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The Little Fund That Could

Published May 16, 2019

Please join me for The Story of the Recorder of Deeds Automation and Infrastructure Improvement Fund. No, really. It’s a good story!

The D.C. Council’s Committee of the Whole was very unhappy in November 1996, and wrote that, “the District is in the midst of a severe financial crisis, exacerbated by the loss of tax-paying businesses and the jobs they provide.” In financial crisis, “The District is hampered in its ability to attract and retain businesses by tax burdens that exceed those in the surrounding jurisdictions.” The unhappy Committee looked with longing at business tax breaks to create a friendlier climate, but, alas, had to reject any big changes because they just cost too much and the cupboard was bare.

But the Committee recognized “the importance of moving forward to create a better business climate” and so found three small tax breaks it could approve. One was called the “dividends received deduction.” Another, the “single factor sales formula.” And the third, “the sales tax on prepaid telephone calling cards.” AND the Committee very cleverly brought forth an amendment “that results in a modest immediate revenue gain to the District while making three positive adjustments to its business taxation system.”

That modest immediate revenue gain was–you guessed it!–The Recorder of Deeds Automation and Infrastructure Improvement Fund!

That fall, the Committee said, fully 92% of the records managed by the city’s Recorder of Deeds were in paper form and the other eight percent “are preserved in aperture cards and microfilm rolls” (whatever that meant). So, the Committee established a $5 surcharge to be collected every time a document was submitted for recordation—deeds, trusts, foreclosures, mechanic’s lien releases, security agreements. Surcharges for all!

The surcharge was to last for just five years and produce $2.5 million to buy and install a computer system and train employees on its use. The Committee was happy. The upgrade would “improve customer service, reduce recordation turnaround time to a matter of minutes, increase cash flow and provide additional revenues and facilitate data transmission and integration.”

Automation, baby.

Time passed. When the five years were up, the Council in 2001 amended the fund’s statute to let the surcharge be collected for another five years. Then in 2008 the time limit was repealed in its entirety.

To this day, the surcharge remains.

And the automation of records at the Office of the Recorder of Deeds? Care to guess?

The Office of the Chief Financial Officer’s 2017-2021 Strategic Plan includes this goal for the Office of Tax and Revenue: That by 2021, “60 percent of documents [are] recorded electronically at the Recorder of Deeds.”

And what about the money? Between FY 2000 and FY 2018 the Fund collected a total of $27,409,243. The surcharge produces around $1.5 million a year and the recordation fees recently have been swept into the city’s general fund and used for other purposes.

Four years ago, during the budget debate, elected officials transferred $3 million out of the fund.

The same amount was moved out the next year.

In FY 2017, another $931,891 was swept.

The recent ODCA report, Elected Officials Create Special Funds but “Sweep” Dollars for Other Purposes, found that such Funds had dollars transferred 72 times between FY 2014 and FY 2017, a total of $142 million used for other than the originally intended purpose.

And this year? The Little Fund That Could is being asked to cough up another $500,000 for the General Fund in the proposed FY 2020 budget pending before the D.C. Council.

And that’s just one story! There are others! There is the Corporate Recordation Fund, and the Intermediate Care Facilities for Persons With Intellectual Disabilities Fund and the Litigation Support Fund …more than 250 in all!

Each with a story to tell.

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