When he was chairman of the D.C. Council, Vincent C. Gray (D) helped create a cap on borrowing that he and Chief Financial Officer Natwar Gandhi said would help protect the city’s standing on Wall Street.
The District’s financial standing has indeed improved since Gray became mayor two years ago. D.C. reaped a $417 million surplus for the 2012 fiscal year, and Gray is putting all of it into a reserve fund that will total $1.5 billion, the highest level since 2005.
But continuing to back the cap has proven problematic. Gray has proposed or supported a slew of big-ticket investments in infrastructure, transportation and economic development, all of which could require borrowing that would exceed the cap. Among them are a $2.5 billion streetcar system, a $1.1 billion plan to bury the city’s power lines and as much as $100 million in infrastructure costs to redevelop the former Walter Reed hospital.
Gray floated strategies for altering the cap in the five-year economic development plan that he released last year, in which he pledges to work with the chief financial officer “to adjust the policy of counting successful tax increment financing projects against the debt cap.” With tax increment financing, the city sells bonds to be repaid by future tax revenue.
But last week, Gray said he would stick with the borrowing limit and did not want to see it changed. “I am not willing to support any change to the debt cap,” he said.
The proposal in his economic development plan, he said, was a mistake. “That should not have been stated that way. That should have been more clear,” he said.
Gray said he would rely on a streetcar task force to determine a way of building the system without violating the debt cap.
But one member of the task force, Richard Bradley, executive director of the Downtown Business Improvement District, said he will push the District to approve projects with dedicated tax streams.
“Some cities take those projects off the financing sheet because they are self-financing,” Bradley said. He offered the example of Nationals Park, which relied on a variety of specific taxes to help cover construction costs. “It’s hardly an obligation in terms of general revenue to the city.”