When the DC quasi-public economic-development corporation (NCRC) borrowed $6.7 million from Bank of America in 2002 with a deed of trust on property it owned, was that loan properly authorized under DC law? Did the Anti-Deficiency Acts apply?
Plain-English summary
The National Capital Revitalization Corporation (NCRC) was DC's economic-development quasi-public corporation, created in 1998 to redevelop properties inherited from the dissolved Redevelopment Land Agency. By 2006 NCRC owned a substantial portfolio, including Southwest waterfront properties tied up in long-term ground leases. As part of the Anacostia Waterfront Initiative, NCRC was being asked to transfer assets to the new Anacostia Waterfront Corporation. During those negotiations, NCRC disclosed that in September 2002 it had borrowed $6.7 million from Bank of America, secured by a deed of trust on two of its waterfront properties. Mayor Williams asked the Attorney General whether that loan was properly authorized.
The Attorney General concluded it was not, and walked through the corporate-finance plumbing.
First, the NCRC is part of the DC government. The Home Rule Act § 404(b) authorizes the Council to "create, abolish, or organize, any office, agency, department, or instrumentality of the government of the District." Under expressio unius, that authority does not extend to creating extra-governmental entities. The NCRC's enabling statute described it as "an independent instrumentality of the District, with a legal existence separate from that of the District government," but that boilerplate cannot lift NCRC outside the government. NCRC is independent (not subject to Mayoral administrative authority), but it is still inside the District government for legal purposes.
Second, NCRC is subject to both the federal Anti-Deficiency Act (31 U.S.C. §§ 1341, 1342) and the DC Anti-Deficiency Act (D.C. Law 14-285). Both Acts forbid government employees from making expenditures or obligations exceeding available appropriations or before appropriations are enacted, except as expressly authorized by law.
Third, NCRC has no independent authority to borrow money. Municipal debt authority must be express, and is strictly construed. The Home Rule Act gives borrowing authority only to the Council (general obligation bonds, short-term notes) and provides that the Council may delegate § 490 revenue-bond authority to instrumentalities. NCRC's enabling statute (D.C. Official Code §§ 2-1219.15(a)(14), 2-1219.18, 2-1219.23) is the only proper Council delegation.
Fourth, the 2002 Note did not comply with that delegation. NCRC failed to obtain Council resolution approving the underlying project, failed to include the required full-faith-and-credit disclaimer on the Note, and granted recourse liability and uncapped indemnities that exceed the limited-revenue security that § 2-1219.18 authorizes. The Note was therefore ultra vires, void, and unenforceable, and would lose any tax-exempt status. Because the Note was issued for a period greater than one fiscal year without appropriations, the obligations and payments under it likely violated both Anti-Deficiency Acts.
Fifth, NCRC's broad authority to "establish special funds" under D.C. Official Code § 2-1219.17 was an impermissible delegation. The Council's authority to establish special funds under § 450 of the Home Rule Act is non-delegable, except as § 490 specifically permits in connection with revenue-bond issuance.
The opinion offered three cure paths: NCRC could issue new properly-authorized debt and use the proceeds to repay the Bank; NCRC could novate the existing debt with corrected documents and proper Council approval; or another DC instrumentality with proper authority could substitute itself for NCRC under the Note. A Council resolution alone could not cure the deficiency, because § 490(a)(6)(A) requires a Council act, not just a resolution, to delegate borrowing authority.
Currency note
This opinion was issued in 2006. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here. NCRC was dissolved in 2008 by the Council and its functions consolidated into the Office of the Deputy Mayor for Planning and Economic Development. The successor entity structure, the Anti-Deficiency Acts, and Home Rule Act § 490 framework should be checked against current law.
Historical context
NCRC was created in 1998 with broad development authority and a sizable property portfolio inherited from the Redevelopment Land Agency. The corporation was meant to operate with private-sector flexibility while exercising public powers like eminent domain and tax-exempt bond issuance. By the mid-2000s NCRC's governance had become troubled, and the Williams administration's review of NCRC's assets exposed the irregular Bank of America loan.
The 2006 opinion landed in the middle of the Williams-Fenty transition. It was politically explosive: NCRC had been operating on the assumption that it had broad corporate-finance authority, and the AG's review concluded the corporation had violated federal and local Anti-Deficiency law for years. The opinion's careful cure-path analysis (offering three lawful options to fix the situation) was designed to avoid a default and protect the Bank's good-faith reliance while bringing NCRC into compliance.
The Council ultimately responded by dissolving NCRC. Section 490 was later used by other DC instrumentalities (the Tobacco Settlement Financing Corporation, the Housing Finance Agency, the Water and Sewer Authority) following the procedures this opinion lays out.
Common questions
Q: Could a Council resolution after-the-fact have validated the 2002 Note?
A: No. The Home Rule Act § 490(a)(6)(A) requires a Council act, not a resolution, to delegate borrowing authority to an instrumentality. The NCRC Statute is the only Council act that does so for NCRC. To retroactively approve the Note, the Council would have had to either amend the NCRC Statute or pass a stand-alone act approving the Note specifically.
Q: What's the difference between the federal Anti-Deficiency Act and the DC Anti-Deficiency Act?
A: Both forbid making obligations beyond appropriations. The federal Act applies because Congress controls DC's budget structure. The DC Act adds reporting requirements, a Board of Review for Anti-Deficiency Violations, and disciplinary consequences including termination.
Q: Why couldn't NCRC just rely on its broad statutory authority to "exercise any other power usually possessed by, and incident to, public enterprises performing similar functions or private corporations" (D.C. Code § 2-1219.15(a)(31))?
