The number of Washington, D.C., residents with incomes below the federal poverty level increased to 104,000 in 2005, up 11% from the previous two-year period, according to the DC Fiscal Policy Institute (DCFPI).

The District has one of the widest wealth discrepancies in the country and continues to rank among the most poverty-stricken U.S. cities - and the poverty rate is only increasing. But at the same time, the area has shown robust growth over the past several years, with a booming real estate market, a low business vacancy rate and aggressive job growth.

So why are so many residents continuing to be left behind in a city with vast economic opportunities?

One factor, according to local businesses and officials, is the failure of the city's First Source Agreement, a program of the Department of Employment Services (DOES). The program aims to tie the city's economic development to its residents who are most in need of jobs. It requires that all firms getting District funding or subsidies of $100,000 or more must hire at least 51% of their employees from within the District.

This policy has been on the books for 23 years but continues to fall short of its goal. DOES data for 2006 shows that businesses involved in the program have an average of just 34% of employees from the District, a drop from the 36% average of the previous three years.

The program appears to be struggling partly because the skills of many of the city's unemployed residents do not match the job requirements of the businesses looking for help.

"There is a disconnect between the types of jobs that are generated through First Source Agreements and the qualifications of District residents who are seeking employment," said Susan Gilbert, associate director of DOES' Office of Employer Services.

The same problem is apparent to Rocio Galang, assistant director of human resources for D.C.'s Mandarin Oriental Hotel, which received about $50 million dollars in taxpayer subsidies. Her business has been unable to meet the target required by the First Source Agreement.

"[The hotel hasn't] had enough referrals of qualified candidates from the DOES. To achieve 51% is extremely difficult and would require more support from the District government in identifying, screening and training potential employees," Galang said.

Ed Lazere, executive director of the DCFPI, also said the city needs to do a better job of matching unemployed residents with available job opportunities.

"To achieve this, the city must increase job preparedness training and work collaboratively with employers to train District residents in the specific skills that will make them a qualified employee," he said.

Another factor impeding the progress of the First Source Agreement is insufficient monitoring of the businesses, according to Lazere and Gilbert. Lazere said there should be more enforcement of the firms that are part of the agreement, but Gilbert expressed concern that the job of overseeing compliance of the 4,334 businesses covered by the program was simply too much for a staff of only three employees. "There is insufficient staff to carry out the mandate of this program," she said.

Gilbert added that federal funds for the program have decreased in the past several years, thus hampering monitoring and enforcement activities. "In essence, a local 'unfunded mandate' was created," she said.

While there appears to be consensus about the shortcomings of the program among the District government officials and businesses involved with the First Source Agreement, there also is strong agreement that the theory behind the program has the potential to benefit the District's residents.

According to Galang, it's simply a matter of the local government providing the proper assistance that will allow businesses to bring practice in line with the theory.