By Maria Armental
A financial spat that pitted the District of Columbia's governing body against its chief financial officer was resolved Tuesday with a workaround that would allow the district to tap into cash sitting in restricted reserves.
The agreement, brokered behind closed doors over days of back-and-forth discussions, essentially allows the district's council to present a balanced budget over the next four years, as required, and clears the way for the council's spending proposal to head to the mayor and ultimately to Congress for approval.
Jeffrey DeWitt, the district's independent CFO, initially withheld his certification. Mr. DeWitt said the council's original plan to transfer cash from the Washington Convention and Sports Authority to the district's coffers could open the door for bondholders who helped build the convention center and its hotel to sue and for credit rating firms to downgrade the district.
The blow-by-blow of this public row was captured by local media and briefly raised the threat of the council suing the CFO.
By Monday, however, Council Chairman Phil Mendelson and Mr. DeWitt assured the public an agreement would be worked out and a plan would be in place by Tuesday.
In the end, the solution came down to nearly $48 million in extra cash from the Washington Convention and Sports Authority from two previous years. The money should have been transferred to the district, but hadn't been because of a calculation error. Once discovered, the money was moved to the general fund, with about $28 million going into the cash-flow reserve, and nearly $10 million each to the District's housing production trust fund and its pay-as-you-go capital fund, which serves as an additional source of money for the District of Columbia and offsets long-term bond borrowing costs for capital projects.
A local law amendment, approved by the council on Tuesday, allows the district to use that cash to pay for upgrades to the district's 911 system as well as for urgent public-housing repairs.
On Tuesday, Mr. DeWitt formally endorsed the council's plan to dip into the district's 60-day cash-flow reserve fund, which was increased with the $48 million.
Still, Mr. DeWitt warned council members that their financial maneuver wasn't without concern.
"As the Chief Financial Officer, it is my responsibility to advise the Council that such an action, outside of an economic downturn or other fiscal distress, sets a dangerous precedent for use of this critical reserve fund and is inconsistent with sound financial management practices," Mr. DeWitt wrote to the council on Tuesday.
Write to Maria Armental at firstname.lastname@example.org
(END) Dow Jones Newswires
June 18, 2019 15:38 ET (19:38 GMT)
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