District of Columbia to Issue $95M for Development in Six Neighborhoods

WASHINGTON — The District of Columbia announced yesterday that it will issue up to $95 million of bonds to spur development in six district neighborhoods.

“Real economic development means encouraging investment in every part of the city, especially in places where the market might not otherwise go on its own,” Mayor Adrian Fenty said during a press conference yesterday. “This new program is going to pump millions of dollars into some of our most important commercial districts, creating new jobs, better amenities, and more vibrant places.”

Initially, the district will consider tax-exempt financing and will create six new TIF districts, which officials hope will entice developers “anchor, stabilize, and catalyze” retail and infrastructure development, Fenty said.

However, district officials said the use of TIF will depend upon economic conditions and that it is possible that the district might instead issue notes backed by the developers.

When asked at the press conference if the current economic downturn could make issuing the bonds difficult, Fenty said that the district is strong economically and has managed to avoid many issues facing other municipalities.

Of the six neighborhoods, two will receive up to $25 million of financing, one will receive up to $15 million, and the remaining three are allocated up to $10 million each.

Officials will determine the winning developers through a competitive process, and will accept bids for the sites until April 18. Developers must submit bids for sites involving no less than 10,000 square feet of retail space.

When it comes to a successful bid, Neil Albert, the deputy mayor of economic development, said preparedness is a major consideration, as officials want to see development begin as soon as possible.

“What’s most important is how ready your project is to go,” he said. “We don’t want these funds sitting around forever.”

Even though the city is borrowing $95 million for the project, District Council member Jack Evans, chairman of the finance and revenue committee, said it still falls within the acceptable margins of debt for the city.

Last June, chief financial officer Natwar Gandhi recommended the city adhere to a strict debt cap to avoid jeopardizing its bond rating. He said the district should work to maintain a debt-to-expenditures ratio of 10%, with 12% serving as the acceptable maximum. A federal law states that if the district exceeds a 17% debt ratio, a new federal control board could be established similar to the one that oversaw the city’s finances during its mid-1990s crisis.

Evans said yesterday that the district currently has a ratio of 9%, and the introduction of the new debt will still keep it under 10%. However, he did note that the city must be careful in the future when it comes to new debt.

“The bigger chunks of money we borrow can become a concern when we deal with the bond agencies,” Evans said.

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