D.C. police takeover raises public finance questions

A 30-day temporary takeover of Washington D.C.’s Metropolitan Police Department is spinning into a request from the Trump White House to establish funding for improving the capital city.

“I had a very good discussion with President Trump and Attorney General Pam Bondi and POTUS senior staffers on how Congress can help make Washington, DC safe again,” said Sen. Lindsey Graham R- S.C. via a post on X.    

“The White House is working on a package to send me and Sen. Katie Britt from Alabama. Together, we will try to shepherd the D.C. Security Fund through Congress to give President Trump the resources he will need to improve the safety and quality of life in our nation’s capital.”

Plans for the fund could include using taxpayer money to repair roads, bridges, fund police and improve public spaces. Estimates for the size of the fund run from a relatively small amount of money to over a billion dollars. 

Creating the fund would require an act of Congress and represents the latest chapter in the ongoing tug of war between the city and federal government over money and control. 

Trump is using his presidential powers to supplement the local police force with over 400 members of the National Guard, a move which may or may not be paid for with the nascent Security Fund.  

“In D.C. the President of the United States can make an emergency declaration, and it doesn’t really matter what the numbers say,” said Democratic Mayor Muriel Bowser. “Over the last two years, we have reached a 30-year low in violent crime.” 

Earlier this month, the Trump administration announced it was cutting the city’s urban security fund that flows from the Federal Emergency Management Agency by 44% as measured year over year. 

Chicago, New York City, Los Angeles, San Francisco and Jersey City also had their FEMA funds cut. 

A push is underway in Congress to reform FEMA’s role by returning it to a cabinet level agency instead of it functioning as a division of the Department of Homeland Security. 

According to a report published by Barclay’s in July, “FEMA reform is clearly on the president’s agenda, with the contested cancellation of the Building Resilient Infrasturcture and Communities program a negative for munis but the potential elevation of FEMA to a cabinet-level agency a positive.” 

In April the city was hit with a credit downgrade from Moody’s on six groups of Washington’s bonds and its issuer rating which went to Aa1 with a negative outlook from Aaa.   

The current disruptions are so far not creating any rating concern from S&P Global Ratings. 

“DC’s creditworthiness is characterized by a historically stable financial profile, supported by sophisticated forward-looking financial planning policies and practices, as well as a robust, affluent tax base that has shown resilience and growth throughout various economic cycles,” said Tim Barrett, associate director, S&P Global U.S. Public Finance Ratings.

“We will continue to evaluate the effects of federal legislation and actions on the District’s budgeting and economic trends, but we believe DC can withstand near-term volatility while maintaining credit quality commensurate with AA+ and stable outlook.”

As part of the budget reconciliation process  in March, Congress effectively cut the city’s already approved budget by $1.1 billion by mandating it to finish the fiscal year using numbers from its 2024 budget. 

The city has been lobbying to have the money restored since then. 

“The federal government plays a role through Congress passing a budget fix so that D.C. residents can spend their own tax dollars to pay our police and firefighters the wages they deserve,” said City Council Chairman Phil Mendelson. 

“Taking over our police department and deploying hundreds of National Guard members is not the hard work of public safety – it is a show of force without impact.” 

The city is also reeling from reductions in the federal workforce and looking for ways to bolster its downtown core that has never recovered from the pandemic. 

Congress already has a heavy workload when it returns from the August recess trying to get caught up with the budget appropriations caseload. 

The final numbers on twelve separate bills were due on June 30 with the new fiscal year starting on Oct. 1. So far, none are complete which could lead to a government shutdown. 

In the meantime, the city’s finance team is keeping an eye on the bottom line. The city is required by law to adhere to a balanced budget.

According to a spokesman for the CFO, “It’s too early to tell, but the Office of the Chief Financial Officer is monitoring and working with our program partners to see what the financial impact will be, to ensure the district’s budget stays within balance.”