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gress regarding the level at which its programs should go forward in a reasonable and orderly fashion. Such a method of computing the authorized annual Federal payment would provide a steady growth in the payment in proportion to revenue returns, as is illustrated by the following estimated projection for the next six years:

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Throughout much of the history of the District of Columbia, the Federal payment was based upon a percentage of the total appropriation. For a number of reasons, relating the Federal payment to local revenues is more appropriate. In the first place, it would tend to avoid any criticism that the District might seek to spend more money in an effort to increase the Federal payment. Second, this method provides the District an incentive to keep local taxes at a realistic level since the authorized Federal payment would be tied directly to local tax effort in a ratio of 1 to 4.

The Commissioners desire to emphasize that a Federal payment authorization based on a percentage of District tax revenues does not involve any kind of automatic payment of Federal funds to the District. The District Government would not be able to spend either local revenues or the Federal payment authorization until they have been appropriated by the Congress. The District budget will continue to be reviewed and justified each year before the Appropriations Committee of the Senate and House. Under such a proposal, the Congress can be assured that the Federal payment authorization will increase only as revenues from local taxes increase. Except for the establishment of the property tax rates, a function delegated by the Congress to the Commissioners, any changes in local taxes must be enacted by Congress.

Title II of the bill amends existing law so as to establish a new method for determining the maximum amount the District is authorized to borrow from the U.S. Treasury for general fund capital projects.

Under present law, the ceiling of the District's borrowing authority is set at a fixed amount of $290 million ($200 million for general fund public works, $50 million to carry out the purposes of the National Capital Transportation Act of 1965, and $40 million to carry out the purposes of titles I and II of the District of Columbia Public Education Act).

Under the method prescribed by title II, the total annual revenues from local District taxes and the annual Federal payment would serve as the basis for computing the annual borrowing authority for the District of Columbia general fund. The proposal would, for a three-year period (Fiscal Years 1968, 1969, and 1970), limit the amount of revenue the District would be authorized to use for long-term retirement annually to 6 percent of total estimated annual general fund revenues from local taxes, and the authorized annual Federal payment for each of such years. After Fiscal Year 1970, the District's debt limit would be fixed at 6 percent of the general revenue of the District credited to the general fund of the District for the fiscal year ending June 30, 1970.

Thus, title II, taking into account the flat $70 million Federal payment authorized by title I, would have the effect of fixing the District's general fund debt limit at $333.8 million for 1968, $363.9 million for 1969, and $392.3 million for 1970 and subsequent fiscal years.

The fixed lump sum debt limit ceiling which under title II would come into effect for fiscal year 1970 and subsequent fiscal years bears no relationship whatsoever to the city's ability to repay or the need for its capital construction items to be funded by its borrowing authority. The better method of fixing the

District's general fund debt limit is that contained in title II of S. 1218, which, taken in conjunction with title I of that bill, provides for fiscal responsibility that cannot be questioned because of its general nationwide practice. This method would provide for a steady growth in the borrowing authority that would be available to the District on a year-to-year basis. This is illustrated by the following estimated projection for the next 6 years:

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Annual revenues from all local sources unquestionably constitute the most reliable and realistic measure of the ability of a government to support longterm debt, especially in the case of jurisdictions like the District of Columbia where property taxes are only one of a number of tax resources. In the District, property taxes constitute only about one-third of the local general fund tax base. The growth of nonproperty tax sources and the emergence of a number of other problems in connection with the use of assessed values, have caused the Advisory Commission on Intergovernmental Relations and others to recommend that consideration be given to the use of annual revenues rather than assessed values as a measure of debt ceilings. Use of annual revenues also has the advantage of eliminating the problems caused by changes in the assessment level which makes these values subject to manipulation.

