Mayor Marion Barry has asked the D.C. City Council to approve a $30 million revenue bond issue to finance construction projects for George Washington University.
Under terms of a bill introduced by Council Chairman Arrington Dixon at Barry's request, the city would market the tax-exempt bonds and then relend the proceeds to the university, which would use them to finance the "academic cluster" and facilities for the handicapped already under construction on the Foggy Bottom campus.
The District never has issued any bonds of any kind. The proposed revenue bond issue for GWU would be the first under authority granted in the 1974 home rule charter, which anticipated that the District, like other cites, would issue bonds to finance its own capital projects and which empowered the city to issue revenue or development bonds for other organizations.
Charles E. Diehl, vice president and treasurer of the university, estimated that GWU could save up to $10 million over the life of the bonds because of the difference between interest rates on tax-exempt securities and the rates the university would have to pay on the conventional market. "That's money we won't have to raise through tuition increases or a fund drive," he said.
In a letter to Dixon, Barry said the District government would act merely as a "conduit" for the loan to GWU and would not incur any new debt or any liability for repayment of the bonds. The university would repay the loans and also would pay the city a fee for the administrative costs of the bond issue, he said.
The university agreed to pledge a portion of its tuition revenues and rental income from two office buildings it owns as security for the loan. Barry said he had been "assured by the District's bond counsel that there would be no liability to the District arising from the proposed bonds and that the District is adequately indemnified" against every risk except its own "gross negligence and intentional and willful misconduct."
The revenue bond procedure, which is similar to that in use in many states, allows nonpublic institutions and organizations to take advantage of a municipal government's tax-free borrowing power. Some jurisdictions have issued revenue bonds on behalf of profit-making corporations, as the District is planning to do for WRC-TV, a practice denounced by members of Congress as an abuse of the tax-exempt bonding privilege.
Riggs National Bank and American Security Bank each have agreed to buy half of the GWU revenue bonds, commitments that expire Dec. 1. National Savings and Trust Co. has been designated trustee of the bonds.
The bond authorization resolution has been referred to the City Council's Committee on Finance and Revenue.