More than $300 million in public subsidy aimed at a pair of Anacostia riverfront projects threatens D.C.’s debt capacity and puts future bond sales at risk of higher interest rates, District finance officials say.
Between the Southwest Waterfront and Poplar Point developments, D.C. leaders are talking about investing $348 million in new communities along the Anacostia. But a spokesman for Chief Financial Officer Natwar Gandhi said Thursday the amount of debt proposed comes perilously close to the CFO’s recommended caps.
“The District’s debt ratios are approaching the limits recommended by the CFO for fiscal prudence,” David Umansky said.
Wall Street credit reports, Umansky continued, already consider the city’s debt level as “high.” Additional borrowing, he said, “could be viewed by potential investors as excessive, which could affect interest rates on future bond issues.”
Mayor Adrian Fenty has proposed investing $198 million in the Southwest Waterfront, a $1.1 billion project slated to include 2.1 million square feet of hotel, residential and commercial development on 23 underused acres. The District’s contribution — bonds to be repaid with future property and sales taxes generated on the site — would fund infrastructure improvements.
“There’s little doubt in my mind that it will generate the revenue to cover the bonds,” said Ward 6 Councilman Tommy Wells.
D.C. Council members, meanwhile, are crafting a $150 million subsidy to support construction of a new D.C. United soccer stadium at Poplar Point. The stadium and related development is projected as another bonded project, this one backed by revenues collected at Nationals Park.
Gandhi last June advised city leaders toreduce their dependence on bonds, as the District was approaching debt levels that “would begin to risk compromising and jeopardizing its financial health, future and bond ratings.” The $198 million for the Southwest Waterfront, Gandhi told the council two weeks ago in a fiscal impact statement, “reduces the amount available … for other projects.”
And the Poplar Point subsidy, Umansky said, “could require a tradeoff between this project and other planned or contemplated District projects.”
Sean Madigan, spokesman for the deputy mayor for planning and economic development, said the Southwest project will deliver more than 2,800 new jobs, space for 100 new businesses and homes for 1,100 new residents. There is, he said, “ample time to plan our budgets accordingly.”