A: The opinion reads § 2-1219.15(a)(31) as a savings clause, not a separate grant of authority. Reading it broadly would render the 30 specific powers superfluous and would conflict with Home Rule Act § 490(a)(6)(A)'s specificity requirement.
Q: Could NCRC create its own special funds?
A: Only those associated with § 490 revenue bonds. Section 2-1219.17 of the NCRC Statute purported to give NCRC a broader fund-creation power, but the Council cannot delegate its § 450 special-fund authority to an instrumentality. That broad delegation in the NCRC Statute was invalid.
Q: Did NCRC's tax-exempt bond authority survive these problems?
A: NCRC retained its § 490(a)(6)(A) revenue-bond authority for properly authorized issuances. The 2002 Note was not such an authorized issuance and likely lost any tax-exempt status, but properly issued NCRC bonds would still qualify.
Citations
Statutes
- DC Home Rule Act §§ 404, 446, 450, 461-485, 490, 602(a)
- Federal Anti-Deficiency Act, 31 U.S.C. §§ 1341, 1342, 1349-1351, 1511-1519
- DC Anti-Deficiency Act of 2002, D.C. Law 14-285
- National Capital Revitalization Corporation Act of 1998, D.C. Law 12-144
- Securities Act of 1933, 15 U.S.C. § 77a et seq.
Cases
- Wilson v. Kelly, 615 A.2d 229 (D.C. 1992) (executive function doctrine)
- Shook v. DC Financial Responsibility and Management Assistance Authority, 132 F.3d 775 (D.C. Cir. 1998) (expressio unius)
- Dyer v. DC Department of Housing, 452 A.2d 968 (D.C. 1982) (legislative history can override boilerplate language)
- DC Water and Sewer Authority v. Hampton & Assocs., 851 A.2d 410 (D.C. 2004) (instrumentality scope)
- Hampton v. United States, 276 U.S. 394 (1928) (non-delegation doctrine)
- Scofield Engineering Co. v. City of Danville, 35 F. Supp. 668 (W.D. Va. 1940), aff'd, 126 F.2d 942 (4th Cir. 1942) (ultra vires municipal debt unenforceable)
- Chemical Bank v. Washington Public Power Supply, 99 Wash. 2d 772 (1983)
Source
- Index page: https://oag.dc.gov/about-oag/our-structure-divisions/legal-counsel-division/opinions-attorney-general
- Original PDF: https://oag.dc.gov/sites/default/files/2018-02/Opinion-July-2014-National-Capital-Revitalization.pdf
Source
- Index page: https://oag.dc.gov/about-oag/our-structure-divisions/legal-counsel-division/opinions-attorney-general
- Original PDF: https://oag.dc.gov/sites/default/files/2018-02/Opinion-July-2014-National-Capital-Revitalization.pdf
License
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Original opinion text
GOVERNMENT OF THE DISTRICT OF COLUMBIA
OFFICE OF THE ATTORNEY GENERAL
--
ATTORNEY GENERAL
December 8, 2006 (Rev.)
OPINION OF THE ATTORNEY GENERAL
SUBJECT:
The National Capital Revitalization Corporation ("NCRC") and its Subsidiaries
Honorable Anthony A. Williams
Mayor of the District of Columbia
1350 Pennsylvania Avenue, N.W., 6th Floor
Washington, D.C. 20004
Dear Mayor Williams:
This opinion, which is issued pursuant to Reorganization Order No. 50 of 1953, as amended, and
which is the guiding statement of law to be followed by all District employees in the
performance of their official duties, in the absence of specific action by the Mayor or the
Council, or until overruled by controlling court decision, addresses these questions:
1. Is the NCRC part of the District of Columbia Government (the "District")?
2. Is the NCRC subject to
a) the federal Anti-Deficiency Act; or
b) the District's Anti-Deficiency Act?l
3. Is the NCRC statutorily authorized to borrow money from a private commercial bank, execute
a limited-recourse promissory note and secure that note with a deed of trust encumbering two of
its properties? And, if yes, is it nevertheless prohibited from doing so under either AntiDeficiency Act? Furthermore, assuming the NCRC may borrow money from private
commercial banks, to what extent does the NCRC have authority to establish special, revolving
1 District of Columbia Anti-Deficiency Act of 2002, effective April 4, 2003 (D.C. Law 14-285; D.C.
Official Code § 47-355.01, et seq. (2005 Supp.» (hereinafter "D.C. Anti-Deficiency Act" or "D.C.
ADA"). For purposes of this Opinion, all references to the provisions of the District of Columbia statutes
will be to the D.C. Official Code.
1350 Pennsylvania Avenue, N.W., Suite 409, Washington, D.C. 20004 (202) 724-1520 Fax: (202) 724-6590
funds as provided in D.C. Official Code § 2~1219.17 (2001)?
BACKGROUND
The questions presented arise out of the following circumstances. The NCRC received
assignment of numerous property interests (in many cases, properties in Southwest D.C. that
were encumbered with Iong~term ground leases on terms highly favorable to the ground tenants)
from the Redevelopment Land Agency ("RLA") at the time the RLA was dissolved. Most of
these property interests were transferred by the NCRC to its land~holding subsidiary, the RLA
Revitalization Corporation ("RLARC"). Some of the NCRC property interests and some
RLARC properties encumbered by ground leases are to be transferred to the newly~formed
Anacostia Waterfront Corporation ("AWC") for the purpose of redevelopment under the
Anacostia Waterfront Initiative. In the course of negotiations regarding the transfer of assets to
take place among the District, A WC, NCRC and RLARC, the NCRC disclosed that it had
borrowed $6,700,000 from Bank of America. N.A. (the "Bank") in September 2002, and secured
that loan with some of its property holdings, including the revenues generated by two ground
leases held by the NCRC. The property subject to the two ground leases is referred to herein as
the "Waterfront Property." The NCRC signed a limited~recourse promissory note titled
"Promissory Note Secured by Security Instrument" on September 10, 2002 (the "Note"). The
promissory note was secured by a Leasehold Deed of Trust, also dated September 10, 2002, and
recorded in the land records as Document No. 2002104179 (the "Deed of Trust"). I have been
advised that $5,000,000 of the loan proceeds were used to purchase the interests ofthe tenant in
one of the ground leases encumbering the Waterfront Property (presumably so that the NCRC
could lease that property to another tenant who would redevelop the property and lease the
ground on more favorable terms) and the remaining proceeds were used for other capital projects
of the NCRC (collectively, the "Project"). I do not have any written documentation verifying the
use of the loan proceeds.
