D.C. Del. Walter E. Fauntroy proposed yesterday using federal loan guarantees, similar to those granted New York City and the ailing Chrysler Corp., to solve the District of Columbia's financial crisis.
In doing so, Fauntroy rejected as what an aide termed "overly optimistic" Mayor Marion Barry's fiscal rescue plan, which centers on borrowing up to $215 million from the Federal Financing Bank, an arm of the U.S. Treasury. Under Barry's plan the federal government would guarantee the loan, and the city would pay reduced government rates.
Fauntroy's proposal, if based on the New York model, would have the federal government issue guarantees to back up loans from private lenders -- possibly District of Columbia banks -- with the city paying higher, commercial interest rates.
The actual money backing the loans, again following the New York model, would consist of city revenues, probably tax receipts. In New York, sales tax revenues were used to guarantee bonds sold to bail the city out of its financial crisis.
Other options available to the city would include the property tax, which is slow to respond to inflation, and the federal payment, subject to the whims of Congress. Fauntroy declined to say yesterday which revenue source he preferred.
Fauntroy said "the most intimate nature of federal involvement" was needed to solve the city's financial crisis, and said he believed his rising seniority in the House of Representatives -- he is in line this year to be named chairman of the domestic monetary policy subcommittee of the House Banking, Finance and Urban Affairs Committee -- would make it easier to win passage of a rescue plan.
The subcommittee has little to do with the District. But it has political value to other Congressmen, and Fauntroy hopes to be able to use his influence to win their support for legislation to bail the city out. Any District financial rescue plan would have to pass through the banking committee.
"Our committee fashioned the Lockheed, Chrysler and New York City guarantees," Fauntroy said. "It does appear the city ought to pursue the loan guarantee formula."
Fauntroy acknowledged that getting any pledge of financial support from Congress will be difficult at a time when legislators, glancing over their shoulders at the results of the November election, will be "looking for every opportunity to cut federal spending."
Also, the city's plea comes at a time when a number of other cities -- Cleveland, Philadelphia, Detroit -- are suffering fiscal woes and could also request federal aid.
Fauntroy said he has not yet received from Barry firm figures on the size of the deficit. "I've been promised them, and I cannot move without them," he said.
In the case of New York, congressional action on a rescue plan was complicated and sometimes stalled by conflicting reports by city oficials on the size of that city's deficit, and Fauntroy emphasized that Congress will probably demand specific and reliable numbers. At times, Barry has given different estimates of the size of the budget deficit.
Fauntroy added that he also has not received a pledge from Barry and the City Council to develop a single proposal, though he said he believes "the better plan dictates that we get together." Council member John A. Wilson (D-Ward 2), head of the council's finance committee, has produced his own plan based on tax increases.
Fauntroy, now in this 10th year as the District's nonvoting delegate in Congress, said winning passage of a loan guarantee program was one of four chief legislative goals for the 97th Congress. He said other items he will introduce include:
Legislation calling for a fixed-formula federal payment to the city from Congress in lieu of tax revenues on federal lands. Fauntroy said he has reworked a formula bill he and Rep. Ronald V. Dellums (D-Calif.), chairman of the House District Committee, introduced in the last Congress. The new formula bill would pay the city around $350 million a year for the next five years, Fauntroy said. So far, the city has been able to obtain no more than $296 million.
A bill to give the District more budgetary autonomy. Under Fauntroy's proposal, Congress would no longer have the right to conduct a line-by-line review of the city's budget. Instead, the budget would be treated like any other legislation and subject to a normal congressional review period, after which it would automatically take effect.
A proposal trimming the congresional review period in most cases. Under the current system, Congress has 30 legislative days to review all D.C. legislation before it automatically becomes law.
Fauntroy wants to allow Congress just seven days to determine whether or not city law involves a "federal interest." If no such interest is found, then the bill would become law after the seven days expire. If either the House or Senate committee charged with overseeing the city's affairs finds that a federal interest does exist, the seven-day period would be expanded to 30 days.