cases directly on the local concerns of the District. As this is s departure, for a special purpose, from the general principles of our system, it may merit con- sideration whether an arrangement better adapted to the principles of our Government and to the particu- lar interests of the people may not be derived which will neither in- fringe the Constitution nor affect the object which the provision in question was intended to secure.” Fight for Amendment Is One of Leng Standing. Individual legal residents and a number of civic, trade, labor, end other organizations are unitedly supporting s congressional joint resolution proposing the required amendment to the Constitution. This united front has been and is being maintained through the Citizens’ Joint Committee on Ns- tional Representation for the Dis- trict of Columbia. This committee has held the leadership since its organization in 1917. It has ar- ranged and conducted a number of hearings before committees of Congress carried on extensive cor- respondence, sent speakers before many meetings, and arranged numerous radio broadcasts. Federal suffrage, and national Tepresentation is a live movement, and its support shows a steady growth, both locally and through- out the country. Many important national organizations have put it on their legislative programs, and by vote of their national conven- tions their officers and committees stand instructed to lend every pos- sible aid. Local Suffrage Possible By Statatory Enactment. The problem of local suffrage and broader control over purely local Affairs is closely related to the question of fiscal relations between the Federal and District govern- ments. Congress can grant such broader powers and local suffrage by statutory enactment. The pas- sage of an act by Congress along the lines indicated herein immedi- ately establishing a representative working advisory council and grant- ing such local powers upon refer- endum and favorable vote of the residents of the District would eliminate much controversy and irritation, and would have the ef- fect of fixing reponsibility for local administration and - expenditures definitely upon officials elected by the people. It would further pre- sent an opportunity to the local citizenry for establishing the Dis- trict as a model of municipal opers- tion and fiscal management. The provision of Federal suffrage and national representation re- quires constitutional amendment and is more remote from the fiscal relations problem. Achievement of TFederal suffrage should and will be hastened with the equitable and business-like settlement of the fis- cal relations problem, and as the District demonstrates its insiste ence upon high standards of ad- ministration and service in local governmental affairs and its ability to establish and maintain such standards. L !not strictly within the term. Extra-| ‘oruuury municipal services rendered ' |in the District but not matched in | | the average comparable city are in- | cluded here—for example, education | |of mnon-resident children without | | charge. In such instances the solu- tion recommended in section 8 is impo- | | sition of charge upon the special bene- ficiaries. Similarly, statutory amend- ment to impose adequate charges is recommended to eliminate deficiencies |in water main special assessments— | the deficiency resulting from a statu- tory provision fixing assessment rates materially below actual cost. Likewise, | there are inciuded in this category excess costs of ordinary services occa- sioned by meeting special Federal standards for employes’ leaves and other working conditions. These should be paid by the Federal Govern- ment to the extent that the excess over the average of comparable cities is imposed by congressional enactment. 1 Capital Outlays of ‘ Jeint Interest. | The interests of the Federal and District Governments are intertwined in the problem of Capital development planning as a whole and in the con- struction of many specific public im- provements. The general rule for allo- cation of costs may be the same for permanent improvements as for ordinary intergovernmental operating services, but the method of applying the rule will differ, since capital out- lays must be considered separately for each development or project and can- not be handled by continuing con- tractual arrangements. In view of the knowledge and ex- perience accumulated by the National | Capital Park and Planning Commis- sion in its administration of parks and participation in District planning, it is recommended (1) that the powers and duties of the commission be en- larged to make it the one responsible agency for physical planning and | development of the District: (2) that the commission be charged, among | other duties, with amalyzing proposed capital improvements and preparing the estimates of the capital budget ' (as distinguished from the operating budget) of the District, end 1with showing in the capital budget the portions payable by the District and | by the Federal Government, respec- tively: (3) that the personnel of the commission be modified to include | representatives of both Governments and local citizens qualified in glan- ning and engineering, and (4) that | the commission be relieved of its pres- | ent administrative duties and Te- named the National Capital Planning Commission. With the organization | of the Capital improvement program. this commission might also be charged | with the duties of the advisory council recommended in this report. It should be understood that the | District authorities would have the | privilege of omitting specific Capital improvements from their reguiar | budget estimates but would have no authority to modify the proportionate | cost allocations determined by the | Planning Commission. With intergovernmental services and | the Federal interests in capital outl | adjusted by the procedures recom- | mended above, cost payments of the | District government for g2neral de- | partments may be compared with cost | payments of other communities, in ac- | cordance with the followine definitions | and procedures. | Social and Fconomical | Characteristics Compared. Comparable Communities. — Cities differ in population, social conditions, wealth, industri customs, and in vs. The differ- however. are comparatively | small in metropolitan cities. Com- | parison of the social and economic characteristics of the District with | those in the average of 17 other cities | of approximately the same population are presented in section 14. These | indicate that variations of the Dis- | trict from the average exert no net | influence upon the level of govern- | mental expenditures, and that the | District has greater ability to pay for | governmental services than: has the typical comparable city. PFor the purpose of supplying a standard with which to compare the District government, it is necessary that the group of cities be large enough so that averages will give a good cross section of American mu- nicipal administration and not be dis- torted by chance deviations. On the | other hand, it is necessary that the | group of cities be small enough so that the task of compiling data will i not be too arduous or extended. The | choice of cities should be practically automatic. The number of larger | cities that are adequately comparable with the District will decrease if the | District continues to advance in pop- ulation faster than other cities. There were in 1930 only 13 cities with popu- lations greater than in the District. Therefore, it is recommended (1) that the comparable cities be selected every 10 years on the basis of the de- cennial census; (2) that the number of other cities 30 selected be not great- er than 17, and (3) that the choice of particular cities be made by start- ing with the largest city which has a population not exceeding twice that of the District and counting down- ward through the designated number of citi In the application of this formula in the present decade, the District astands ninth from the top, with 486.- 869 population in the census of 1930. Cleveland, with 900429 population, ‘was the largest, and Jersey City, with 316,715, the smallest among the 17 other cities. Normal Governmental Services.— There is no fixed body of governmen- tal activities which may be selected as representing the “normal services ordinarily rendered by State and local | governments.” It is possible to com- | pile an extended list of services per- formed by some locel or State agency in every American city of a size com- parable with the District. Corres- | pondingly, it can be shown that every | substantial governmental operation of | local benefit in the District is matched | ©0f a kind that would be as beneficial in the District as elsewhere. Normal Cost of Supporting Govern- ment.—In order to apply in practice the doctrine that the taxpayers of the District may be expacted to bear costs equa! to normal costs for like services in comparable communities, | it Is necessary to determine (1) the terms in which costs shall be meas- ured, and (2) precisely what shall be considered comparable costs. (1) Criteria of Comparable Costs.— Comparisons between the District and other communities might be made in | terms of cost payments per capita or | effective tax rates. Earlier reports have suggested adop- tion of a standard in terms of effec- tive tax rates. For example, a con- gressional report of 1914 on real es- | tate taxation stated: Your commitiee was unable to see any good reason why a man liv- ing in the District of Columbia hav ing property there should not be as- sessed substantially the same rate Rs is assessed on like property of like individuals in other similar municipalities. All reports on fiscal relations sine~ 1914 have adopted this view either ex- pressly or by implication. Comparison of the Distriet and other communities on the basis of effective tax rates has much to commend it Citizens are more directly concerned with what they individually have t» pay for governmental services than with the expenditures made in provid- ing the services. Moreover, differ- ences in the ability of different com- munities to support public services ar~ reflected in the various tax bases- property, income, privileges. ete. A standard in terms of effective t= rates implies that the District shall be required to raise from local sourcr whatever amounts may be derived bt applying the