D.C. Council Chairman Phil Mendelson
D.C. Council Chairman Phil Mendelson Credit: Darrow Montgomery

Jeffrey DeWitt warned the chairman.

If the Council’s $15.5 billion budget included $49 million taken from the reserves of the city’s sports and entertainment authority, Events DC, DeWitt, the District’s chief financial officer, would not certify the budget. Chairman Phil Mendelson wanted to use the money to repair the city’s public housing stock and neutralize a hotel tax increase proposed by Mayor Muriel Bowser.

But Mendo didn’t listen, claiming he had it on good authority that the Council could indeed dip into Events DC’s reserve fund. The Council passed the budget, including the $49 million from Events DC’s coffers, and in a letter sent to Mendelson Monday afternoon, DeWitt, who is an ex-officio member on Events DC’s board, is making good on his promise.

“For fiscal certification prior to the vote on the proposed FY 2020 Budget Support Act, the expenses planned for the $49 million in the Council’s budget must either be reduced, or alternate funding must be identified,” DeWitt writes in a June 10 letter to Mendelson.

The letter states that the law requires D.C. to pay back its debts to bondholders who helped fund the construction of the Walter E. Washington Convention Center, which Events DC operates.

DeWitt’s letter cites an analysis by two lawyers to bolster his argument. Mendelson released a brief statement Monday night saying he does not agree with the CFO’s opinion, but believes the certification issue could still be resolved “because the dollars at issue are budgeted in a separate account where they can be spent only if available.”

The chairman was not immediately available for comment Monday evening.

Without the legally required certification by the CFO, the District would have no funds approved for use at the beginning of fiscal year 2020, which begins October 1. DeWitt acknowledges in his letter that a total of about $48 million from Events DC’s reserves from 2017 and 2018 should have gone to the city’s general fund, but did not end up there due to a miscalculation. The letter says DeWitt remedied the problem, but the law requires the money go toward affordable housing, capital expenses, and into the city’s reserves.

DeWitt, in his earlier letter to Mendelson warning of his concerns, laid out the danger of tapping into Events DC’s reserve funds:

“Investors and rating agencies will be concerned that if we are willing to set aside our commitments to [Events DC] bond holders, what other financial commitments might we be willing to ignore,” DeWitt writes in a May 15 letter to the chairman. “The financial consequences are real.”

DeWitt writes that a downgraded bond rating would increase the cost of borrowing for the District and could therefore “impact the construction and modernization of schools, roads, bridges, and other public facilities.”