- The Washington Times - Tuesday, January 30, 2001

The District of Columbia yesterday released its fourth consecutive clean financial audit, its last hurdle for regaining autonomy from the financial control board, which essentially will cease its oversight of the city next week.

"This audit is a milestone for the District … We are prepared to take the financial destiny of this great city into our own hands and never have the need for a control board to oversee our financial operations again," Chief Financial Officer Natwar M. Gandhi said at a news conference.

In presenting the city's Comprehensive Annual Financial Report, Mr. Gandhi said the city had made a $1 billion turnaround from 1996 when the city had deficits of $518.2 million to this past year's positive balance of $464.9 million in its accumulated fund balance.

The city's coffers are overflowing with more than $240 million in surpluses for the fourth straight year, said Mr. Gandhi, who took over as the city's chief budget hawk last June after an embattled Valerie A. Holt left in May.

Control board Chairman Alice M. Rivlin said the city was challenged to not have spend any more money than it brought in. It was a goal, she said, that has "been met, more than met" and is the product of fiscal discipline and the luck of a good economy.

Mr. Gandhi said one of the keys to the city's success has come from tax collections, which netted more than $3 billion in local tax revenue last year compared to more than $2.4 billion in 1996.

"We are very aggressive tax collectors," Mr. Gandhi said, noting the District's population has decreased over the last decade.

According to the U.S. Census, the city's population of 572,059 in 2000 represents a 5.7 percent decrease from 1990.

The increased tax collections, Mr. Gandhi and others explained, is one way the city has been able to climb out of its financial hole. Even in 1997, the city's accumulated fund balance was more than a $332 million deficit. But that same year started its four-year run of posting overall budget surpluses, with year 1997 totaling $186 million and meeting the control board's requirement that the city not spend more than it has available.

The independent audit of the city's year 2000 budget was conducted by KPMG Peat Marwick, LLP.

Both the audits for the University of the District of Columbia and the Public Benefits Corporation also were clean.

"This is the beginning of the end for the financial control board," Mr. Gandhi said.

The report was four days ahead of the Feb. 1 deadline and well ahead of the nearly three-month delay in getting last year's report out.

Next week, on Feb. 7, the control board will hold a public hearing to certify the audit, said control board spokesman Jim Davison. It is then that Mrs. Rivlin and others on the control board will cease to function.

Mrs. Rivlin said yesterday that the board, while thrilled to disband, will stay on through Sept. 30 as mandated by Congress. The statute creating the board, she said, will still be in effect as well.

"We will continue to be here to help," Mrs. Rivlin said.

Keeping the law on the books, Mr. Gandhi said, simply means the president could reappoint board members if D.C. again struggles with its finances.

"Anytime you have a cash problem or a cash deficit" is when the control board could be reestablished, Mr. Gandhi said after the news conference.

Created by Congress in 1995 to get the city's financial house in order, the control board established several criteria the city had to meet in order for the watchdog group to be dissolved.

"The city was not only insolvent, but was in fact bankrupt," said Andrew Brimmer, the first chairman of the control board.

Many of the goals set for the city, such as repaying its debt to the federal government, were met in the first few years the control board was in operation.

One of the hardest goals D.C. officials faced, though, was getting the city out of the red, which would get it out from under Congress's thumb.

Once former Mayor Marion Barry left office and Anthony A. Williams,former CFO of the city, took over as mayor, the control board began working more amicably with the D.C. Council and budget officials.

Mr. Williams, known as a policy wonk and numbers cruncher, started implementing reforms that gave the control board confidence the city was on the right track to self-sufficiency.

"If we looked at where we are now and where we were, it's completely night and day," Mr. Williams said.

Mr. Williams, who faced many long nights himself forging budgets as the city's CFO, said city officials need to remain cautious and not let D.C. slide into another financial crisis.

"We look forward to the District of Columbia returning to its elected officials," said D.C. Council Chairman Linda W. Cropp, at-large Democrat. She added that the city will need to remain vigilant about its finances in order for the control board not to return to power.

Congress, which granted the District home rule in 1973 so residents could elect a mayor and city council members, still has the authority to make changes to legislation passed by the D.C. Council and to amend the District's budget.

Delegate Eleanor Holmes Norton, a Democrat and D.C.'s nonvoting representative, said the city's "worst financial crisis in a hundred years is over," as she announced that she is introducing a bill that could bring millions more to the District.

"The city's expenditures continue to rise faster than revenues," Mrs. Norton said.

The bill, she said, would establish a non-D.C. resident tax credit that the federal government would fund to reimburse the city for extra services used by nonresidents, including the federal government.

If approved, Mr. Gandhi said the tax credit could net the city over $400 million.

"Most cities … are subsidized by the states," Mr. Gandhi said. "We need that kind of help from the federal government."

Jonathan Dean, a spokesman for Rep. Constance Morella, a Maryland Republican and new chairman of the House Government Reform District of Columbia subcommittee, said the city has done a complete turnaround from six years ago when the financial control board was put in place.

"The congresswoman has confidence in the mayor and the council in their day-to-day operations of the city," Mr. Dean said. "The District of Columbia's elected leaders have made impressive progress in handling the city's finances and delivering services."

Rep. Thomas M. Davis III, a Virginia Republican and the former chairman of the D.C. subcommittee, said the latest financial scorecard shows the District has come a long way from a financial "crisis of epic proportions" it faced in the mid-1990s when Congress had to take over the city's finances.

"This is what we envisioned when we passed the control board legislation and the revitalization act: The day when the District showed that it was financially sound and it was able to deliver basic services to its residents," Mr. Davis said.

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