DISCUSSION
I.
THE NCRC IS PART OF THE DISTRICT GOVERNMENT
The NCRC is a statutorily created instrumentality of the District government created by the
Council of the District of Columbia (the "Council"), and it is a governmental unit contemplated
by the District of Columbia Home Rule Act ("Home Rule Act"), approved December 24, 1973
(87 Stat. 777; D.C. Official Code § 1~201.01, et seq. (2001 & 2005 Supp.».
A. The NCRC Statute
The National Capital Revitalization Corporation Act of 1998, effective September 11, 1998
(D.C. Law 12~144; D.C. Official Code § 2~1219.01, et seq. (2001 & 2005 Supp.» ("NCRC
Statute") created the NCRC as a body corporate and an independent instrumentality of the
District, with a legal existence separate from that of the District government. 2 The NCRC was
tasked with the broad mission of engaging in economic development and revitalization activities
for the benefit of the District and was given mandates to retain and expand businesses located in
2
See D.C. Official Code § 2-1219.02(a) (2001).
2
the District, to attract new businesses to the District, to induce economic development and job
creation in the District, to provide incentives and assistance, to remove slum and blight, and to
3
coordinate the District's efforts to achieve these purposes.
B. Authority of the District Government to Create an "Independent
Instrumentality of the District"
The District's government was created as a municipal corporation and:
is constituted a body corporate for municipal purposes, and may contract and be
contracted with, sue and be sued, plead and be impleaded, have a seal, and
exercise all other powers of a municipal corporation not inconsistent with the
4
Constitution and laws of the United States and the provisions of this Code.
The Home Rule Act established a charter for the District which provides for the District's current
means of governance and delegates certain legislative powers to the District. The Home Rule
Act serves as an enabling act, determining what the District, through its three branches of
government, can and cannot do. Section 404 of the Home Rule Act (D.C. Official Code § 1~
204.04 (2001)), delegates certain legislative powers to the Council. Among those powers, as set
out in section 404(b) of the Home Rule Act, is the Council's power to:
create, abolish, or organize, any office, agency, department, or instrumentality of
the government of the District and to define the powers and duties, and
responsibilities of any such office, agency, department, or instrumentality.
(Emphasis supplied.)
The Council clearly has the authority under the Home Rule Act to create an instrumentality of
the District government and define its powers, duties and responsibilities. However, the Council
can only create an entity outside of the District government if the Council is expressly granted
the power to do that by Congress.
The typical municipal corporation is subject to Dillon's Rule, which means it can exercise only
those powers: (1) granted in express words; (2) necessarily or fairly implied in or incident to the
powers expressly granted; and (3) essential to the declared objects and purposes of the municipal
corporation - not simply convenient, but indispensable. The Rule takes its name from an
opinion of John F. Dillon in 1868, a federal circuit judge, chief justice of the Iowa Supreme
Court, and noted law professor. See Dillon on Mun. Corp. (3 fd ed.), sec. 89. Dillon's Rule
applied to all agencies and instrumentalities of the District government before the 1975 home
rule District government, because the pre-home rule government was only a government of
specifically delineated executive and quasi-legislative powers. By contrast, the home rule
government is virtually the opposite: a tri-partite government patterned after the federal one, see,
D.C. Official Code § 2-1219.02(b) (2001).
Section 1 of An Act to Provide a Government for the District of Columbia, approved February 21,1871 (16 Stat.
419; D.C. Official Code § 1-102 (2001». See also section 717(a) of the Home Rule Act, D.C. Official Code § 1207. 17(a) (2001).
3
4
3
e.g., Wilson v. Kelly, 615 A.2d 229, 231 (D.C. 1992), with broadly-delegated executive and
legislative powers, subject only to such specific limitations of those powers as are contained in
the Home Rule Act. Instead of the typical "limitation of power charter" under Dillon's Rule, the
District has a classic "grant of power charter." See id.
However, the conclusion that Dillon's Rule does not apply to the current District government
does not mean that the government's broad legislative power embraces the creation of entities
outside the government. This is true because of the provision already quoted in section 404(b) of
the Home Rule Act, which authorizes the Council to create any office, agency, department, or
instrumentality "of the government of the District." By its terms, this provision does not
authorize the Council to create any entity outside or otherwise not "of' the government. Under
the well-settled rule of statutory construction known as expressio un ius est exc/usio alterius
(which means that the express provision of one thing should be understood as the exclusion of
other related things, see, e.g., Shook v. District of Columbia Financial Responsibility and
Management Assistance Authority, 132 F.3d 775, 782 (D.C. Cir. 1998); 2A Sutherland Statutory
Construction, § 47.23, pp. 216-17 (5 th ed. 1992), citing, inter alia, National Rifle Association v.
Potter, 628 F. Supp. 903, 909 (D.D.C. 1986), and McCray v. McGee, 504 A.2d 1128, 1130 (D.C.
