(Washington, DC) - Chief Financial Officer Natwar M. Gandhi today announced that the city hopes to launch an innovative – yet financially prudent – way to issue debt that will let the city borrow money at the lowest possible interest rate.

Bill 17-741, the "Income Tax Secured Bond Authorization Act of 2008," would allow the District to issue revenue bonds secured by and paid solely from the individual income tax and the business franchise tax.

Dr. Natwar M. Gandhi, chief financial officer said, "This is a valuable tool that we can use to increase savings. For example, if the city issues $1 billion of bonds, this program could save $1 million or more annually. We could save more than $70 million over the life of these bonds compared to what we would earn if we issued general obligation bonds."

The income tax bond program has three goals:

• Achieve a lower cost of borrowing for the District.
• Get higher ratings than the District’s general obligation bonds.
• Provide a flexible borrowing program that may be used instead of, or in addition to, the general obligations bond program (depending upon market conditions and other considerations).

"We believe that the income tax bonds can help the city increase its bond ratings from our current level of A to double-A or even triple-A," said Lasana K. Mack, treasurer and deputy chief financial officer of the District government in testimony before the Committee on Finance and Revenue.

Gandhi noted that income tax bonds are not likely to be used in the jurisdictions surrounding the city because income taxes are not generally a source of revenue for local governments. Most states have double-A or triple-A ratings on their general obligation bonds. That means they have no reason to issue income tax bonds, because they would not get significant interest rate savings.