The BCDs of Going to Wall Street
Tomorrow, the District's head financial honchos–Mayor Vince Gray, Council chairman Kwame Brown, Chief Financial Officer Nat Gandhi, and Committee on Finance and Revenue chairman Jack Evans–will show up in lower Manhattan to beg for something very important: A continued healthy bond rating, which allows the city to borrow what it needs to run the government without paying through the nose in interest. Currently, the District is rated A+, or "strong," but several categories away from the prized AAA bond rating held by Maryland and Virginia. In a letter in early December, the bond rating agency Standard & Poors outlined what the District could do to either get better or worse:
To the extent that management can demonstrate its ability to structurally balance its budget, replenish its fund balances, and manage risks associated with the United Medical Center (UMC) and its capital improvement plan over the long term, we could raise the rating. Factors that could place downward pressure on the rating include the district's failure to reverse its current trend of declining fund reserve and achieve structural balance on a generally accepted accounting principles basis, increased costs and liabilities associated with the district's recent purchase of UMC; and continued capital pressures.
Which makes it crystal clear why Gray booted UMC board members who were opposed to turning the hospital back over to the private sector: He needs to show the rating agencies that he's serious about getting it off the District's books.
Evans has been playing this game for longer than anybody, and thinks that one of former mayor Adrian Fenty's biggest mistakes was promising the rating agencies that he wouldn't dip into the District's savings account, and then doing it anyway. "I said 'what are you doing, you said you weren't going to do that!'" as Evans recalled the conversation last week.
Here's what Evans asks the guys in the room who give D.C. its letter grade: Rate the District with Boston, Chicago, and Denver–which typically get high ratings–and not Baltimore, Cleveland, or Detroit. The BCDs, get it?
Photo from flickr user michaelaston.