1986)), section 404(b) of the Home Rule Act should be read as a limitation on the Council's
powers regarding the creation of the entities it describes. While the Shook decision at 782-83
cautions against using the expressio rule to create a negative inference from legislative language
that is merely intended to clarify what might otherwise be doubtful, in this case - under section
404(b) of the Home Rule Act - such an inference is proper because there could be no doubt
regarding the Council's power to create new entities of the government, and Congress's failure
to also provide expressly for the Council's power to create extra-governmental entities cannot
reasonably be viewed as a mere oversight. The failure of Congress to include such a power in
the Home Rule Act, in light of its mention of the power to create government entities, must be
accorded significance. Hence, the Home Rule Act limits the Council to the creation of entities
that are part of the District government.
Absent an act of Congress (not just a Council act that has sat before Congress for passive
review), the District cannot create any office, agency, department, or other instrumentality that is
outside the District government. Construing the NCRC Statute to the maximum extent of the
Council's powers, the description of the NCRC as "an independent instrumentality of the
District, with a legal existence separate from that of the District government" - standard,
boilerplate language that appears in most of the enabling laws for the District's independent
agencies - means that the NCRC, while still a part of the District government, is nevertheless
independent and separate from all other government entities, including the Executive Office of
the Mayor. s
5 The legislative history of the NCRC Statute reflects the Council's intent that the NCRC remain part of the
government, notwithstanding the statutory phrase, "with a legal existence separate from that of the District
government." The Report of the Committee on Economic Development to the Council dated February 13, 1998 (the
"Report") reflects a vision of the NCRC as a public entity that would harness the talent, capital and drive of the
private sector and focus those assets on addressing many of the social ills, and the physical deterioration, plaguing
the District through a coordinated economic development strategy. The Report characterized the to-be-formed
NCRC as "a business development instrumentality of the District government" and "an independent public
instrumentality." Report at 3. The legislative history also reflects the Council's knowledge and understanding that
the NCRC would be a public entity that is part of the District government. This point is made repeatedly throughout
4
c. The NCRC as an Instrumentality of the District Government
The foregoing analysis makes it clear that the District's instrumentalities, including the
NCRC, are part of its government. This conclusion is reinforced by the definition of
"District instrumentality" in section 490(n)(2) of the Home Rule Act (D.C. Official Code
§ 1-204.90(n)(2) (2001)), which means "any agency or instrumentality (including an
independent agency or instrumentality), authority, commission, board, department,
division, office, body, or officer of the District of Columbia government duly established
by an act of the Councilor by the laws of the United States, whether established before or
after August 5, 1997." Additionally, the NCRC Statute expressly reserves substantial
control and oversight of its activities to the Council beyond the limitations contained in
the Home Rule Act. The list of areas where the Council reserved its ability to control the
NCRC includes:
1.
2.
3.
Council Review of Board of Director Nominees;6
Council Review of all disposition of real property; 7
Council review of the NCRC's adoption of written guidelines or rules and
procedures pertaining to:
a. Gifts, grants, or subsidies;
b. Procurement of goods and services; and
c. Disposition of Property;8
4.
5.
6.
Council review of any revitalization plan;9
Council review of the creation of any subsidiary; 10
Council review of the public purpose of any bond undertaking; 11
the legislative history, in statements like " ... the bill provides to the [NCRC] an array of governmental
instrumentality powers, including the condemnation of property under existing D.C. laws and procedures .....",
Report at.3, and "[t]he powers conferred by this act are for public uses and purposes for which public powers may
be employed, public funds may be expended, and the power of eminent domain and the police power may be
exercised, and the granting of such powers is necessary and in the public interest." Report at.5. Given this
legislative history, a court likely would not give any effect to the statutory phrase, "with a legal existence separate
from that of the District government," even if the Council had the power to create an entity outside the government.
See, e.g., Dyerv. D.C. DepartmentojHousing, 452 A.2d 968,969-70 (D.C. 1982). Moreover, even if the legislative
history were not so clear, because the Council lacks the power to create an entity outside the government, the
general rule of severability would apply to strike a broad interpretation of the statutory phrase "with a legal
existence separate from that of the District government." The general rule of severability is contained in D.C.
Official Code § 45-20 I (200 I), which in relevant part states that "if any provision of any act of the Council of the
District of Columbia or the application thereof to any person or circumstance is ... beyond the statutory authority of
the Council of the District of Columbia, or otherwise invalid, the ... invalidity shall not affect other provisions or
applications of the act which can be given effect without the invalid provision or application, and to this end the
provisions of each act of the Council of the District of Columbia are deemed severable."
6 D.C. Official Code § 2-1219.03 (2005 Supp.).
7 D.C. Official Code § 2-1219.07 (2005 Supp.).
8 D.C. Official Code § 2-1219.10 (2001).
9 D.C. Official Code § 2-1219.12 (2005 Supp.).
10 D.C. Official Code § 2-1219.16 (2001).
5
7.
8.
Council review of any exercise of the power of eminent domain; 12 and
Reservation oftitle to all NCRC property in the District upon the corporation's
dissolution. 13
Of course, the ultimate reservation of control over the NCRC is the Council's authority under
section 404 of the Home Rule Act to create, abolish, or organize any department, agency or
instrumentality. It is not reasonable to interpret the Council's authority to extend to the creation
of the NCRC, but not its abolition (which the Council might not have authority to do if the
NCRC were outside of the District government). In addition to the Home Rule Act limitation on
the Council's power to create extra-governmental entities, the Council's reservation of the
degree of control listed above is inconsistent with a conclusion that the Council intended the
NCRC, as an instrumentality of the District, to be outside the District government. Rather, the
NCRC Statute reflects a clear intent of Council that the NCRC be part of the District
government. 14 This conclusion is supported by the NCRC Statute's legislative history, as
described earlier.
