Untested new financing mechanism and a massive, long-term commitment from Congress are the underpinnings of the intricate, high-risk financial rescue plan for the District of Columbia government that Mayor Marion Berry announced yesterday.
Barry proposed to borrow money from sources he is not currently authorized to tap, disburse revenues he does not now command and pay off loans not yet incurred by a device that Congress always has been reluctant to approve.
The mayor's plan won quick and enthusiastic endorsement from leaders of the city's business community. But some labor leaders, members of the City Council and of Congress responded coolly, saying that they needed more details about what the mayor wanted to do and more justification for his proposals.
But it appeared that even if the mayor's plan is successful, it may complicate the city's fiscal posture in years to come because it proposes to mortgage the future to pay for the past.
Barry proposed to "set aside" $10 million a year for the next 20 years to pay off part of the city's cumulative deficit. Unless Congress grants the city new funds to do that, the money will have to come out of city programs. Traditionally, Congress has declined to authorize the city to build up funds not earmarked for specific current expenses.
Overall, the long-term rescue plan would cost $30 million a year for the next 20 years, and $20 million a year for a decade after that.
Even as he appealed for congressional assistance last night, the mayor risked alienating important suburban congressional delegations by suggesting the resuscitation of the city's tax on nonresident professionals to pay the city's contribution to Metro.
That was one of several alternatives the mayor said he would consider if Congress rebuffs his claim that it owes the city an increase in the annual federal payment. The tax was struck down by the courts in February as a violation of Home Rule Charter's ban on a commuter tax.
The mayor's long-await plan, announced in a television speech, is a two-inch-thick volume of text charts and bewildering numbers that is long on history, but short on details about what programs may have to be cut or whose jobs may be in jeopardy.
By stressing the origins of the city's fiscal problems and his proposals for long-term solutions financed by Congress, the mayor deferred yet again the painful, politically sensitive decisions he has said he must make.
Most of the key members of Congress who would have to act on the plan said they had no immediate comment. But Rep. Julian Dixon (D-Calif.), chairman of House District Appropriations subcommittee, called it a skeleton in need of "more specifics."
"In general, I support the spirit of the speech," he said, but he said he was "not so sure it (the burden) is equitably shared" between Congress and the city.
Influential members of the city council said the plan -- the fourth presented by Barry in six months -- was incomplete and fifty.
"I would not characterize it as a plan, but as an explanation of some options," said Council Chairman Arrington Dixon. 'It's got a lot of ifs and assumptions in it, and no (proposed) legislation or timetable."
John D. Wilson (D-Ward 2), chairman of the council's Finance and Revenue committee, said, "I think we have a hypothesis -- an idea -- of things we can do to alleviate the deficit and put the city in financial order . . . I would be more interested in a road map of what we've got to do. We don't have that."
Wilson a persistent critic of Barry's handling of the budget, said on television last night that the plan had a 50-50 chance "of being approved in its entirety, but "I wouldn't put any money on it."
Barry conceded in last night's televised speech that the city will incur a new deficit of $125 million this year on top of a cumulative past deficit officially calculated by private auditors of $284 million.
Barry said the city would raise "needed cash" to pay off $215 million of the $409 million total deficit by selling bonds to the Federal Financing Bank.
That bank, a branch of the Treasury Department, is authorized to lend money only to federal agencies or to organizations whose borrowings are guaranteed by a federal agency. Officials at the bank said the District of Columbia falls into neither category.
Wilson, a persistent critic of Barry's handling of the budget, said on television last night that the plan had a 50-50 chance "of being approved in its entirety, but "I wouldn't put any money on it."
Barry conceded in last night's televised speech that the city will incur a new deficit of $125 million this year on top ofnk, a branch of the Treasury Department, is authorized to lend money only to federal agencies or to organizations whose borrowings are guaranteed by a federal agency. Officials at the bank said the District of Columbia falls into neither category.
The mayor conceded that Congressional approval would be required to float such a bond issue. The immediate reaction among Congressional sources and other analysts of the city's finances was that legislation would be difficult to obtain unless the mayor specified just what would be done with the money.
"I think the federal government does have a financial responsibility to assist them," Dixon said. "But there have to be more specifics about what the money is to be used for and why they just couldn't borrow it from the treasury" instead of from a special bank as Barry proposed.
Neither the mayor's speech nor a briefing for the press by City Administrator Elijah B. Rogers nor the test of the plan itself directly addressed that question.
Barry and his aides have been peppered for months with variations of the question. "If you had the money to pay off the deficit today, whom would you pay it to?" and there is still no answer that will satisfy their critics.
In fact, critics noted last night their difficulty in reconciling the mayor's proposals for dealing with the deficit with tables in the supporting documents showing that well over $100 million of the official deficit has already been paid off.
If the federal financing bank loan plan is approved by the City Council and Congress and successfully negotiated, the mayor said, it will take 30 years to repay it at $20 million a year in principal and interest -- a total of $600 million.
That money would have to come out of future city budgets, as would the $10 million a year "set aside" to pay off those parts of the deficit not immediately due.
The proposed bond issue would be floated through the federal agency because the city is not yet prepared to face the scrutiny of the private bond market. Barry said the "full faith and credit" of the District of Columbia government -- meaning increased property taxes if necessary -- would stand behind the bonds, but the value of that credit has never been tested.
All the key proposals of Barry's plan depend in some way on Congressional action or cooperation. Besides the bond issue and the "set aside" funds, Barry asked for more than $5 billion in federal funds for city workers' pension over the coming 29 years and he noted what he said was Congress' "moral obligation" to increase the annual federal payment.
Barry said that if Congress keeps the federal payment at its current annual maximum of $300 million, the District of Columbia will have to consider several alternatives, such as layoffs, to balance future budgets.
One of those alternatives, unmentioned in his television speech and unmentioned in Rogers' briefing, was reinstating the tax on the income of nonresident professionals to meet the city's obligation to earmark a "stable and reliable" source of funds to pay its share of Metro costs.
That would involve congressional authorization to resuscitate a tax already struck down by the courts to allow the city to tax suburbanites for the city's share of Metro funds -- a step long feared by suburban officials and strongly opposed by suburban Congressmen and Metro board members.
Another possibility Barry suggested was raising Metro fares to cut the deficit, this reducing the city's share of that deficit. Both suggestions -- the professionals' tax and the fare increase -- have the political virtue of obliging someone other than the mayor to make unpleasant decisions about how the budget is to be balanced.
Barry adhered to his positon that city taxes cannot be raised because they already are the highest in the area -- except for the residential property tax, which is the lowest -- and therefore Congress must either increase the federal payment or authorize some of the controversial, unpopular alternatives that the mayor proposed.
The consensus of more than a dozen Capitol Hill business, labor and community leaders interviewed last night was that Barry's congressonal wish list had little chance of complete approval. The mayor gave no indication of what he would do if key components are rejected on Capitol Hill.