Jack Evans Report: DC’s Annual Audit
Every year, the Mayor, the Chairman of the Council, the Chief Financial Officer and myself, the Chairman of the Finance Committee, meet with the three major Wall Street rating agencies (Fitch, Moody’s, and Standard & Poor’s). These meetings are important because the rating agencies evaluate the fiscal health of cities, counties and states throughout the country. These ratings, in turn, impact the interest rate imposed on our borrowing through public finance bonds. The proceeds of these bonds allow us to make capital improvements, such as work at our schools, libraries, and even roads --backed in part by the federal government as well. The better the rating, the lower the interest rates and the less it costs to borrow the money. Because of the increase in our bond ratings, the District has saved millions in debt service over the years.
This year, the District delegation was pleased to report on the city’s annual audit of FY 2012, which reported a surplus of roughly $417 million. In addition, the delegation discussed the potential impact of the federal sequester cuts and the ongoing efforts to stabilize the United Medical Center hospital in Ward 8. Finally, the rating agencies were interested in the process for selecting a new permanent CFO with the announced retirement of current CFO Natwar Gandhi.
I made a presentation to each of the agencies regarding our eligibility for a ratings upgrade. I reminded the agencies that we’ve done everything they have asked of us – we have put a cap on our borrowing, replenished the fund balance in our “savings accounts,” and produced structurally sound budgets for a number of years. The rating agencies are also realizing that the District’s economy has changed. We used to be able to tax only about 30 percent of the income earned in the District due to our inability to tax commuters. Now, as the number of District residents continues to increase, we are able to tax more like 45 percent of the income earned in the District. This means we have a stronger, more stable economy, and we are working hard to diversify. I always use the example of “BCD” - we are currently rated better than as Baltimore, Cleveland and Detroit, but we should be on the same AAA ratings scale as Boston, Charlotte and Denver.
I am hopeful that this will be the year for an upgrade, but if not, I will continue to advocate for balanced budgets and spending within our means while continuing to bolster our savings accounts. Thanks for your support.