This conclusion is further supported by the observation that, were the NCRC a completely
independent, non-governmental body, and thus not subject to the laws that apply to the District
as a government, then the federal tax-exemption of bonds issued by the NCRC might be
questioned by the Internal Revenue Service. Despite numerous changes to the federal Internal
Revenue Code, it has been a constant that tax-exempt bonds must be direct or collateral
obligations of: (1) a state; (2) a political subdivision of a state; (3) a constituted authority with
the right to issue obligations on behalf of a state or a political subdivision; (4) certain types of
special assessment districts; or (5) certain types of quasi-public corporations qualified under the
Internal Revenue Code or the implementing regulations. Generally, a political subdivision is a
division of a state or local government unit which has been delegated the right to exercise part of
the sovereign powers of that unit. Sovereign powers include eminent domain, taxing powers,
and police powers. However, because the NCRC has the delegated authority to issue tax-exempt
bonds derived from section 490 of the Home Rule Act, and because the NCRC has other powers
of a sovereign entity, such as eminent domain powers, the NCRC would be hard-pressed, indeed
foolhardy, to assert that it is not a duly-constituted entity of the District government.
II.
THE NCRC IS SUBJECT TO THE ANTI-DEFICIENCY ACTS
The District government is subject to two anti-deficiency acts: (1) the federal Anti-Deficiency
Act, 31 U.S.c. §§ 1341, 1342, 1349-1351 1511-1519 (2004) (the "Federal ADA"), and D.C. Official
Code §§ 1-206.03(e) and 47-105 (2001); and (2) the District of Columbia Anti-Deficiency Act,
D.C. Official Code § 2-1219.18 (2001).
D.C. Official Code § 2-1219.19 (2005 Supp.).
13 D.C. Official Code § 2-1219.28 (2001).
14 I note there is recent case law that the D.C. Water and Sewer Authority (WASA) is not entitled to the protections
afforded the District government under D.C. Official Code §§ 12-301 and 12-309 (statute oflimitations and
statutory pre-suit notice). See D.C. Water and Sewer Authority v. Hampton & Assocs., 851 A.2d 410 (D.C. 2004);
and Dingwall v. D.C. Water and Sewer Authority, 800 A.2d 686 (D.C. 2002). However, those rulings do not stand
for the proposition that W ASA is not part of the District government for all purposes, but rather that, as a matter of
statutory interpretation, the particular sections of District statutes at issue in the cases were not intended to extend
certain statutorily-imposed protections of portions of the District government to W ASA.
11
12
6
D.C. Official Code §§ 47-355.01 - 355.08 (2005 Supp.) (the "D.C. ADA" and together with the
Federal ADA, the "Anti-Deficiency Acts"). Generally, the Anti-Deficiency Acts are intended to
prevent federal and District government employees from (1) (a) making or authorizing an
expenditure or obligation that exceeds an amount available in an appropriation or fund for the
expenditure or obligation, or (b) involving either government in a contract or obligation for the
payment of money before an appropriation is made unless authorized by law; and (2) accepting
voluntary services for either government or employing personal services exceeding that
authorized by law in the absence of an agreement setting forth the cost and method of payment,
if any, for such services.
A. The Federal Anti-Deficiency Act
The Federal ADA applies to federal agencies and the District government and ensures that,
before a public official obligates the government to spend money, the funds are available and
appropriated for the purpose for which they are obligated. The Federal ADA was intended to
keep an agency's level of operations within the amounts Congress appropriates for that p~ose.
See the General Accounting Office's Principles of Federal Appropriations Law, Vol. II (2n ed.
1992) at 6_56. 15
The two basic prongs ofthe Federal ADA are:
1.
31 U.S.C. § 1341(a): prohibiting both federal and District government employees
from (a) making or authorizing an expenditure or obligation that exceeds an amount available in
an appropriation or fund for the expenditure or obligation, or (b) involving either government in
a contract or obligation for the payment of money before an appropriation is made unless
authorized by law; and
2.
31 U.S.C. § 1342: prohibiting any officer or employee of the federal or District
governments from accepting voluntary services outside of the authorized procurement process
for either government or employing personal services exceeding that authorized by law except
for emergencies involving the safety of human life or the protection of property. This provision
is intended to prevent a government officer from accepting unauthorized services not intended or
agreed to be gratuitous and therefore likely to afford a basis for a future claim upon Congress.
30 Op. Atty. Gen. 51 (1913). This rule is supported by the rationale that, if an agency cannot
directly obligate in excess or advance of its appropriations, it should not be able to accomplish
the same thing indirectly by accepting ostensibly "voluntary" services and then presenting
Congress with the bill- a strategy referred to as "coercive deficiency."
As part of the District government, the NCRC is subject to the Federal ADA until such time as
Congress enacts a statute exempting it from the appropriations process or the Federal ADA
itself.
B. The D.C. Anti-Deficiency Act ("D.C. ADA")
The D.C. ADA expressly applies to any of the following: "a District agency head, deputy
15
The General Accounting Office is now known as the Government Accountability Office.
7
agency head, agency chief financial officer, agency budget director, agency controller, manager,
or other employee." See D.C. Official Code § 47-355.01 (2005 Supp.). In addition, the D.C.
ADA expressly defines the term "Agency" to include an "instrumentality of the District
Govemment.,,16
Much like the Federal ADA, any person to whom the D.C. ADA is made applicable may
not:
1. Make or authorize an expenditure or obligation exceeding an amount available
in an appropriation or fund;
2. Involve the District in a contract or obligation for the payment of money before
an appropriation is made unless authorized by law;
3. Approve a disbursement without appropriate authorization; or
4. Defer recording a transaction incurred in the current fiscal year to a future
fiscal yearY
The D.C. ADA imposes a series of reporting requirements and extends budgetary and
expenditure restrictions beyond those imposed by the Federal ADA. For example, the D.C.