Such a change in the method of setting debt limits has been made in several other American jurisdictions. Puerto Rico, for example, adopted a constitutional amendment in 1961 which limited the maximum annual debt service of its Commonwealth government to 15 percent of the average of the last 2 years' annual revenues. Connecticut also changed its statutory debt limits for local governments in 1963 and now uses multiples of average tax receipts of these governments as the basis for determining their debt ceilings. Two other States which use annual tax revenues for debt limitations are Tennessee and Mississippi. In Tennessee additional bonds may be authorized by the legislature only if tax revenues collected during the preceding year were at least 11⁄2 times the debt service on all outstanding bonds. Mississippi provides that bonded debt may not exceed 11⁄2 times the highest annual tax receipts of the past 4 years.

Limiting the annual debt service of the District for general fund purposes to 6 percent of general fund revenues from local taxes and the Federal payment would permit the District at the current U.S. Treasury interest rate of 44 percent on 30-year bonds to incur an outstanding indebtedness which is slightly less than the estimated revenues from local taxes and the Federal payment for the corresponding years as the borrowing authorization estimates shown above indicate. In comparison with prevailing local government practices generally in the United States, this is a conservative amount of indebtedness in relation to local revenues. A comparison of the outstanding indebtedness for general governmental purposes with revenues in the 21 largest cities in the United States in fiscal 1964, indicates that the ratio of revenue to debt in these cities ranged from a low of slightly less than 1 to 1 to a high of 1 to 4 with a median level of indebtedness that was twice the revenues for the same year.

Of the Nation's 21 largest cities, Washington, D.C., for fiscal year 1964 had the smallest outstanding indebtedness as compared to local revenues. The objective of all debt limitation provisions is to limit the amount of debt a government may incur to an amount which it can safely repay and to restrict the authority of imprudent administrations. Most governments are unable to finance all their requirements on a current basis and use long-term borrowing to finance capital outlay projects of lasting benefit whose cost is heavy relative to the current financial resources of the community. Between

1952 and 1960, 63 percent of all local government capital outlay work was financed with loans. In many respects the use of long-term loans to finance projects which will serve residents of the community for many years in the future is more equitable than current payment since it places some of the financial burden of these projects on the future users of the facilities. Paying for such capital improvements entirely out of current revenues actually constitutes payment in advance in these cases.

In the belief, therefore, that the proposed method of fixing the limit of the District's borrowing authority should not be limited to a period of three fiscal years, and thereafter be set at the level fixed in the last of those years, the Commissioners strongly recommended that the Committee give favorable consideration to substituting for title II of H.R. 8718 the language of title II of S 1218, since the latter title is better suited to the long-term needs of the District. Such a change in the District's borrowing authority would relieve Congress of the need to periodically adjust the lump-sum authorization that inevitably be comes inadequate in a relatively short time, since this type of authorization does not reflect repayments or changes in the District's capacity to finance long-term debt. A flexible borrowing authorization is essential to putting financial planning for long-range public works programs on a sound basis in the District. The availability of early estimates of the level of borrowing authorization would permit the District to plan the timing of substantial capital outlay expenditures by providing a more accurate estimate of the city's ability to finance such projects.

With respect to title III, the Commissioners have one reservation. This title provides that no officer or employee of the government of the District of Columbia shall exclude or give preference to the residents of the District of Columbia or any state of the United States on the basis of residence, religion, race, color, or national origin. The District does not, of course, give weight to religion, race, color, or national origin in hiring or recruitment. The inclusion in this title of the residence factor, however, is of some concern to the Commissioners because it runs counter to their policy that

"Whenever two or more applicants for appointment or promotion to a District Government position possess equal qualifications and meet all other appointment or promotion criteria to a substantially equal degree, selection preference shall be accorded to the individual who is a resident of the District of Columbia *

The Commissioners believe that this long-standing policy of giving preference to a District resident when all other factors are equal provides a sound and fair approach to hiring and recruitment preference. A resident, with his consequent obligation to pay local taxes, ordinarily would be expected to have a greater knowledge and interest in local affairs than would a non-resident. They regret, therefore, that title III fails to give recognition to this policy.

