REP. STEWART B. MCKINNEY (R-Conn.) now says he will not oppose the Barry administration's efforts to get Congress to approve the selling of city bonds. The congressman, the ranking Republican member of the House District Committee, had opposed the bond-market idea, saying, accurately, that bonds are very expensive and would place the great burden of repaying their cost plus interest on the shoulders of District citizens for as many as the next 30 years. This change of heart, according to the congressman's staff, came about because Mr. McKinney realized that the city will have to have some cash very soon to avoid financial paralysis. So he is taking his hands off the wheel and telling the city to do what it can to solve its dilemma.
The District has been juggling its debts for several years, but the debt has now grown to a size ($184 million in short-term debts) that no longer makes for easy juggling. Mr. McKinney had suggested that the city get the money by selling off unused properties and making cuts in its budget. But the city has consistently said no to these seemingly reasonable proposals. Mr. McKinney also urged the U.S. Treasury to loan the city $100 million; the Treasury said no to that one.
The city is now in desperate need of money. Mayor Barry this week sent the city council an analysis of the city's cash-flow problems to explain why his administration is asking that the city be allowed to borrow $40 million from the Treasury next month, a loan that will leave the city $80 million in debt to the Treasury for this year alone. City administrator Elijah B. Rogers says this latest loan will prevent the "payless paydays." The city council must act quickly to approve the necessary loan.
The short-term Treasury loan, however, does not remove the need for the $184 million in hand for the next fiscal year, the city will run into more cash-flow problems, probably larger ones, and have to ask the Treasury for even bigger loans. The need for the money is unquestionable. But is the bond market the best source?
Mr. McKinney's voice is gone from that debate, but before he removed himself he asked some pointed questions. Foremost of these is why the city should not sell off properties or make budget cuts instead of taking on the massive debt involved in entering a bond market that, at the moment, has sky-high interest rates. Another question is why the city should make its first appearance on the bond market an attempt to finance a deficit; even if it is an attempt to get old debts under control, selling bonds to finance a deficit is universally viewed as a mark of bad fiscal management and will translate into higher costs for any future city bond offering.