Scrambling to recover from a collapse in the high-risk bond market and a sudden surge in interest rate payments, the D.C. government will soon convert $550 million in tanking variable-rate debt to another, more stable security, city finance officials said.

The District holds roughly $1.2 billion in auction-rate securities, a long-term debt with variable interest rates that reset every time they go to auction – in D.C.’s case every 35 days. Until recently, the securities were a popular though risky financing tool for municipalities, universities and other institutions.