ADA makes it a violation: (l) to knowingly report incorrectly on spending to date or on
projected total annual spending; and (2) to fail to adhere to a spending plan. IS In addition, the
District created a Board of Review for Anti-Deficiency Violations to ascertain the culpability of
employees responsible for violations of the D.C. ADA and to recommend appropriate
disciplinary actions, which may include termination of employment. This Board is to report to
the Council regarding each violation and the actions taken or proposed to be taken as a result.
The NCRC is, by its express terms, subject to the provisions of the D.C. ADA. Moreover, the
Council has not statutorily modified the D.C. ADA to exempt or exclude any District agency or
instrumentality, including the NCRC. Indeed, the Council recently made amendments to the
NCRC Statute without including any exemption from the D.C. ADA. 19
c. The Anti-Deficiency Acts and Section 446 Exemptions
Borrowing money, which then must be repaid with interest and other fees, is inherently
contradictory to the purposes and application of both Anti-Deficiency Acts.
Congress recognized this contradiction, and also the importance to the District government of
borrowing funds from either private lenders or the public markets for certain purposes.
Therefore, it created certain exceptions to the application of the Federal ADA in the Home Rule
Act to authorize such borrowing. These exceptions are, for the most part, set forth in section 446
of the Home Rule Act (D.C. Official Code § 1-204.46 (2005 Supp.». They are:
16 D.C. Official Code § 47-355.01 (1) (2005 Supp.). (Emphasis supplied.)
17
D.C. Official Code § 47-355.02 (2005 Supp.).
18 D.C. Official Code § 47-355.06 (2005 Supp.).
19 See Section 233 ofFY 2004 Budget Support of2003, effective November 13,2003 (D.C. Law 15-39; D.C.
Official Code § 2-1219.01 passim (2005 Supp.».
8
1. Obligations or expenditures of excess revenues of Water and Sewer Authority for
capital projects;20
2. Obligations or expenditures of District revenues to secure general obligation bonds or
notes·,21
3. Obligations or expenditures for the parznent of principal of, interest on, or redemption
premium for general obligation notes; 2
4. Obligations or expenditures for payment of principal of, interest on, or redemption
premium for revenue anticipation notes;23
5. Obligations or expenditures for payment of principal of, interest on, or redemption
premium for bond anticipation notes;24
6. Amounts set aside in a debt service fund under section 481(a) of the Home Rule Act
(D.C. Official Code § 1-204.8 I (a) (2005 Supp.)); amounts obligated or expended for
the payment of principal of, interest on, or redemption premium for any general
obligation bond or note issued under sections 461 (a), 471(a), or 472(a) of the Home
Rule Act (D.C. Official Code §§ 1-204.61(a), 1-204.71(a) and 1-204.72(a) (2001));
amounts obligated or expended as provided by the Council in any annual budget (or
amendment or supplement thereto) for the District pursuant to section 483(a) of the
Home Rule Act (D.C. Official Code § 1-204.83(a) (2005 Supp.)); or any amount
obligated or expended pursuant to section 483(b) of the Home Rule Act (for debt
service on general obligation bonds);25 and
7. Revenue bonds and other obligations (issued by the District, the Housing Finance
Agency, Water and Sewer Authority, or District of Columbia Tobacco Settlement
Financing Corporation). 26
Congress further recognized that certain instrumentalities, such as the District of Columbia
Water and Sewer Authority, would need similar borrowing powers and, therefore, both
authorized specific entities to exercise such borrowing authority and authorized the Council to
delegate certain borrowing authority powers to District instrumentalities in the future. See, e.g.,
section 490(a)(6)(A) of the Home Rule Act ("The Council may by act delegate to any District
instrumentality the authority of the Council under subsection (a)(I) of this section to issue
taxable or tax-exempt revenue bonds, notes or other obligations to borrow money for the
purposes specified in this subsection.").
Because section 446 of the Home Rule Act governs the process by which the District obtains
appropriated funds, an exemption from section 446 of the Home Rule Act effectively functions
to exempt an activity, obli~ation or expenditure (depending on the nature of the exemption) from
the Anti-Deficiency Acts.2 Therefore, an exemption from section 446 of the Home Rule Act
20 D.C. Official Code § 1-204.45a(b) (2001).
21 D.C. Official Code § 1-204.67(d) (2001).
22 D.C. Official Code § 1-204.71(c) (2001).
23 D.C. Official Code § 1-204.72(d)(2) (2001).
24 D.C. Official Code § 1-204.75(e)(2) (2001).
25 D.C. Official Code § 1-204.83(d) (2001).
26 D.C. Official Code §§ 1-204.90(1), (g), (h)(3), and (i)(3) (2001).
27 Section 446 of the Home Rule Act obligates the District to submit its annual budgets to Congress for approval and
specifies that, except as provided in certain sections of the D.C. Official Code, "no amount may be obligated or
expended by any officer or employee of the District of Columbia government unless such amount has been approved
9
means that funds used pursuant to an enumerated exemption are not subject to the appropriations
process authorized by Congress and, further, that obligations and expenditures of the monies so
exempted are not subject to limitation by the appropriations process.
Notwithstanding the foregoing, funds that are appropriated by Congress for specific purposes
must be spent in accordance with such purposes (unless the funds are reprogrammed or
transferred, or the appropriation is later modified), and are not available for expenditure for the
exempt purposes specified in section 446 of the Home Rule Act if such expenditure would be
inconsistent with the appropriation that governs them. Appropriated funds cannot generally be
diverted for such exempt uses (unless expressly authorized by Congress) because doing so would
frustrate the express directive of Congress to use appropriated funds in the manner specified.
