The District’s Types of Debt and Debt Limitations

The Home Rule Act authorizes and sets limits on various types of short- and long-term debt that is backed by the full faith and credit of the District. The limits have not been revised since enactment of the provisions in the Home Rule Act that authorized the various types of debt. The District also is authorized to issue revenue bonds that are not backed by the full faith and credit of the District. Finally, the District is authorized to borrow from the U.S. Treasury to meet the District’s general expenses. The District can issue general obligation bonds to refund (that is, refinance) existing debt or to finance capital projects. These borrowings are not subject to the 14-percent limitation on long-term debt. Also on September 30, 1994, the District had $3.65 billion in long-term debt (both general obligation and U.S. Treasury debt). As calculated by the District Treasurer’s Office, total debt service for these long-term obligations is expected to be $409 million in fiscal year 1998, the highest projected year, or 11.42 percent of total expected fiscal year 1994 revenues. The District’s Bond Rating and Debt Compared With Other Jurisdictions

Various debt indicators are available to compare debt characteristics of jurisdictions. This rating has been the same since the District first issued general obligation bonds in 1984. Other comparisons of the District’s debt with other jurisdictions are more problematic. The District of Columbia’s overall net debt per capita was $6,315, and the ratio of net debt to taxable real property was 8.1 percent. Recommendations

We recommend that the Mayor of the District of Columbia direct that (1) the multi-year plans contain debt service percentage information in the manner required by the Home Rule Act, and (2) the financial statements contain information on the debt service percentage that is calculated using the Home Rule Act methodology by dividing the maximum estimated annual debt service by the actual revenues.
Why GAO Did This Study

Pursuant to a congressional request, GAO provided information on the District of Columbia's debt, focusing on: (1) the types of debt that are available to the District and the limitations on that debt; (2) the total District debt and its estimated future borrowings; and (3) how the District's debt compares with other jurisdictions' debt.

What GAO Found

GAO found that: (1) the Home Rule Act authorizes and limits the District's short- and long-term debt; (2) the District's debt limits have not been revised since enactment of the Home Rule Act; (3) the District is authorized to issue revenue bonds to finance capital projects that are not backed by the full faith and credit of the District and to borrow from the U.S. Treasury to meet its general expenses; (4) as of September 30, 1994, the District's long-term general obligation debt totalled $3.65 billion; (5) total debt service for these long-term obligations is expected to be $409 million in fiscal year 1998; (6) by 2000, the District's projected debt service percentage is expected to be close to the statutory limitation of 14 percent; (7) as of September 30, 1994, the District's general obligation bond rating was at its lowest and was below that of most states and large cities; (8) the District's bond rating has not changed since it began issuing general obligation bonds in 1984; (9) the District's debt level is higher than other jurisdictions, in terms of debt per capita and debt as a percentage of real property; (10) the District's debt cannot be adequately compared with other jurisdictions because its service responsibilities include both city and state governments; and (11) debt service calculations in the District's multiyear plans and annual financial statements are not consistent with the methodology required by the Home Rule Act.