appertaining to such temporary or definitive Bond) in exchange and substitution for such definitive or temporary Bond and any coupons appertaining thereto which shall not be destroyed, lost, or stolen and in lieu of and substitution for the coupons appertaining thereto which shall be mutilated, destroyed, lost, or stolen. In every case of exchange or substitution, the applicant shall furnish to the District such security or indemnity as may be required by the Mayor to save the District harmless from all risks, however remote, and the applicant shall also furnish to the District evidence to the satisfaction of the Mayor of the mutilation, destruction, loss or theft of the applicant's Bond (or coupon or coupons) and of the ownership thereof. Upon the issue of any Bond upon such exchange or substitution, the Mayor may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses, including counsel fees, of the District. In case any Bond or any coupon which has matured or is about to mature shall become mutilated or be destroyed, lost or stolen, the Mayor may, instead of issuing a Bond in exchange or substitution therefor, authorize the payment of the same (without surrender thereof except in the case of a mutilated Bond or coupon) if the applicant for such payment shall furnish to the District such security or indemnity as the Mayor may require to save the District harmless, and evidence to the satisfaction of the Mayor of the mutilation, destruction, loss or theft of such Bond or coupon and of the ownership thereof.

(b) Every Bond issued pursuant to the provisions of this act in exchange or substitution for any Bond which (or coupon appertaining to which) is destroyed, lost, or stolen, shall constitute an additional contractual obligation of the District, whether or not the destroyed, lost, or stolen Bond or coupon or coupons shall be found at any time, or be enforceable by anyone, and shall be entitled to all benefits equally and proportionately with any and all other Bonds and coupons of the same issue.

SEC. 11. This act shall become law and become effective in accordance with the provisions of sections 404 (e) and 602 (c) of the District Charter.

COUNCIL OF THE DISTRICT OF COLUMBIA

REPORT

1

To: All Councilmembers.

*

From: Marion Barry, Chairperson, Committee on Finance and Revenue.

Date: September 24, 1975.

Subject: Refunding Bond Authorization Act, Bill 1-162.

INTRODUCTION AND BACKGROUND

This is a report of the D.C. City Council's Committee on Finance and Revenue on the "Refunding Bond Authorization Act" Bill No. 1-162, initially introduced by Sterling Tucker, Chairman, D.C. Council.

Attached is the proposed Refunding Bond Authorization Act as voted and passed by the Finance and Revenue Committee on September 18, 1975.

Prior to the enactment of the District of Columbia Self-Government and Governmental Reorganization Act (PL 93-198), the District of Columbia was required to finance its capital projects by borrowing from the Treasury of the United States.

In the 1950's and 1960's, the city received long-term borrowing authority for various capital projects. This authority was also limited to borrowing from the U.S. Treasury. Under the form of government established by the Reorganization Plan No. 3 of 1967, the District of Columbia expanded its borrowing from the U.S. Treasury and engaged in an extensive building program to modernize and build new facilities. In June 1967, the amount of outstanding principal for the General Fund was about $51,000,000. During the District's last three fiscal years, such borrowings aggregated $124,000,000, $162,000,000 and $192,106,000 respectively, at interest rates varying from a low of 7% to a high of 8%. The total amount of principal owed to the Treasury for all funds is now about one billion dollars. Annual debt service for current borrowings is $65,000,000 in fiscal year 1976 and is projected to $84,000,000 in fiscal year 1977.

Comer Coppie, Director of the Office of Budget and Management Systems, noted in presenting the above figures at the Committee's public hearing, September 11, 1975, that "the growth in our outstanding indebtedness reflects the rapid expansion of our public works program." He also stated "We now have more than 4 projects under construction and another 40 projects in the design stage. The cost of projects in progress totals almost $1.6 billion."

With the enactment of the District of Columbia Self-Government and Governmental Reorganization Act (PL 93-198), the District was provided with expanded borrowing authority. Under the charter, the District's capacity to borrow from the Treasury was terminated except

62-640-75

(7)

to complete capital improvements projects approved by the Congress before January 2, 1975. The District, however, was provided authority to issue long-term General Obligation bonds, revenue bonds and short-term notes. Bonds may also be issued to refund debt outstanding.