However, the exemptions under section 446 of the Home Rule Act permit the District to use
certain revenue streams that it creates or receives outside the appropriations process without
restriction by appropriation laws. Section 490(f) of the Home Rule Act is one such exemption
from section 446 of the Home Rule Act. It permits the District to pledge certain District assets to
secure revenue bonds, notes or other obligations ("revenue bonds") that it issues, and to use the
proceeds of such revenue bonds, without going through the normal budgeting and appropriations
process so long as the District pledges such assets and uses such proceeds in accordance with the
requirements of the exemption in section 490 of the Home Rule Act.
Subsection (f) of section 490 of the Home Rule Act (which is exempted from the budgeting and
appropriations process under section 446 of the Home Rule Act) states:
(f) The fourth sentence of [Section 446] shall not apply to:
(1) Any amount (including the amount of any accrued interest or
premium) obligated or expended from the proceeds of the sale of any
revenue bond, note or other obligations issued under subsection (a)(l) of
this section;
(2) Any amount obligated or expended for the payment of the principal
of, interest on, or any premium for any revenue bond, note or other
obligation issued under subsection (a)(1) of this section;
by Act of Congress, and then only according to such Act." This is the "appropriations requirement." As stated
above, the Federal ADA prohibits the making or authorizing of an expenditure or obligation that exceeds an amount
available in an appropriation or fund for the expenditure or obligation or involving the government in a contract or
obligation for the payment of money before an appropriation is made unless authorized by law. Thus, ifno
appropriation is required, there can be no violation of the appropriations requirement in the Federal ADA.
The exemptions from Section 446 ofthe Home Rule Act also apply to the D.C. ADA. If the D.C. ADA were
construed to make unlawful- albeit under local, not federal, law - the very same conduct that section 490 of the
Home Rule Act expressly makes lawful, there would be a conflict in which the enforcement of local law would
frustrate congressional intent. Since section 602(a) of the Home Rule Act (D.C. Official Code § 1-206.02(a) (2001»
prohibits the Council from passing any act contrary to the Home Rule Act, the D.C. ADA would be void if it were
construed to limit powers of the District in ways that Congress expressly granted to it. Under the rule of statutory
construction that a statute should be construed so as to make it lawful, the D.C. ADA should be construed as not
prohibiting expenditures and obligations that Congress expressly permitted under the exceptions to section 446 of
the Home Rule Act.
10
(3) Any amount obligated or expended pursuant to provisions made to
secure any revenue bond, note or other obligations issued under subsection
(a)(1) ofthis section; and
(4) Any amount obligated or expended pursuant to commitments made in
connection with the issuance of revenue bonds, notes or other obligations
for repair, maintenance, and capital improvements relating to undertakings
financed through any revenue bond, note or other obligation issued under
subsection (a)(1) of this section.
III.
THE NOTE IS INVALID BECAUSE IT WAS NOT ISSUED IN CONFORMITY
WITH A DELEGATION GRANTED BY ACT OF THE COUNCIL
Home Rule Act section 490(n)(I) defines "revenue bonds, notes, or other obligations" to include
obligations used to borrow money to fmance an undertaking referred to in section 490(a)(1)one that is secured as provided in section 490(a)(3) and that does not obligate the full faith and
credit of the District. The NCRC Statute (D.C. Official Code § 2-1219.01(8) (2005 Supp.»
defines "bonds" as "revenue bonds, notes, or other obligations, including refunding revenue
bonds, notes, or other obligations and tax increment revenue bonds authorized to be issued by the
[NCRC] pursuant to [the NCRC Statute]." Thus, the terms "debt" and "debt obligations" are
used in this Opinion to refer to all forms of debt authorized to be issued by the NCRC - revenue
bonds, notes, or other obligations as defined in Home Rule Act section 490(n).
A. The NCRC Does Not Possess Independent Home Rule Act Authority to Incur
Debt
Generally, authority to incur municipal debt must be expressly granted by constitution, general
law or charter and cannot be implied from other powers, such as the power to acquire property or
the power to build and operate facilities. 28 In addition, the delegated grant of authority to incur
debt is strictly construed; there can be reasonable doubt of the intention to grant the authority.29
The Home Rule Act authorizes the District government to borrow money by issuing general
obligation bonds (sections 461-467), to borrow money by issuing short-term notes (sections 471475), to impose taxes to pay bonds and notes (sections 481-483), to declare bonds and notes
28 The majority of courts still require express statutory authorization behind municipal powers, especially when
construing the power to borrow. Mcquillin Mun Corp § 39.07 (3rd Ed). "It is well established and illustrated by
numerous decisions that municipal corporations are rigidly restricted as to their power to raise and expend money to
the purposes specified, through the officers and channels authorized by law, and they cannot transcend the bounds
imposed. Id at § 39.17. "The general rule is that there is no authority to issue bonds unless it has been expressly
conferred." Id at § 43.18. "At present it is the law that municipal corporations have no power to issue bonds unless
expressly authorized to do so ... : and the power cannot be implied from the ordinary police powers conferred upon
municipalities." Id at § 43.19.
29 See, e.g., Mcquillin Mun Corp §§ 39.17 & 43.21 (3rd Ed). For example, although D.C. Official Code § 21219.l5(a)(17) (2001) grants to the NCRC the authority to mortgage or pledge its property, actions usually
associated with the creation of debt, this subsection does not confer independent authority to issue debt. Rather, this
subsection grants the NCRC the ability to secure debt otherwise validly issued.
11
issued by the Council exempt from taxation (section 485), and to issue revenue bonds for
undertakings by the District or by any authorized District instrumentality (section 490). The
Home Rule Act does not contain authority for any independent agency to incur debt. However,
section 490(a)(6)(A) authorizes the Council to delegate to District instrumentalities its authority
to issue the debt obligations that the Council can issue pursuant to section 490(a)(l).
