Council Approves Budget on Second Vote, RENTAL Act on First Vote

At what is thought to be the penultimate Legislative Meeting prior to an abbreviated summer work period, the Council approved two key agenda items.

Budget

The first was itself actually two measures, the primary bills that comprise the District’s annual budget. The two bills are interlocking counterparts. The first of the two is the Local Budget Act, which includes the dollars-and-cents aspects of the budget. The second is the Budget Support Act, which includes the legislative language needed to implement the budget’s financial decisions.

Both measures had received the first of two necessary votes at the Council’s prior Legislative Meeting on July 14. However, in the interval between the two meetings, an ultimatum issued by the District’s chief financial officer threw the Council’s previously balanced budget plan into what the chief financial officer deemed an imbalance.

In our Home Rule Charter-designated budgetary role, the Council is the District’s sole appropriator. With problematic overspending in some District agencies, and insufficient real-time year-long pushback on these excesses by the Office of the Chief Financial Officer, funding decisions from outside the Council’s purview had de facto been allowed. Through an analysis of initial vs. subsequent estimates of agency overspending, expected revenue increases, spending pressures, and the replenishing of reserves, it was determined that some current year revenue overages could be put towards the Council’s restoration of cuts made by the mayor to next year’s budget. The budget bills passed at the prior Legislative Meeting reflected the inclusion of those funds.

In light of the chief financial officer’s intervening ultimatum, the difficult decision was made to cut approximately $30 million of those funds from the budget as passed at the prior meeting. With an additional revenue estimate coming in September, and given the proximity of the issuance of that estimate to the end of the fiscal year, the hope is that funds from that revenue can be used to backfill some of the cuts made to programs between the Council’s two budget votes. An addendum detailing the cuts provided a cascading priority list of where funds should flow, and in what order, if they are located in September.

In striking language, the statement accompanying the detailed list of cuts explained that it was “being forced on the Council” and that the acquiescence should be considered “an erosion of our legislative authority, which cannot stand.”

Tipped Wage Reform

While this institutional debate led to the most last-minute budget cutting, the aspect of the approved budget that drew the most public attention was a revision of how the District pays its tipped workers. For decades, tipped workers were paid a reduced minimum wage with the understanding that employers were to top off the worker’s hourly wage to equal the standard minimum wage if customer tips did not already elevate wages to hit this target. Via two initiative votes, the general public expressed its disapproval of this practice, instead seeking the gradual elimination of the sub-minimum tipped wage, elevating it gradually each year until it equaled the standard tipped wage.

When restaurant owners plus some tipped workers and members of the public approached the Council stating that the pace and extent of the tipped wage’s elimination was untenable, the Council passed emergency legislation in June to pause the wage for 90 days at the $10 level so that a compromise approach could be worked out.

One potential compromise offered at the prior Legislative Meeting was deemed insufficient, but at the most recent Legislative Meeting, a different compromise tipped wage reform was adopted as an amendment to the Budget Support Act. Under that compromise, the tipped wage will remain at $10 for now before once again beginning to climb in July of 2026, increasing by a set percentage every two years, until it caps out at 75 percent of overall minimum wage in 2034.

Additionally, beginning in January of 2026, tipped workers’ paystubs will need to include a breakdown of where employees wages come from (tips, commissions, service charges, etc.) This will clarify to each employee, as well as to the District government, how the component elements of wages are distributed.

In other votes regarding the budget, both an effort to fund an implementation study on ranked choice voting and an effort to fund open District primary elections (allowing Independent voters to vote in party primaries) both failed to gain a majority. An effort to fund a number of programs, including a scaled-back child tax credit, via a small increase in the capital gains tax, also failed.

RENTAL Act

Postponed from the prior Legislative Meeting was the first of two necessary votes on the Rebalancing Expectations for Neighbors, Tenants, and Landlords (RENTAL) Act. Like most Council legislation, the bill is a complicated balancing act—an attempt to balance maintaining the District’s cherished legacy of tenant protection law with the reality of a District-specific decline in housing production, especially affordable housing production. With elevated rent nonpayment rates dating back to COVID-era tenant protections, coupled with judicial vacancies in landlord/tenant court and the slower transaction timeline associated with the Tenant Opportunity to Purchase Act (TOPA) adherence, housing investors are uniquely wary of investing in the District.

An initial version of the RENTAL Act was included in the mayor’s budget proposal as part of the Budget Support Act, but it was broken out of that bill and treated as standalone legislation so that a standalone hearing could be held and a full, distinct legislative record could be created.

Changes were made to the mayor’s initially proposed RENTAL Act language prior to the bill’s originally planned first vote at the prior Legislative Meeting, and subsequent changes were made before the most recent Legislative Meeting in response to intervening input from Councilmembers.

In regards to the RENTAL Act’s most discussed provision, as passed at the most recent Legislative Meeting, the bill would provide for expedited evictions in cases of an alleged crime of violence on the premises, if a judge made a preliminary determination by a preponderance of the evidence that such a crime had occurred. This was intended as a compromise between the provision being triggered by an arrest for such a crime (seen as too broad) and by formal charges being pressed (seen as too narrow).

In regards to TOPA, the bill as passed at first reading would exempt residential buildings for the fifteen years following construction from the requirement to allow tenants the opportunity to purchase their building. Fully 96 percent of properties that have a TOPA transaction were built prior to 1978, so newer buildings do in practice make less use of TOPA protections.

The bill also provides a TOPA exemption for the sale of buildings where the buyer agrees in writing to maintain rents for 51 percent or more of rental units at at or below eighty percent of Area Median Income for the twenty following years. During some TOPA transactions, current residents take a financial buyout in exchange for waiving their purchase rights and allowing a purchase to move forward. While these buyouts are an effort to make displaced residents whole, they are essentially an acquiescence that, from the time of purchase forward, these units will cease to be affordable. A twenty-year guarantee of affordability is intended to balance longer-term affordability for the many against the short-term financial compensation of the few.

The second vote on the RENTAL Act is expected in September, after the Council summer work session.

The Council’s next Legislative Meeting is scheduled for Friday, when a first vote on legislation regarding the future of the Robert F, Kennedy stadium project is expected. The second vote on the project is expected in September.