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D.C. headed for another financial meltdown
By: Barbara Hollingsworth
Local Opinion Editor
03/10/10 4:13 PM EST
The District of Columbia has a much bigger financial problem than next year’s publicly acknowledged $600 million budget gap, warned David Mallof, first vice president of the Federation of Civic Associations of D.C. in written testimony he submitted Wednesday morning to the District Council’s Committee on Finance and Revenue.
Here’s a black-and-white snapshot of what Mallof calls a “a crash in slow motion”:
- The city is still short $220 million for the current FY2010 fiscal year.
- Even lower revenue forecasts for FY2011 were announced two weeks ago.
- Most ominous is the fact that the city’s Discretionary Working Capital – used to pay its bills - is down to zero. On Feb. 5, Chief Financial Officer Natwar Gandhi told Council members that “we have only 18 days of working capital…” but what he didn’t mention is that every cent of that is either restricted or escrowed. One month’s worth of working capital ($500 million) is considered the bare minimum for municipalities to have on hand, and two months’ is recommended. D.C. has none.
- Due to all of the above, the real budget gap next year could be as high as $750 million – or about what it cost taxpayers to build the baseball stadium.
“Our beloved D.C. is starting to look like a municipal Toyota,” Mallof told The Examiner. “It’s very hard to watch. And the same folks who intentionally accelerated recklessly and careened wildly on an irresponsible joy ride now want to claim to be safety engineers looking out for our fiscal (and physical) lives.”
A proposed debt restructuring plan that would have the city make interest-only payments over the next four years is fraught with peril, Gandhi warned last month, because the District had the “third most volatile revenue base” in the U.S.
“The committee must break out of its old behaviors as merely a candy shop,” for special interests with political connections, Mallof told Council members.
Deficiencies in structuring the city’s debt and managing its operations and capital budget all add up to a “dangerous moment” for the District, the report concluded. Gandhi’s “late raising all five of these massive challenges simultaneously is unacceptable financial management.”
As for solutions, Mallof doesn’t mince words: “A massive 7 percent buzz-cut is needed pronto on a $6 billion discretionary budget base.”
Council members should recall when the District of Columbia under then Mayor Marion Barry went broke and the humiliation of having the city’s finances taken over by a federal Control Board. If they don’t do something – fast - those dark days will soon be back, and their constituents will find themselves strapped inside a speeding Prius heading for a cliff.
More from Barbara Hollingsworth
Topics
Washington Examiner , Sharp Sticks , District of Columbia , David Mallof , working capital , Natwar Gandhi , District Council Committe on Finance and RevenueFollow The Examiner
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