In its present form, with particular reference to the lump-sum annual Federal payment authorization, which the Commissioners firmly believe will all too soon become inadequate, and because the bill does not provide for increases in the District's debt limit after June 30, 1970, the Commissioners are of the view that it does not provide adequately for the long-term financial needs of the Government of the District of Columbia, and accordingly, they recommend against its enactment. If, however, titles I and II of the bill be amended as the Commissioners have recommended in this report, they would strongly urge its enactment by the Congress.

The Commissioners have been advised by the Bureau of the Budget that, from the standpoint of the Administration's program, there is no objection to the submission of this report to the Congress.

Sincerely yours,

WALTER N. TOBRINER,

President, Board of Commissioners, District of Columbia.

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1 Prepared by the Department of General Administration, District of Columbia government.

2 Includes estimated supplementals of $19,509,000 for pay increase and program items and $10,000,000 in Federal payment.

3 Includes estimated later transmittals of $1,147,000 for proposed District of Columbia police pay increase and $10,600,000 in Federal payment under proposed plan to base this payment on a percentage (25 percent) of general fund

revenues.

Note. Prior to 1923 the percentage of the U.S. share was set at 50 percent. In 1956 a Federal payment of $20,000,000 was authorized. This authorization was increased to $23,000,000 in 1957, to $32,000,000 in 1959, and to $50,000,000 in 1963. Public Law 89-610, Sept. 30, 1966, increased the authorization to $60,000,000,

81-348-67-2

Senator SPONG. Mr. Tobriner, will you come up, please?

Mr. Tobriner, I believe that your testimony is substantially the same as given before the House District Committee; is it not?

STATEMENT OF HON. WALTER N. TOBRINER, PRESIDENT, DISTRICT OF COLUMBIA BOARD OF COMMISSIONERS; ACCOMPANIED BY HON. JOHN B. DUNCAN, MEMBER, DISTRICT OF COLUMBIA BOARD OF COMMISSIONERS; BRIG. GEN. ROBERT E. MATHE, DISTRICT OF COLUMBIA ENGINEER COMMISSIONER; KENNETH BACK, ACTING DIRECTOR, DEPARTMENT OF GENERAL ADMINISTRATION; AND D. P. HERMAN, BUDGET OFFICE, DEPARTMENT OF GENERAL ADMINISTRATION

Mr. TOBRINER. Yes.

Senator SPONG. We are going to accept your statement in toto, and I would ask you to summarize and elaborate upon anything else that you wish to say other than what you have already stated and what is in your statement.

Thank you very much, sir.

Mr.TOBRINER. Shall I proceed?
Senator SPONG. Yes, please.

Mr. TOBRINER. In summary, Mr. Chairman, the Commissioners are in favor of Chairman Bible's bill, S. 1218, which we feel would give the District more breathing space, more ability to plan our budgetary requirements in advance.

The differences between the House bill and the bill proposed by Senator Bible are these. In the House bill the Federal payment is fixed at $70 million, and will continue at $70 million. And as far as the loan authority is concerned, that is based on 6 percent of the general fund tax yield plus the authorized Federal payment. But that again is frozen after the end of 3 years, and will remain at that figure until the Congress changes it.

There are many items that require urgent attention. We feel, in brief, that with the growing needs of this city, with new programs that are constantly being requested by the people of the city, and which in most instances are justified, that we must have the flexibility that is provided in the Bible bill, which would give us the necessary predictability in order to plan and finance our budget requirements.

Now, there are many details here. But as you indicated, the committee will accept my statement in toto as prepared for the record. (The prepared statement of Mr. Tobriner follows:)

STATEMENT OF WALTER N. TOBRINER PRESIDENT, BOARD OF COMMISSIONERS, DISTRICT OF COLUMBIA

Mr. Chairman: The towering problems of the nation's big cities-education, jobs, housing, crime, transportation, water and air pollution-have become an all too familiar story.

Alone, each problem area poses formidable and complex questions; together, they make up an array of staggering dimensions.

The nation's capital has not, unfortunately, escaped this plague of urban ailments.

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