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District Government Plan Main Points

Here are key elements of the D.C. financial and management proposal approved yesterday:

1. Grants hundreds of millions of dollars in tax breaks to the District, including a $5,000 credit for first-time home buyers (reduced for individuals with incomes of $70,000 to $90,000 and couples with incomes of $110,000 to $130,000). Capital gains taxes on the sale of profitable new business investments in the city after Jan. 1, 1998, would be eliminated, provided the investments are held for at least five years and made in areas of the city where at least 10 percent of residents' incomes are below the federal poverty level. Companies must do 80 percent of their business in those areas to qualify for the special capital gains tax break.

2. Transfers substantial authority over critical city agencies from Mayor Marion Barry to the D.C. financial control board and directs the board to bring in consultants to produce swift changes in personnel, contracting, asset management and information technology.

3. Requires the current directors of the Fire Department and Emergency Medical Services and the departments of Public Works, Administrative Services, Corrections, Human Services, Health, Consumer and Regulatory Affairs, Employment Services, and Housing and Community Development to be reconfirmed by the control board. The mayor's future nominations for these agencies would be subject to control board approval. The control board could fire these agency heads at will; the mayor would need control board approval to fire them.

4. Transfers the $4.9 billion District pension shortfall to the federal government, relieving the city of its single biggest financial problem. A study of the best way to fund the program will be completed by fiscal 1999.

5. Mandates closing Lorton Correctional Complex in Northern Virginia by 2001. Many inmates would be transferred to privately run prisons; maximum security inmates would go into the federal prison system. The District would be required to eliminate parole and make other changes that meet federal truth-in-sentencing requirements.

6. Increases the federal government's share of the city's Medicaid expenses from 50 percent to 70 percent, giving the District about $168 million more annually in its health care program for the poor. Federal officials would gain greater authority to control benefits and other aspects of the city's program.

7. Permits the District to borrow $300 million for 10 years from the U.S. Treasury to ease the city's cash flow crunch.

8. Ends the $660 million annual federal payment to the District, which would then receive a "federal contribution" of $190 million in fiscal 1998.