Proposed Authorization for the District of Columbia To Sell General Obligation Bonds To Pay Certain Liabilities

Legislation has been proposed that would authorize the District of Columbia to sell general obligation bonds to pay certain liabilities outstanding at the end of fiscal year 1980. General obligation bond sales have been used to finance operating deficits by some jurisdictions, but the most common use of these bonds is to finance capital projects with a useful life at least as long as the term of the obligation involved. The District estimates that debt service of about $400 million would be required to repay the $184 million in bonds which would be authorized by S. 744. A significant amount of operating revenue would have to be dedicated for 20 years. The amount of bonds which would be authorized by the proposed legislation is derived from a calculation of net eligible liabilities from the general fund balance sheet in the District's fiscal year 1980 annual report. If the District plans to use the cash from the bonds to reduce its general fund deficit by the amount of liabilities to be paid immediately, other items similar to the accrued interest payable on long-term debt, accrued annual leave payable to District employees, and taxes collected which are applicable to the future which are excluded by the bill should be eliminated from the cash requirements determination. Asset and liability amounts are not intended to measure cash needs and should not be used without adjustment. The objective of such adjustments must be to minimize the amount of money borrowed long range to pay short-range debts. The District must take steps to assure that its revenues and expenditures are balanced in future years. Budgeted expenditures should include amounts required to pay bond interest when due and to provide for bond retirement upon maturity.