The District of Columbia government, strapped for cash and pleading with Congress for permission to borrow, is writing off as "uncollectible" more than $139 million in past-due bills.
City officials and the accountants who prepared the first audit of the District's books say they had no choice. The money is theoretically owed to the city and to public institutions such as D.C. General Hospital, they said, but in reality will never be collected and cannot be carried on the city's books as an asset.
"Some of these accounts go back 40 years," said city administrator Elijah B. Rogers. "Obviously a lot of them are not going to be collected. You have to show them in your accounts and then write them off."
Bert T. Edwards, a partner in Arthur Anderson & Co., the accounting firm that prepared the audit published last week, described the list of uncollectible accounts as "a gold mine with no gold in it." Edwards, who has been deeply involved in the long process of straightening out the city's books, said that "if you could collect $100,000 of that $139 million, I bet the city would be glad to give you half of it."
Among the accounts listed in the audit as uncollectible are loans to students who have moved on, taxes on odd-shaped properties that nobody wants, D.C. General Hospital bills, water bills, past-due tuition fees and fees for service at city health clinics. The total, $139.4 million, is more than triple the amount of debt that the audit concluded the city could reasonably expect to collect.
Writing off uncollectible debts is part of the city's effort to clean up its books in anticipation of selling municipal bonds to private investors, a scheme aimed at paying off the city's $184 million cash deficit.
The district tries to collect unpaid property taxes by selling at auction properties on which taxes are overdue, but that process is effective only on properties that somebody wants to buy. Bidders at the recent annual auction said they knew of some parcels that have been offered for sale for many years with no takers, while the overdue tax bills continue to mount.
The law prohibits the District from giving those parcels away, but Edwards said it is unrealistic to record the taxes on them as if they could be collected.
Part of the hole New York City dug for itself consisted of loans made against theoretical property taxes owed on burned-out and abandoned buildings.
Edwards said a decision had been made not to try to collect overdue payments from some users of city health clinics. "A fee is charged for urinalysis to test for heroin abuse and for the blood test for VD," he said, "but if you pester the clients for the money they'll stop coming in. If the guy comes in with money in hand or he has Blue Cross, you collect. Otherwise, you never get it."
Such "service receivables," or money due for city services, make up the largest item on the list of uncollectibles -- $70.5 million, which includes $8.7 million in guaranteed student loans that will not be repaid.
Other major items are $28.6 in unpaid hospital bills, $18.3 million in overdue taxes, such as sales taxes from defunct businesses and $11.7 million in water and sewer bills.