effective rates prevailing on the average, in other comparab'~ communities and that these amount= shall be supplemented from the Fed- eral Treasury if and to the extent that they prove deficient for support of the local government in any Year. This presupposes, however, that the District has a revenue system similar td the State and local systems of com- parable cities. This report shows that the taxing system in the District is less diversified than the systems in other cities. It shows, on the basis of field appraisals of typical properties. that the effective rate of property tax on real estate is materially lower in the District than in 17 comparable cities. It shows also that the aggrogate tax load upon typical taxpayers is mate rially lower in the District. Low Fffective Property Tax Rates. Most of the differences between the District and the average of other cities in total tax load reflects low effective property tax rates and some of the difference results from lack of diversity in the revenue system of the District. Until the District system conforms to the normal State and local pattern comparisons in terms of effective tax rates will be more difficult to interpret than comparisons based on governe mental cost pavments per capita. Fur- thermore, reliable data are not regu- larly available for comparisons of ef- fective tax rates and will not be avail- able until provision is made for pe- riodic reappraisal of property accord= |ing to uniform valuation techniques and for reporting of effective tax rates determined on this basis. Cost paye ments have been compiled regularly on | a well-defined basis by the Bureau of Census in its Financial Statistics of Cities and its similar series for States, Comparison in terms of cost paye ments is, therefore. more practical. The data for States are not at present compiled This series clearly should be revived and extended. If it is not, the State statistics necessary for the Federal-District fiscal relations foi mula may be gathered for this pare ticular purpose. (2) Comparable Costs.—The actual costs of general departmental activi- ties of the District government at present are not comparable with those of other cities. Expenditures of the District government include some items that are not for ordinary local services but for the special benefit of the national Government. These must be deducted from District payments for purposes of the comparison. Like= wise there must be deducted expendi- tures made to meet unusual require~ | ments imposed upon the District by | Congress—e. g.. the tuition of non- | resident children admitted to the Dis- trict schools without charge; excesy | payments for public improvements to the extent that these are made in order to enhance the District in its special role as seat of the national Government, and excess costs of ordis nary services occasioned by meeting the relatively higher Federal stand- ards of employment. On the other | hand, additions must be made for | those services ordinarily rendered by | State or local governments which are provided in the District by the Federal | Government. . With the changes recommended | above under the headings, “Inter- governmental Contractual Services" and “Capital Outlays,” the regular a counts of the District government will show directly the actual costs of local governmental services, since spe- cial services to the Federal Govern- ment and other extraordinary serv- | ices will have been eliminated and | services rendered by the Féderal Gov- | ernment will have been added. Adjustments in Aggregate Cost Payments. It is necessary to make some adjust- ments in aggregate cost payments of | local governments elsewhere, as re- ported by the Bureau of the Census, if they are to be comparable with the net costs of local services in the Dis- trict. To city expenditures must be | added expenditures of counties, school districts, park districts and other local governments where these overlap the city jurisdiction, as they do in most cities comparable in size with the Dis- trict of Columbia. In the Financial Statistics of Cities, compiled by the ing problem by defining the role of the National Government in financing the District. The proposals should make more or less certain the extent and character of the Federal allotment ‘which may be anticipeted and the uses to which it may be applied. ‘These objectives may serve as cri- teria for measuring the adequacy of recommendations for a future program of Federal-District fiscal relationships. ‘They need to be interpreted, of courge, in the light of certain basic assump- tions as to the reciprocal obligations of the District and the Nation. These assumptions are presented below as the fundamental principles on which are based the recommendations in this report. Special Obligation Of Federal Government. ‘The unique status of the Distriet of Columbia as a governmental ter- Titory implies that the National Gov- ing special allowances and leaves in excess of those usually provided in cities of comparable size shall be met by the Federal Government. II. Capital outlays of joint interest: The National Capital Planning Com- mission shall determine the extent of the respective Federal and District interests in capital outlays and im- provements included in the District budget. The capital outlay budget of the District, divided accordingly, shall be prepared and submitted by this commission through a District au- thority together with a long-time im- provement program for the District similarly apportioned. 