An ongoing dispute between District lawmakers and the city’s chief financial officer threatens to derail tens of millions of dollars in proposed renovations to dangerously neglected public housing complexes.
But the move is opposed by D.C. Chief Financial Officer Jeffrey S. DeWitt, who says it would violate the District’s pledges to bondholders whose investments funded the construction of the convention center in 1998 and the convention center hotel in 2010.
The bondholders were promised that money generated by the convention center would go to them until the debt was fully repaid, with any excess revenue going toward early repayments, DeWitt wrote in a recent letter to Mendelson.
Redirection of the money could prompt legal action by bondholders and even a downgrade in the District’s hard-won credit rating, DeWitt said.
“If we break our promises to investors, we not only lose our credit, but also our credibility and reputation; and our cost of borrowing can substantially increase,” DeWitt wrote.
A credit rating downgrade could hamper the construction or renovation of schools, roads, bridges and other public facilities the city is planning to improve, DeWitt said.
Mendelson, in an interview, said he believed after consulting with the council’s general counsel and the office of D.C. Attorney General Karl A. Racine (D) that DeWitt’s objections were “overstated.” He said the money he wants to use — part of more than $400 million the convention authority has in reserve, less than half of which is restricted — is not currently going to bond repayments.
“Folks who say that we can’t touch the money say that we’re threatening the bond investors, and that’s not correct,” Mendelson said. “What’s at issue is the increasing hoard of unrestricted cash.”
In an initial vote on the budget earlier this month, the council approved a plan to remove $60 million from the reserve, but Mendelson has revised that to $49 million in what he described as an effort “to be cautious” after DeWitt’s objections.
Only half of that would be spent on public housing repairs, which have been identified by D.C. Housing Authority officials as an urgent priority. The other half would eliminate the need for an increase in hotel room taxes proposed by D.C. Mayor Muriel E. Bowser (D).
David Umansky, a spokesman for DeWitt, said the chief financial officer is reviewing the latest legal arguments advanced by Mendelson and would decide by June 4 — when the council votes for the last time on budget-related legislation — whether to certify the budget.
“The conversations are going on,” Umansky said.
If DeWitt opts not to certify the budget, the council would have to restore the money to the convention authority.
The standoff between Mendelson and DeWitt comes as the council prepares to vote on a budget largely unchanged from what it preliminarily approved two weeks ago.
The latest spending plan restores $7.5 million to a fund for preserving affordable housing from which the council initially eliminated funding. However, the amount is only half the $15 million for the fund proposed by Bowser, and the council ceded no ground on other changes to housing initiatives the mayor had championed.
Also unchanged: a reduced, $15 million subsidy for United Medical Center, the District’s public hospital. That is less than half the $40 million hospital officials said they need to stay afloat, and could lead to reductions in staff and services at the facility, currently the only hospital in Southeast Washington.