WASHINGTON -- The District of Columbia may have to borrow from the short-term market sooner than planned, but the financial community sees no cause for alarm yet.

The timing of the district's next borrowing "is no big deal at all," said David Herships, an analyst who follows the district credit for Kemper Securities Inc. Kemper, based in Chicago, is a major institutional purchaser of district bonds. The district had planned to borrow a total of $250 million next year in February and May, but "they may have to move up their cash-flow borrowing," Herships said in an interview Friday.

The critical issue will be whether the district can pay back short-term notes by the end of the fiscal year, which ends Sept. 30, Herships said.

Top district officials, including the city administrator, the treasurer, the chief financial officer, and others, did not return calls, but one aide in the mayor's office said short-term borrowing probably would not occur "On our watch."

Mayor Sharon Pratt Kelly lost the Democratic mayoral primary in September to Marion Barry, who is expected to win the general election in the heavily Democratic city. The next mayor will be sworn in on Jan. 2.

A Barry spokeswoman could not be reached for comment on the candidate's financial plans, but during a debate last Thursday with Republican opponent Carol Schwartz, Barry said, "You have to have someone who knows how to manage our money."

Barry has said he may keep some Kelly appointees if he wins the race, but that Ellen O'Connor, the district's deputy mayor for finance and chief financial officer, will not be one of them.

Herships and other financial analysts were unalarmed by largely unattributed local press reports last week highlighting the district's continued weak cash position and predicting a return to the short-term market as early as November.

The lead story of last Thursday's edition of the Washington Post, headlined "D.C. Faces Shortfall of Cash," reiterated a prediction that the district eventually will require a federal bailout as its cash shortfall increases. The Post, which based its story on discussions with unnamed congressional sources, "was stirring the pot," Herships said.

The district's fiscal 1994 operating deficit of about $40 million, and the continued deterioration of its cash position, are not news to the financial community. "Not that much has changed" since June, when Standard & Poor's Corp. revised its rating outlook for the district to negative from stable because of "acute budget stress," said Parry Young, a director in Standard & Poor's municipal finance department.

Standard & Poor's rates the district A-minus, and Moody's Investors Service rates it Baa. The district has $3.4 billion of outstanding debt.

Young said Standard & Poor's had expected the fiscal 1994 operating deficit, which resulted from overspending in Medicaid and lower-than-projected receipts from a public safety fee imposed on business income last year.

Moody's Investors Service also cited those factors in an Oct. 14 credit report, which focused on the district's reliance on funds borrowed from its capital improvements program and debt service account to keep operating. The district transferred the debt service funds to the proper account after receiving a $660 million federal payment in early October, and it repaid the capital projects funds by the end of the fiscal year.

Young emphasized that Standard & Poor's rating of the district is for the long term. There are "a lot of potentially positive developments in the offing," such as plans to stabilize the pension fund and public hospital operations, and to build a new convention center and sports arena, he said. These activities could "turn around" the district's financial situation, he said.

"We will have to wait and see" what the final results are for fiscal 1994, which will be reported in January in the district's annual financial report, Young said.

"The good news," Herships said, "is that the budget passed on time" for fiscal 1995, and "the deficit is not out of line with what's going on" with the district's finances. "Is cash flow tight? Absolutely ... The big issues are, how do you downsize the government. They will have to downsize more," he said.

One major problem is that "you have a lame-duck government that doesn't have political power," which will make spending cuts more difficult, he said.

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