WASHINGTON -- The cash-strapped District of Columbia is rushing to settle the $200 million of short-term notes it sold yesterday to pay its bills and infuse some cash into its badly underfunded pension program.

The fact that the settlement date is tomorrow, rather than a week later as is typical with such note sales, reflects the district's immediate need for cash, said David Herships, vice president and municipal bond analyst for Kemper Securities Inc. in Chicago.

The district "needs the money right now," Herships said. The district's tax revenue anticipation notes were sold at a net interest cost of 2.8834% to CS First Boston Corp., one of 11 competitive bidders. First Boston will reoffer the notes at 2.80%. The notes, due Sept. 30, have a 3.50% coupon.

"He's right, we need the money ... We always needed the money," said Ellen O'Connor, the city's deputy mayor for finance and chief financial officer.

The quick settlement date reflects delays of the original sale date of April 27 and closing date of May 4 "for reasons having to do with getting approval from the city council and just, the-dog-ate-my-homework," she said.

The district did not want the delay to interfere with previous commitments built around the original sale date, including a scheduled payment to the retirement board on May 10, O'Connor said.

Moody's Investors Service rates the notes MIG-1 and Standard & Poor's Corp. rates them SP1-plus.

First Boston's bid "is a pretty good price," but not surprising since triple-A rated Swiss Bank Corp. is backing the sale with a letter of credit, said Herships. The letter cost the district 28 basis points, according to Valerie Lancaster, vice president of M.R. Beal & Co., the district's financial adviser.

The sale showed "competitive and aggressive bidding for district paper," reflecting confidence in the city's ability to make timely payments, said Lancaster.

"We had real good, strong support from the 11 bidders," she said. "Although there is a lot of concern and conversation" about the district's troubled finances, "the name still sells well," she said.

Swiss Bank's backing inaugurates a new relationship between the bank and the district -- "one that we are real pleased about," Lancaster said.

Swiss Bank's involvement "in the middle of" intense congressional and media scrutiny of the city's finances shows that "when you look at the fundamentals of the ability of the district to pay [debt service] on a timely basis, the credit banks as well as the note holders are still supportive" of the city, she said.

Earlier this year, district Treasurer Maria Day-Marshall said the city was planning to borrow another $250 million in the next fiscal year, which begins October 1.

Lancaster could not comment on whether and how soon the district would return to the short-term market after the notes are paid on Sept. 30.

"You have gotten ahead of us," she said when asked about Day-Marshall's comment.

The district's still must finalize cash flow projections for next year and see what effect about $60 million in revenue increases recently approved by the mayor and city council for the remainder of fiscal 1994 and fiscal 1995 will have, she said. The budget still must be approved by Congress, which has not begun hearings on the $3.4 billion package.

With Congress having yet to act, the revenue projections may be "overly optimistic," said Herships.

The revenue increases include a one-time tax on businesses of about $31 million for "public safety," and a temporary sales tax increase, effective for four months beginning July 1, from 6% to 7%, which is expected to generate almost $11 million.

"One has to say, ~How realistic are these budget estimates? Are they pie in the sky?'" Herships asked. If the revenues are not raised, the district could end the fiscal year with a carry-over deficit, he said.

About $40 million of yesterday's note proceeds will be paid to the district's troubled pension fund. The district has missed the last two quarterly payments. The unfunded liability has reached $5 billion.

Other proceeds will be used for general operating purposes in anticipation of the receipt of property taxes in late August and early September. Proceeds will not be used to pay debt service on outstanding general obligation bonds, Lancaster said.

The other bidders for the notes were: Chemical Securities Inc.; PainWebber Inc.; Morgan Stanley & Co. with Dillon Read & Co., and Bankers Trust Co.; Bear Stearns & Co.; J.P. Morgan Securities Inc.; Merrill Lynch & Co. with Pryor, McClendon, Counts & Co.; Prudential Securities Inc.; Goldman, Sachs & Co., with Carmona, Motley & Co.; Smith Barney Shearson Inc.; and Lehman Brothers with Artemis Capital Group Inc.

"With this offering, and as I have advised the [city] council, the district is taking appropriate steps to assure solid cash resources," Mayor Sharon Pratt Kelly said in a statement.

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