Evening star., 1940-04-28
Roosevelt Plan
Cuts D. {. Rate
On P.W.A. Debt
Proposal Would
Sove $500, 900
On Interest

Casting about last fall for
methods OF cutting do,Dn the Dis
trict budget for 1941 to duert
tar increase, officials conceiued
the plan OF floating a refunding
bond issue to slash the interest
rate in 7epdying loan OF about
$40, 900 900 to the p. w. A. This
method has been adopted in some
other jurisdictions. Uhere bank
loans are negotiated for refund
ing P. w. A. debts.
President Roosevelt yesterday
paved the way for the District to
effect saving of approximately
S3,500,00O in paying off its $685.
500 debt to the Public Works Ad.
ministration.
In letter to Commissioner Mel
vim G. Hazen. the President an
nounced his approval of plan
whereby existing agreements be-
tween the District and w. P. A.
would be amended to provide a SUBJ
stantial reduction in the interest
rate on the loan and permit the
District to amortize its Indebtedness
over a period of Is years.
Mr.. Roosevelt suggested this plan
as substitute for the Commits
sions' proposal to authorize the
District to sell bonds so that it
might refund its loan at a rate of
interest of approximately per cent.
In opposing this plan, the Presi-
dent told the Commissioners he felt
the bond issue might mean the
abandonment of the pay-as-you-go
principle to which Congress has ad-
hered since liquidation of the Dis
trict's former Indebtedness in 1891,
and might also set precedent.for
financing of future construction pro-
grams.
Low Rate in Prospect.
The Commissioners were In
formed, however, that the Chief
Executive believed the District
should not be prevented from tax
ing advantage of low rate of in
terest such as its municipal credit
rating would justify. The Districts
high credit rating would assure an
interest rate as low as per cent
if the bond issue were permitted,
the President is understood to have
said.
Mr.. Roosevelt said he has re.
| quested Secretary of the Treasury
Morgenthau to study his suggestion
and determine the rate of interest
to be charged the District. It is
expected that the existing agree
ments between P. w. A. and the
District will be amended so that
the rate of interest which the Dis
trict will be required to pay would
be the rate that Secretary Nor
genthau determines as the rate that
bonds of the District should bear
were they to be offered for sale to
the public.
The bond issue was suggested by
Col. David McCoach, jr., Engineer
Commissioner, late last November,
when he and Maj Daniel J. DON
ovan, District auditor, voiced a be-
lief that the District could save a
considerable sum by obtaining loans
from banking interests at perhaps
half the Federal per cent interest
charge.
The Districts P. w. A. program
totaled $18,l50 900, of which the loan
portion (55 per cent? amounts to
SO 1882 500. Under the present act,
the loan was to be repaid in annual
installments over a period of not
over Is years, with accrued interest
at per cent. The interest pay
ments. to begin with the new fiscal
year, would total $5.6O9875 under
the per cent rate. Over a 25-year
period, the District thus would have
been required to pay back a total
of $15,592 1878 for a loan of a little
less than $4,000 000.
Under Col. McCoachs plan, how
ever, the District would have saved
approximately 100000 less than
will be saved through the arrange
ment suggested by the President.