WASHINGTON -- District of Columbia officials hope to go to market in mid-September with a $332 million bond issue designed to eliminate the city's accumulated deficit, Ellen M. O'Connor, the city's deputy mayor for finance, said yesterday.
Ms. O'Connor, who spoke four days after Congress cleared the way for the bond issue, said she "would love" to see the bonds on the market by Sept. 12, but added that the issue may not be offered until Sept. 17. The city's plans are still tentative, she said.
The 12-year general obligation bonds will be offered by competitive bid.
Officials previously had said the city probably would need money this month, but Ms. O'Connor said a number of factors make a September issue date preferable to one in August. For one thing, the issue is unusual in that it is being used to bond out a deficit the district inherited from the federal government when the city was granted home rule powers in 1974.
Also, because the deal will be sold competitively, rather than through negotiation, city finance officials need "to make sure we have a crackerjack" request for proposals, Ms. O'Connor said. "We need to spend a proper amount of time explaining and presenting the bonds" to dealers and investors, she said.
Officials also are taking into account that the end of August is generally slow for Wall Street because of late-summer vacations. Officials likewise have ruled out selling the bonds on a Friday, when Wall Street activity is light, Ms. O'Connor said.
The deputy mayor and investment banking sources said questions of the deal's structure, including whether to insure the bonds or seek a letter of credit, are as yet unresolved. But they said a prime concern will be trying to get the lowest possible interest rate on the bonds.
The accumulated deficit was discovered in the 1980 fiscal year, when the district for the first time reported financial results using generally accepted accounting principles. The report revealed an accumulated general fund operating deficit of $378 million.
Beginning in 1983, the city pared the deficit by $20 million annually until its 1988 fiscal year, when it ran a $14 million deficit. After posting a $118 million deficit in the 1990 fiscal year, the accumulated deficit stood at $331.5 million.
Ratings agencies cite the accumulated deficit as a negative factor in their assessment of the district's general obligation debt. The city's bonds are rated Baa by Moody's Investors Service and A-minus by Standard & Poor's Corp.
The district currently faces a projected revenue shortfall of $20 million to $25 million this fiscal year, which ends Sept. 30. Mayor Sharon Pratt Dixon has abandoned the idea of furloughing workers to pare the gap and has instead decided on a package of deferred equipment purchases and other agency budget reductions, according to spokesman Vada Manager.