Summary Analysis of:

The Economic and Fiscal Impacts of the World Bank Group
on the District of Colombia and Washington Area
by Stephen Fuller, Ph.D.

Analysis by The 50 Years is Enough Network

Mr Fuller, on behalf of the World Bank Group Community Outreach Program (or should we say Public Relations Department), outlines various economic and fiscal impacts of the Bank on the Washington, DC Metro Area, including the District of Colombia, Northern Virginia, and Suburban Maryland. While some feel that the commission of this paper may have been the Bank's response to criticism by campaigners calling for the contribution of PILOTS, or Payments in Lieu of Taxes, voluntary payments made by tax-exempt organizations like the World Bank Group to the localities in which they own property. If, indeed, Mr Fuller's attempt is intended to show that the Bank contributes to the area's tax base, he is skirting the issue to the tune of an estimated US$430,922,298.12 in annual unpaid property and corporate taxes to the District alone. As pointed out in an earlier analysis of this paper by Figaro Joseph, "the report did not calculate the value of the World Bank Group's assets and other constraints it places on the city. Without these factors, the findings of the report are incomplete and meaningless."

What is at stake here? An estimated $430 million dollars in unpaid tax revenues to the District, at a time when the city is facing virtually insurmountable fiscal challenges, the burden of which is resting squarely on the shoulders of the city's tax paying residents and businesspeople.  Mr Fuller attempts to show that "a tax exempt organization can be a major source of local tax revenues" (p.22). The problem, however, is not what the report shows, but what it doesn't show.

Mr Fuller outlines what he feels are the three main sources of economic impact on the District to be:

1. Direct and related payments to the World Bank Group active staff, consultants and retirees (p.5)

   According to the report, there were 3,700 (27%) Bank staff, consultants and retirees living in the District at the time of the study, of whom 2,013 are active staff. Within the active staff residing in the District, only 706 were U.S. citizens required to pay income tax; the remaining 1307, under international provisions, are not required to pay U.S. taxes (p.7). The Bank's active staff who are US citizens are paid salaries that are net of taxes, and afforded an income tax allowance by the Bank to compensate them for wages lost to income tax (p.17).

2. Procurement outlays for goods and services provided to the Bank by vendors located within the Washington area (p.5)

   This represents outlays such as medical and non-payroll direct payments by the Bank on the behalf of its employees. The total for outlays in FY 2001 in the District was $32.3 million (p.11). Procurement spending in the areas of building management, construction, utilities, transportation, communications, retail spending, financial services, hotels, business, food and health services, information technology, and miscellaneous spending totaled $48.847 in the District (p.13).

3. Spending in the Washington area by government officials, negotiating teams and business representatives visiting the Bank (p.5)

   The author here outlines the benefits derived from the Bank's daily and over-night visitors, as measured by the security clearance logs at the Bank.  These visitors come to attend official meetings, conferences and on informal matters. The report cites the annual meetings of the Band, in conjunction with the IMF, which attract official delegates, unofficial participants, and representatives of special interest groups to be very significant to the group's contribution to the tax base, especially in the areas of hospitality. In addition, in citing additional contributions, "Some delegates to this meeting bring their spouses" (p.15) These visitors' economic impact on the District fall into the following categories: hotel, restaurant, retail, transportation, and other.  Important to note is the fact that some revenue is lost, as Bank visitors are drawn out of the District to spend money at Tyson's Corner and Pentagon City (p.16)

Mr Fuller has gone to the trouble of calculating all figures to reflect the number of District jobs that they would support. For example, the District total of economic impact on the District was calculated at $351.4 million, which he as calculated to be equal to the support of 1, 214 jobs (p.19). He has not taken into account, however, the est. $430 million that the District forgoes as a result of the Bank's exemption from corporate and property taxes. In fact, the reports conclusion that "[E]ven though the World Bank Group is a tax exempt organization, its spending and the spending generated by its spending are the sources of a significant magnitude of tax revenues of the District of Colombia" (p.20), fails to reflect the analysis of important factors (i.e. tax-exempt assets, receipt of public services, etc.) that would likely lead to a very different conclusion.

As Figaro Joseph points out, Mr Fuller's argument that spending by Bank staff in the District is of significant import to the city is a moot point, as Mr Fuller himself states that "spending by Bank personnel and its local retirees impacts the local economy in a manner similar to other residents" (p.8). He also attempts to make the point that the location of the Bank within the District creates a significant comparative advantage for the city, attracting visitors and businesses by the attractive lure of the institutions.

We can further parallel the conclusion made by Mr Fuller himself, that the spending of the Bank is really no different than the spending of employees of other firms to counter that, as DC is also the seat of the federal government and holds the history of the country within, it creates a significant comparative advantage to the rest of the United States, and as such, attracts visitors and business to the area that undoubtedly would be or greater economic impact on the District than the Bank.

The District, according to Fuller, captures only 20.4% of the Bank's total economic impact, which generates $32 million in revenues "from a select group of tax sources." (p.21) However, keep in mind that "[v]isitors as well as Bank employees and consultants may generate alcoholic beverage taxes. And, bank employees and consultants will also generate parking tax revenues." (p.20) And really, when you add these in, the $430 million that is not currently being contributed by he Bank just pales in comparison.