By Nikita Stewart
Washington Post Staff Writer
Sunday, June 6, 2010; C01
D.C. Chief Financial Officer Natwar M. Gandhi delivered two warnings at the beginning of this year's budget season: The city relies too much on reserve funds and borrows too heavily to pay for capital projects. Both actions had to stop, he warned.
Most recently, the independent monitor of city finances has gone along with Mayor Adrian M. Fenty's decision to scoop $264 million this year from the city's rainy-day fund and a plan by D.C. Council Chairman Vincent C. Gray (D) on May 26 to borrow to partially pay for about $50 million in 2011 streetcar project expenses. Fenty's dip into the city's reserves leaves the fund with $656 million for 2011 despite a promise to bond raters that it would not fall below $920 million. Gray's plan would push the city closer to its borrowing limit of 12 percent of overall expenses.
Now, some D.C. Council members wonder whether Gandhi, nicknamed "Dr. No" for his conservative budgeting, is being swayed by election-year politics. Gray and Fenty (D) tout delivery of services and capital projects in their mayoral campaigns and sparred over spending during a budget forum Thursday night in Ward 3.
Council member Jack Evans (D-Ward 2), chairman of the Committee on Finance and Revenue, was so upset with city spending that he refused to give preliminary approval to the budget May 26 and the fees and taxes that came with some amendments.
"You have to cut money, and no one wants to make cuts," said Evans, who was the sole dissenter. "The bottom line is you can't run the government this way. . . . I have grave concerns with the council borrowing $47 million. It's like using a credit card at the last minute."
In an interview last week, Gandhi acknowledged the perception by some that his decision-making is pressured by politics but denied that it influences his certification of the budget.
"You operate in a highly political environment here," he said. "My function here is to say no."
Gandhi said that he is impartial on city finances and that his office is trying to determine how close the District is to bumping against the 12 percent cap. Budget documents show that debt service is expected to jump from 9.51 percent in fiscal 2010 to 11.8 percent in fiscal 2011, before Gray's proposed borrowing for the streetcar program. Council and finance staff members are looking at ways to pay for the streetcars without borrowing.
Evans has repeatedly said during recent budget hearings that the current level of city spending reminds him of the time just before Congress stepped in with the financial control board, which oversaw city finances from 1995 to 2001. At the time, Congress also bestowed independence on the city's financial officer.
Gandhi dismissed Evans's comparison.
"Is the control board around the corner? Emphatically no," Gandhi said, pointing to a balanced budget and a spending plan that remains fiscally sound.
Gandhi defended his decisions to say yes to the mayor's tapping into reserves, Gray's borrowing as well as Schools Chancellor Michelle A. Rhee's controversial plan to fund a new voluntary pay performance program for teachers with private donations.
Gandhi said his recommendations go only so far because he cannot make policy. "We don't tell them where to spend the money. We tell them there's money to spend," he said.
He said he was "very assertive" with the mayor and the council about the city's fund balance. "You can lose just like that," he said, snapping his fingers.
But reserves, he said, are rainy-day funds that are used during crises, and the city's declining revenue could be considered a crisis. "In tough times, a family uses its savings account," Gandhi said.
With the streetcar project, Gandhi said his office told budget staffs of both the mayor and the council that there was room to borrow, just not much. "That's the myth. This whole idea that there was no money," he said.
"I think as long as we're within" the debt limit, said Gray, who is challenging Fenty for mayor. "I was the architect of the debt cap in the first place."
In the case of the teachers contract, Gandhi noted that he told Rhee she could not fund pay raises with private contributions outlined in her initial union contract. He said he certified the contract only because a $39 million funding gap in the agreement was filled by budget cuts. The private contributions now cover the pay-for-performance part of the contract, which was approved Wednesday.
Council member David A. Catania (I-At Large), who once pegged Gandhi the "chief fictional officer," said the mayor and council might have felt comfortable in ignoring some of Gandhi's advice because his conservative number-crunching has led to surpluses in the past. "I call it the September miracle," Catania said. "It happens like clockwork."
Gandhi "is walking a tightrope" when it comes to the tug of politics from the mayor and council, he said.
Gandhi, whose five-year term will be up in 2012, said he is independent. "Here, you can disagree with the mayor in the morning and be here in the afternoon," Gandhi said. "I've been here many afternoons."