D.C. Area Budgets Mostly Unshaken By Credit Crisis

The declining economy and housing slowdown have forced local governments across the Washington region to recalculate their budgets and cut spending.

But most area officials said yesterday that the impact of the credit crisis on Wall Street has been minimal because their governments do not own variable-rate bonds.

A notable exception is the District, which has had the interest rate on some of its $600 million in bonds double this week, from about 2.75 percent to 5.5 percent.

The increase means the District owes creditors several hundred thousand more dollars.

District officials say they have prepared for the fluctuating rates by setting aside funds in the budget. They also said Wall Street's turmoil has not affected their ability to operate the government.

"The District of Columbia is in sound financial condition," David Umansky, a spokesman for the District's chief financial officer, Natwar Gandhi, said in a statement. "The capital projects that are funded by our bonds will continue to be funded, and the debt service on our bonds will continue to be paid. We are closely monitoring the unprecedented developments in the financial marketplace and are managing District funds in a manner to keep them secure."

Officials in Fairfax and Loudoun counties said they do not own variable-rate bonds. And while Montgomery County as well as Prince William and Arlington counties have such bonds, officials said they are for relatively small amounts. The higher interest rates, they said, do not pose an immediate concern.

Local officials are more focused on how the credit crisis is affecting the broader economy. Around the region, municipalities and counties are suffering from a steep drop in tax revenue because of the housing slump, a slowdown that could worsen if the banking crisis deepens.

A $57 million shortfall has forced Prince George's officials to announce plans to furlough 5,900 employees without pay for two weeks, a step the county hasn't taken since 1991. And revenue problems forced Maryland state officials last week to announce a delay of $1.1 billion in transportation projects around the state.

"With the softening of the economy, local jurisdictions are looking at two things that are challenging -- raising taxes and cutting expenses to maintain stability and their bond ratings," said David Robertson, executive director of the Metropolitan Washington Council of Governments.

The tightening credit markets, he said, could make it difficult for local governments to borrow funds at favorable terms.

Virginia state officials said the Wall Street crisis has not impeded their operations. That said, officials are monitoring the $55 billion pension fund and more than $6 billion in investments.