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After three long, hot years, the increasingly intractable conflict between Mayor Adrian M. Fenty and the D.C. Council is heading to court.

There’s a twist: Neither of the parties is suing.

Chief Financial Officer Natwar M. Gandhi, independent of both, has announced he’s going to D.C. Superior Court to settle an ongoing dispute over review of city contracts. He’ll be asking a judge “in the interest of maintaining good governance” to determine whether the council has the authority to order payments stopped on certain city contracts not submitted for the council’s approval.

Background: This whole thing is about something called “option-year contracts.” Until last January, the executive branch sent the council all contracts worth up to $1 million per year, as well as any renewals (or “option years”) of those contracts. But last fall, Ward 8 Councilmember Marion Barry started filing a rash of contract disapproval resolutions, including on option-year renewals, a situation that nearly led to the stoppage of certain important city services.

That led Attorney General Peter Nickles to send an order to city functionaries ordering them not to send option-year renewals. The council realized what was happening and passed legislation requiring the city to send the renewals for approval. Nickles refused to comply, and so to force his hand and maintain institutional prerogatives, the council passed emergency legislation ordering the CFO’s office to stop payment on all contracts not submitted for council approval.

If the payments are stopped, city officials fear nothing short of a government shutdown. Vincent Gray and the council’s lawyers say the legislature has that power; Nickles says it does not. LL will summarize their legal positions thusly: Nickles makes a constitutional claim that the legislature cannot “abrogate” contracts; the council says that you can’t abrogate a contract that’s void—-and contracts not approved by the council are void.

According to a letter sent by Gandhi, the two branches “are continuing to discuss a compromise” but “neither has indicated that any agreement may be achieved soon, if at all.” Thus the litigation.

David Umansky, Gandhi’s spokesperson, says a suit is likely to be filed “within a week or two.” The CFO’s office has hired the firm Wiley Rein and is in talks with partner Larry Mirel, a former D.C. insurance commissioner.

Gandhi’s hand was forced, he says, when the mayor and council ponied up differing legal conclusions on the contracts issue. “It’s almost Marbury v. Madison,” he says. “The executive says one thing, the legislative says another.”

Nickles calls the suit “a wise move,” adding, “I think the key point is that he’s going to continue to pay the vendors.”

The litigation will mark the first time an interbranch battle has gone to a judge since the halcyon days of Sharon Pratt Kelly and John A. Wilson. In that case, Wilson, and the council, lost.

Gandhi’s letter in full:

Natwar M. Gandhi
Chief Financial Officer
January 29, 2010

The Honorable Adrian M. Fenty
Mayor of the District of Columbia
1350 Pennsylvania Avenue, N.W., Suite 327
Washington, B.C. 20004

The Honorable Vincent C. Gray
Chairman of the Council of the District of Columbia
1350 Pennsylvania Avenue, N.W., Suite 504
Washington, D.C. 20004

Re: Option Year Contracts

Dear Mayor Fenty and Chairman Gray:

This letter is to outline my immediate actions with regard to both the Unauthorized Contract Stop Payment Emergency Act of 2009 (A 18-2009) (the “Stop Payment Act”) and the Unauthorized Contract Stop Payment Extension Emergency Act of 2010 (B18-620) (the “Postponement Act”). The Stop Payment Act became law on January 13, 2010, and requires the Chief Financial Officer to stop payment at midnight on January 20, 2010 (the “Stop-Payment Date”) on certain $1 million contracts let in calendar year 2009 unless the Council ratifies the contracts (the “Affected Contracts”).

The Executive did not submit the Affected Contracts to the Council. In response, on January 19, 2010, the Council adopted the Postponement Act which repeals the Stop Payment Act and directs that the Chief Financial Officer stop payment on the Affected Contracts on January 27, 2010 unless they have been received by the Council by that date. Although the Postponement Act was not yet law, given the clear intent of the Postponement Act to delay the effect of the Stop Payment Act until January 27, 2010, and after consultation with Chairman Gray, I did not stop payment on the Affected Contracts on midnight January 20, 2010.

During the last few days all parties have informed me that stopping payment on the Affected Contracts may, among other concerns, create hardships for those District citizens receiving benefits or services under some of the Affected Contracts, create financial difficulties for some of the contracting parties that have provided services under some of the Affected Contracts, and increase future District contracting costs because of concerns about the reliability of the timing of contract payments.

The Affected Contracts have yet to be delivered to the Council, so the Council’s implementation delay until January 27, 2010 has expired. Despite my understanding that the Council and the Executive are continuing to discuss a compromise, neither has indicated that any agreement may be achieved soon, if at all. Thus, I have considered the materials provided to me by both the Executive and the Council and decided to take the following course.

Pursuant to the Home Rule Act authority granted to the independent Chief Financial Officer by the Congress and the intent behind that grant of authority, I am compelled to act pursuant to section 424(d) of the Home Rule Act (D.C. Official Code § l-204.24d) (“Notwithstanding any provisions of [the Home Rule Act] which grant authority to other entities of the District, the Chief Financial Officer shall have the following duties and shall take such steps as are necessary to perform these duties….”), section 424(d)(6) of the Home Rule Act (the Chief Financial Officer is charged with “[supervising and assuming responsibility for financial transactions to ensure adequate control of revenues and resources.”), and section 424(d)(16) of the Home Rule Act (the Chief Financial Officer must determine “the regularity, legality, and correctness of… bills, invoices, payrolls, claims, demands or charges.”).

Accordingly, in the interest of maintaining good governance in the District of Columbia, to continue those operations of the District government which would otherwise cease if the Affected Contracts were to be suspended, to prevent a rash of lawsuits against the District from affected contractors, and to protect the District’s credibility in the financial markets, for the time being I will authorize payments under the Affected Contracts, when such payments are properly due and owing pursuant to the Affected Contracts. In addition, because the Council and the Executive have advanced differing legal opinions and facts regarding this issue, I have retained counsel and initiated the process to seek a declaratory judgment from the D.C. Superior Court to determine the controlling law in this disagreement between the Council and the Executive.

I remain available to further discuss these matters with you at your convenience. Sincerely,

Natwar M. Gandhi
Chief Financial Officer

cc: All Councilmembers
Neil Albert
Peter Nickles
Eric Goulet
Brian Flowers