The District is quickly approaching the point where it will no longer be able to afford to build new roads, overhaul school buildings and make other capital expenditures. If revenue and spending on capital projects remains the same, the city will be up against a self-imposed 12 percent debt cap within five years. If revenue slips by $100 million, as it has since April, the cap will be reached in four years, according to Ward 1 Councilman Jack Evans, who heads the D.C. Council’s Finance and Revenue Committee. The city’s debt currently amounts to 10.3 percent of all expenditures, a spokesman for Chief Financial Officer Natwar Gandhi said.
“The financial situation is a lot worse than the public realizes,” at-large Councilman Phil Mendelson told The Washington Examiner. “We have increasingly relied upon borrowing to the point where every capital project could come to a halt.”
| A growing concern |
| D.C.’s projected debt-to-expenditures ratio (the cap is 12 percent): |
| 2011: 10.4 percent |
| 2012: 10.22 percent |
| 2013: 11.35 percent |
| 2014: 11.8 percent |
| 2015: At or over 12 percent |
| Sources: Ward 1 Councilman Jack Evans and CFO Natwar Gandhi |
City officials are working to make sure those projects don’t stop. Last week, Mayor-elect Vince Gray said he will be freezing all capital projects “not currently under way.” He will then convene a “blue ribbon panel” to review and prioritize projects. Gray wants the panel to find a way to cut $120 million from the capital budget.
Since 2002, the city’s debt has more than doubled to $7.1 billion from $3.5 billion, Gray said.
“Had the council not established a 12 percent debt ceiling, we would likely now be well above 12 percent,” he said.
The council imposed the cap in 2008 after Gandhi warned that the city’s financial health was at risk if it continued to borrow heavily as the economy began to crumble.
The council could raise the cap, but “the bond agencies were very happy when we made the cap, and they’ll be equally unhappy if we change it,” Evans said.
Gray’s temporary freeze on projects is the “appropriate” response, Evans said.
The council, he said, now needs to get a better handle on the operating budget by lowering expenditures to keep the city further from the debt cap. The council will begin work on closing a $188 million budget gap Tuesday with a public hearing on proposals from outgoing Mayor Adrian Fenty.
“We’re not in dire straits here,” Evans said. “But we are at a critical moment in time.”
