Council Chair Phil Mendelson may complain about his more progressive colleagues on occasion, but they’ve helped him play an important role in recent budget cycles: mediator.

Mendo has his ideological commitments, but he’s always been willing to move in one direction or another if a majority on the Council is pushing him that way. In recent years, that’s meant a lean leftward as older, more conservative lawmakers have retired or lost their seats. And Mendelson’s latest plan for the 2025 budget, released Tuesday, shows the chair has acceded to that pressure in some ways while still trying to resist it. 

The chair’s changes to the 2025 budget would add something like $500 million in new spending to the plan Mayor Muriel Bowser released last month, reversing some of the most painful cuts in her budget while tacking on some new programs that might’ve initially seemed out of reach given the District’s financial challenges this year. He’s restored pay raises for early childhood educators, revived the perpetually imperiled “baby bonds” program, sent millions back to struggling schools in wards 7 and 8, added new housing vouchers, and even created a new child tax credit for families. The plan will have to survive the scrutiny of the full Council, of course, but Mendelson is hopeful it has enough in it to satisfy every faction of the body.

So how has he managed all this after Bowser (and Chief Financial Officer Glen Lee) have spent the past few months promising doom and gloom in the budget? He’s agreed to a series of tax increases, above even what Bowser proposed, as a bid to stave off even more aggressive proposals from other lawmakers. 

“I expect I will get criticized for that,” Mendelson allowed during a briefing with reporters ahead of the revised budget’s release. “But I think you all know that a majority of the Council wanted to raise taxes, so I tried to find a way to minimize how much we were increasing taxes.”

Mendelson has attempted a similar maneuver before, in a bid to dissuade the Council from increasing taxes on high-income earners in 2021, but it was not particularly successful. He’s hoping for better luck this time, as he attempts to play peacemaker between the mayor’s most conservative impulses and the demands of lawmakers expecting more robust changes to the city’s revenue streams to adapt to a post-COVID reality. He added that he is expecting to see additional proposals to raise taxes even more during the Council’s two upcoming debates on the budget—the first is set for Wednesday, the second for June 12—but he doesn’t expect those hikes will have the votes to pass. Loose Lips hears that Ward 1 Councilmember Brianne Nadeau is working on a package for even more aggressive property tax hikes, but time will tell whether Mendelson’s prediction will prove true.

Chiefly, Mendelson wants to raise roughly $85 million a year by raising the payroll tax on businesses even more aggressively than Bowser initially hoped—she wanted to simply reverse a previous cut to the rate, but Mendo would go a step further, raising it from .62 percent to .75 percent. He would also tax properties valued at $2.5 million or more at a new, higher rate to raise about $6 million per year (directly in contravention of Bowser’s threats that lawmakers shouldn’t touch these tax rates) and remove a tax exemption for interest earned on investments in municipal bonds sold by the District government and other public bodies (like Metro), raising $8 million this year and $15 million annually going forward. The latter two ideas were both discussed by the Tax Revision Commission, a panel of experts convened to debate future tax policy, so at least that group’s tortured deliberations have not proven entirely fruitless.

“Some of the other proposals around real property taxes would’ve been far more costly” for homeowners, Mendelson warned this week, noting that the new tax will only be assessed on every dollar of assessed value above the new $2.5 million threshold. The owner of a property worth $2.6 million would only pay another $184 per year, he estimates. Surely that will still prompt some grousing, but LL imagines many of the people with these properties can afford it. (And, as an olive branch to small businesses, he is also increasing property tax credits for any company with revenues less than $3 million annually.)

Perhaps most intriguingly, Mendelson has teamed up with At-Large Councilmember Kenyan McDuffie for one heck of a maneuver to fund McDuffie’s beloved “baby bonds” program. The city will, at last, end its monopoly on sports betting and allow private sportsbooks into the market starting July 15. Any money that the shift generates in taxes and licensing fees will flow first to fund baby bonds (structured to reverse the racial wealth gap by letting young kids make early investments) and then go to other priorities. Mendelson notes that the CFO estimates this will amount to about $6.5 million per year, which he feels “grossly” underestimates the economic benefits tied to such a change. LL would note that there is no small amount of irony here, considering the city’s last CFO grossly overestimated how much money the city stood to earn from rushing to establish a D.C.-run sports wagering program several years ago. 

“Baby bonds has been a tussle with the mayor for several years, unfortunately, so we see this as the only way to keep it funded,” Mendelson says. 

This will probably piss off FanDuel, the sports betting giant that just swooped in to fix the city’s seriously screwed-up deal with Intralot, the Greek gaming company that won the contract to run D.C.’s sports betting program. In just a month of running things for the District, FanDuel reported earning D.C. about $1.9 million in tax revenue; Intralot’s old system, Gambet DC, managed just $4.3 million over about four years of operation. Bowser’s administration has been pleading for more time to let FanDuel get settled in. 

But that would mean extending the city’s overall deal with Intralot, which expires in July, and Mendelson says the Council isn’t especially keen on doing so after its many well-documented problems. He adds that some sort of temporary extension is possible as all this gets hashed out, but he wouldn’t commit to more than that. In fact, LL hears the Office of Lottery and Gaming was preparing a two-year contract extension for Intralot’s deal to run both sports betting and the traditional lottery system, but this could scramble those plans.

Essentially, Mendo hopes to implement legislation that McDuffie pitched back in March that would have left the deal with Intralot in place. But McDuffie’s staff told LL at the time that they hoped the extra competition in the market would force the lottery to abandon its fealty to the status quo. Maybe all this maneuvering will solve two of McDuffie’s problems at once, considering he’s been facing pressure for months to use his economic development committee to fix the sports betting mess. 

Finally, “true to my word,” Mendelson says he’s restoring the Pay Equity Fund for childhood educators. Bowser zeroed out that fund, meant to deliver raises to child care workers and reverse decades of inequity with schoolteachers, under pressure from Lee as he demanded the city send more money to its reserves. But Mendelson has never agreed with that assessment, and he requested that Attorney General Brian Schwalb deliver a legal opinion backing him up and ensuring he can take more than $200 million from those rainy day funds to reverse the cuts. (Mendo will still make some changes to appease Lee, however, committing the city to refilling one of the reserve funds Lee was particularly concerned about by 2026.)

The Council chair is also proposing some changes to slow the growth of the Pay Equity Fund going forward, disconnecting future increases from the city’s contract with the Washington Teachers’ Union and stopping the city’s practice of paying workers who were pursuing additional degrees or certifications. There were some estimates suggesting the fund would cost much more than the $70 million annually that Mendelson found, so he believes this will make it more “sustainable.”

“I would remind advocates that a month ago, they were having a near-death experience,” Mendelson says. “The mayor wanted them at 53 [million dollars annually] and I’ve got them at 70.”

If that isn’t Mendelson in a nutshell, then LL isn’t sure what is. He’s happiest playing the moderate between two competing forces, even if the definition of “moderate” has changed over time. 

“I am confident this will be approved, but I’m not guaranteeing there won’t be some messiness,” Mendelson says. Isn’t that always the case when politicians press for compromise?