Under the authority of the Self-Government and Governmental Reorganization Act (PL 93-198), Part E-Borrowing, two bills were introduced to the Council (1-162), by Chairman Tucker, and (1-163) by Mayor Washington. These bills were referred to the Committee on Finance and Revenue on July 15, 1975. The primary purpose of both bills is to authorize the issuance of $50,000,000 in General Obli gation bonds of the District of Columbia to refund loans of $6,000,000 and $44,000,000 made on March 31, 1975 and May 30, 1975, respectively, to the District from the United States Treasury. The two Treasury loans totaling $50,000,000 were made at the biggest rate of interest (8%) the city has paid on 30-year borrowings from the Treasury.

At 8 percent, the annual debt service on $50,000,000 is $4,441,872. The District would save more than $400,000 a year with bonds sold at 7 percent more than $600.000 a year with bonds sold at 62 percent; and more than $800.000 a year with bonds sold at 6 percent.

With the size of our capital improvements program, those savings will multiply. The proposed 1976-1981 Capital Improvements Program calls for appropriations totaling $789 million during that period.

OVERVIEW

Section 462 of PL 93-198 empowers the Council by act to authorize the issuance of General Obligation bonds. This section requires that a bond refunding act must include the following:

(i) An identification of the outstanding indebtedness to be refunded;

(i) The maximum amount of refunding bonds to be issued; (ii) The maximum rate of interest;

(iv) The maximum term of the bonds (which may not exceed thirty years); and

(v) The maximum debt service to be paid on the bonds in any

year.

Other items which must be determined or authorized by the Council and which would be appropriate to include in a refunding bond act are as follows:

(i) The manner of execution of the bonds and coupons, including a designation of the District officer or officers to execute the bonds (Section 465);

(i) A statement pledging the full faith and credit of the District for the payment of the bonds and authorizing the levy of a special tax to insure the applicability of the sinking fund and Federal payment provisions found in Section 481;

(ii) A recitation that the act is to follow the normal legislative process as set forth in Section 404 (e) as well as being subject to the limitation on congressional review as provided by Section 602 (c) and

(iv) If the question of issuing the bonds is to be submitted to a referendum, the election details (Section 462).

** II 10 87 II (COMMITTEE ACTION ON BILL 15162e mom 787 on si SEC. 2 proposed the authorization for the issuance of $50,000,000 of General Obligations to refinance, $6.000.000 loans of and $44,000.000 made to the District, from the US. Treasury in FY 1975. o The Committee voted to approve. HoL992, bojonqioun ved 977" Infavor: Mr. Barry. Mr. Dixon, and Mrs. Shackleton. Sill zentral Alaqe jon esobedioitob qi ange lo Opposed: None, Committee Reasoning-The Committee's support" of this section was based on the recognition that a public offering in the municipal bond market at a rate of less than 8% represented long-term savings to the District.

SEC. 3 establishes the maximum interest rate at 3%; the inaximum 8% allowable maturity for the bonds at thirty years; and sets a ceiling for the maximum debt service on the bonds at $5,200,000. The Committee voted to approve.

In favor: Mr. Barry, Mr. Dixon, and Mrs. Shackleton.
Opposed: None.

Committee Reasoning.-The Committee's support of this section is tied to section 2. There was strong concern, however, that the ceiling for the maximum debt service on the bonds, set at $5,200,000, was based on twenty years maturity as opposed to thirty years maturity. It is the feeling of the Committee that any offering under 25 years would not be a savings to the city in real dollars. The Committee recommends that the Executive keep the Chairman of the Council and the Committee on Finance and Revenue thoroughly informed as the maturity schedule is developed.

SEC. 4 establishes the signatures both facsimili and manual and the use of the corporate seal of the District of Columbia on the bonds. The Committee voted to approve.

In favor: Mr. Barry, Mr. Dixon, Mrs. Shackleton, and Mr. Wilson.

Opposed: None.

Committee Reasoning. This section is fairly standard, regular in all bond legislation and simply defines the signature procedure for the bonds and coupons.

SEC. 5 establishes the pledge of the full faith and audit of the District for the payment of the interest and principal of the bonds when due. Mandates the establishment of the sinking fund, and authorizes a special tax upon all real property subject to taxation in the District to be levied annually, in an amount that, together with other available revenues, will be sufficient to pay the principal, interest and premium on the bond. There is no limitation as to rate or amount of the special tax. The collections from the tax shall be set aside, with other revenues, in a sinking fund and irrevocably dedicated to the payment of such principal, interest and premium.

The Committee voted to approve.

In favor: Mr. Barry, Mr. Dixon, Mrs. Shackleton, and Mr. Wilson.

Opposed: None.

Committee Reasoning.-The Committee was extremely concerned about this section, especially as it relates to the question of a special tax. It is the Committee's belief and understanding that this issue will