The D.C. Council's Committee on Finance and Revenue voted yesterday to scale back the Barry administration's request for additional borrowing authority this year, expressing concern about the city's ability to pay back the money.
The District government already has borrowed $200 million in short-term loans to help get it through the fiscal year. The city had asked for authority to borrow an additional $100 million, but the committee voted 3 to 1 to allow only $50 million more.
John A. Wilson (D-Ward 2), chairman of the committee, expressed concern about borrowing any additional money, but he said that if the new borrowing was not approved, the city would miss a $55 million payment due July 1 to the fund for police, fire and teachers' pensions.
"We do not have enough money to meet our pension fund obligations," Wilson said. "It wouldn't look very well for all concerned."
Even with the additional borrowing, Deputy Mayor for Finance Robert Pohlman said the city would have trouble meeting its financial obligations this summer. He mentioned in particular a $30 million payment due the Metro system on July 1.
"I don't expect to be able to make that on time," Pohlman said, warning that the city needed the entire $100 million in borrowing authority. He said the committee's action is "going to mean we can't pay all our bills on time. It just means we're going to have to clamp down on spending."
Pohlman's disclosure is the latest piece of bad financial news for the city. Three weeks ago, the city's bond rating was lowered by a major Wall Street rating agency, while this week city officials reported that tax collections had fallen $28 million behind projections for the year because of the flagging regional economy.
The administration has already had to cut back on services, and further reductions are likely in the months ahead, officials said yesterday. The D.C. Council rejected a round of tax increases this year proposed by the administration.
Yesterday's Finance and Revenue Committee meeting was called to discuss the issuing of further short-term notes, which must be paid back by the end of the fiscal year in September.
The purpose of such annual borrowing is to cover short-term obligations when the city is short of money because of the uneven collection of taxes. But several council members expressed concern that the city was becoming too dependent on that kind of borrowing.
"We're running the government on short-term borrowing," Wilson said. "We're not bringing in enough revenue to cover our expenditures."
"We're living on credit. It is like a great big Visa card," he added. "It is not good financial management whatsoever, because eventually it is going to collapse." He predicted that new taxes are inevitable after the fall elections.
Betty Ann Kane (D-At Large), the only member of the committee to vote against the borrowing, said the city "could very well" slow spending, rather than borrow additional funds.