The Washington Post
Finance Chief Urges D.C. to Put Cap on Borrowing
D.C. Chief Financial Officer Natwar M. Gandhi, alarmed at the city government’s high rate of borrowing, has recommended establishing a limit that could curtail the District’s ability to take on new publicly financed projects such as a recently proposed professional soccer stadium or a new central library.
In a letter sent yesterday to Mayor Adrian M. Fenty (D) and D.C. Council Chairman Vincent C. Gray (D), Gandhi said the city’s debt over the next few years will grow to a level that threatens to harm the District’s financial standing on Wall Street. The city’s bond ratings have risen to their highest level this year, and Gandhi said he is intent on continuing the improvement.
“All three of the ratings agencies . . . have indicated that they consider the District’s debt burden to be relatively high,” Gandhi wrote.
The District has the highest debt per capita of any major municipality in the nation: $10,429 per person, according to Gandhi’s letter.
Under current law, the District is allowed to
accrue debt service of up to 18 percent of its total expenditures. In his letter, Gandhi recommended setting the cap at 12 percent, with a goal of not exceeding 10 percent.
Currently, the city’s debt service is about 9 percent of its total expenditures. But that figure is scheduled to rise to 12.1 percent by fiscal 2010 because of capital projects that are already approved, said council member Jack Evans (D-Ward 2), chairman of the Finance and Revenue Committee.
Evans said that the city had been borrowing about $300 million to $400 million annually in recent years and that the amount has shot up to more than $700 million. Large, publicly funded projects such as the $611 million baseball stadium and a massive school modernization program — $2.3 billion over a decade — have helped spur the increase.
“This letter puts my colleagues and the mayor on notice that we can’t go on these borrowing sprees,” Evans said. He added that the council probably would make an oral agreement to avoid exceeding the proposed limits rather than pass legislation to enact Gandhi’s cap.
Under Gandhi’s proposal, already approved projects — including the ballpark, school modernization program, Washington Convention Center hotel, an affordable-housing fund and the Great Streets project — would not be in jeopardy.
City leaders would, however, face tough choices if they sought additional large projects. Examples include a proposed soccer stadium for D.C. United in Southeast and a much-debated central library proposed for downtown at the site of the old convention center.
“It is crucial that the District implement and adhere to policies and practices that ensure current and long-term financial health,” Gandhi wrote.
Evans noted that the District faces a disadvantage when making its case to Wall Street. Other big cities, he said, get relief on their debt service because capital projects are often defrayed by state and county governments.
But the District is “a city, state and a county,” Evans said. “At the end of the day, that argument falls on deaf ears.”