2 III. Per capita governmental costs: Pending the grant of broader powers of local control over purely local aflairs, the excess of District govern- mental costs per capita over the ave erage of those in comparable citics shall be assumed by the Federal Gov- ernment through appropriations espe- cially designated jor this purpose. Provided, however, that such excess District governmental costs shall be assumed only after allowance has been made for reimbursements due to un- usual costs occasioned by congressional enactments referred to under point I of the formula. To clear the way for such legisla- tion, it is recommended that the sub- stantive law providing for annual Fed- eral contributions based on a fized percentage of District a be repealed and that the present sys- tem of annual lump-sum contributions be abandoned. In order to clarify the fiscal opera- tions of the District and to eliminate many points of friction between Dis- trict and natiomal interests, it is recommended that the system of intergovernmental cortractual ar- | the Federal Government. In a few the specific recommendations contem- in_ all or practically all comparabdle | O° mev.nqmmmmmm or decreased reim- e:nm-uiumanmu‘_ 4 d f Y the services rendered by each govern- ment for the other, be extended to all such services which involve substan- tial erpenditures. The cost of each specific service rendered by either government for the other should be estimated annually according to defi- nite equitable bases agreed upon in advance on a contractual basis. Ap- Ppropriations covering these costs should be included in the respective departmental budgets. Reimburse- ment for the services should be made regularly to the departments render- ing the service. Specific Services By Each Government. ‘The Federal Government is per- forming 39 specific services for the District, and the District government is performing 30 specific services for subject to reimbursement apart from the annual lump-sum contributions from the Federal Treasury. Examples of intergovernmental services rendered by the Federal Government are the care of the insane of the District in St. Elizabeth’s Hospital and incarcera- tion of District convicts by the Bureau of Prisons, both of which are now re- imbursed, and the auditing activities of the controller general, which are not now reimbursed. Examples of services rendered by the District gov- ernment are the adjudication of Fed- eral cases in the District court, provie sion of police details for specific Fed- eral and kindred purposes, and incar- ceration of prisoners convicted of Fed- eral offenses. In a few instances in which services are mow reimbursed, bursement. Bases of reimbursement are proposed for most services not now covered by this system. One of the most important of these services, water supply to Federal offices, presents spe- cial problems. It is recommended that the Federal Government pay, on the basis of the standard rate schedule, for water consumed. Further, it is recommended that the United States District Court and the Court of Ap- by State or local governments in all or practically all comparable com- Bureau of the Census, expenditures and revenues of county and other over- munities. Obviously, there are some | lapping local units are prorated to the State and local artivities not appli- | cities in proportion to aggregate as- cable within the District of Columbia | sessments of property for taxes. This —for example, provision for rural | method is here accepted as adequate highways, election of local officials, | for the purposes of the comparison and fish and game conservation. Ur- | with the District of Columbia, since ban residents outside the District help | the bulk of local revenues is derived pay for rural roads through State from property taxes. taxes, but if the District were a State Expenditures made by the State peals of the District be transferred | with its present area’ its taxpayers government also should be added. Its from the District budget to that of | would pay for a few rural roads. cost payments cannot safely be pro- the Department of Justice; and that | no o) Service | rated to the cities according to per~ changes be made in the controlling | go.ommendation. | centages of assessed values, for the agency of Freedmen's Hospital, the | "y 5y rocommended, therefore, that | T€ASORS that property taxes have be- Temporary Home for Bx-Soldiers and | i comparing the District with other | °0Me & minor source of State rev- Ex-Sailors, and the House of Deten- communities, particular State and |€hUes and that assessment standards tion of the metropolitan police. local governmental services be consid- | VAIY more widely throughout a State As & matter of convenience in treat- | cicd “normal corvices” if they ore than & county. As the most practical provided by some State or local agency lable method, State payments may