Under the rule of expressio unius est exclusio alterius discussed on page 4, the specific grant of
debt authority to the Council, when combined with both the failure to grant debt authority to any
other District entity and the grant of Council authority to delegate to District instrumentalities
some portions ofthe Council's debt authority, compels a conclusion that the NCRC does not
possess direct Home Rule Act authority to incur debt and that the Council cannot delegate to the
NCRC authority to borrow money in excess of the Council's own Home Rule Act authority to
borrow money. To declare that the NCRC possesses direct Home Rule Act debt authority would
frustrate the language and purposes of the Home Rule Act, which grants the District specific,
enumerated rights to borrow money and reserves to the Council the power to delegate that
authority to District instrumentalities.
B. The NCRC Has a Council Delegation of Authority to Incur Debt
Home Rule Act section 490(a) authorizes the Council to issue "taxable and tax-exempt revenue
bonds, notes or other obligations to borrow money to finance, refinance, or reimburse and to
assist in the financing, refinancing, or reimbursement of capital projects and other undertakings
of the District or by any District instrumentality ...."
Section 490(a)(6) constitutes the only Home Rule Act authorization for general Council
delegation of its authority to issue revenue bonds. 30 Section 490(a)(6)(A) allows the Council to
delegate - "by act" - to any District instrumentality the Council's section 490(a)(1) authority to
issue taxable or tax-exempt revenue bonds.
Pursuant to section 490(a)(6)(A), the Council proRerly adopted an act delegating to the NCRC
the Council's authority to issue section 490 debt. I D.C. Official Code § 2-1219.15(a)(l4)
(2001) grants the NCRC the power to issue debt "in accordance with §§ 2-1219.18 and 21219.23." D.C. Official Code § 2-1219.18 (2001) permits the NCRC Board of Directors (the
"NCRC Board") to authorize the issuance of debt. D.C. Official Code § 2-1219.23 (2001)
permits the NCRC Board to issue tax increment bonds?2
C. The NCRC's Borrowing Authority Derives from D.C. Official Code §§ 21219.15(a)(14), 2-1219.18 and 1-1219.23 (2001)
30 Sections 490(g), (h) and (i) contain specific delegations of the authority to issue revenue bonds, notes and other
obligations to housing fmance agencies, the District of Columbia Water and Sewer Authority and the District of
Columbia Tobacco Settlement Financing Corporation, respectively.
31 Sections 16(a)(l4), 19, and 24 ofthe NCRC Statute contain the Council grants of authority to NCRC to issue debt
obligations. These provisions will be referenced in this Opinion by use of the D.C. Official Code section.
32 The process for an NCRC issuance oftax increment bonds pursuant to D.C. Official Code § 2-121923 (2001)
differs from the process required for other revenue bonds pursuant to D.C. Official Code § 2-1219.18 (2001), but the
differences are not relevant to this Opinion.
12
As stated above, municipal debt authority must be express. The Council created the NCRC
through the NCRC Statute. Subsections 2-1219.15(a)(1)-(31) (2001) contain a list of specific
powers granted to the NCRC. Section 2-1219.15(a)(14) authorizes the NCRC to issue debt in
accordance with D.C. Official Code §§ 2-1219.18 and 2-1219.23 (2001).
D.C. Official Code § 2-1219.15(a)(3l) (2001) states that the NCRC may "[e]xercise any other
power usually possessed by, and incident to, public enterprises performing similar functions or
private corporations organized under the business corporation law of the District, respectively, to
the extent that the exercise ofsuch powers is not inconsistent with applicable federal or District
law or the purposes of[the NCRC Statute}." (Emphasis supplied.) This qualification places a
substantial limit on the authority conveyed by section 2-1219.15(a)(31). Section 21219.15(a)(31)' s broad language is a "savings" provision designed to provide requisite and
corollary authority necessary to exercise the powers listed in the preceding sections 21219.15(a)(I) through (a)(30). Section 2-1219.15(a)(31) does not constitute a separate and
independent grant of additional authority which imbues NCRC with all of the powers of private
corporations organized under the Business Corporation Act. Such an interpretation would render
superfluous and repetitive the enumeration of the 30 specific powers preceding section 21219.15(a)(31) because many of those powers are possessed by private corporations organized
under the Business Corporation Act. Had the Council intended such an interpretation, it simply
would have granted the NCRC all powers available to private corporations under the law and
enumerated only those additional governmental powers granted to the NCRC, such as the section
2-1219.15(a)(14) authority to issue tax-exempt bonds.
As part of the District government, the NCRC cannot act as if it were nothing more than just
another business corporation. First, the NCRC is an instrumentality ofthe District government
with governmental powers that an ordinary business corporation does not possess, such as the
power of eminent domain and the power to issue tax-exempt debt. Second, the NCRC cannot
possess any powers not available to the District government because the Council cannot grant
such powers to a District instrumentality. Third, if the NCRC were a private business
corporation completely separate and apart from the District government (as if created by the
District government in much the same way as the Congress charters private corporations which
are not part of the federal government), it might be required, unless otherwise exempted by some
other provision in law (i.e., as a non-profit organization) to register its securities offerings with
the federal Securities and Exchange Commission. 33
In addition, section 2-1219.15(a)(31) cannot constitute a grant to NCRC of borrowing authority
in addition to, and separate and apart from, the borrowing authority granted in section 21219.15(a)(14), because such a grant would violate Home Rule Act section 490(a)(6)(A), which
requires that a Council delegation of debt authority "shall specify for what undertakings [the
debt] may be issued under each delegation made .... " Section 2-1219 .15(a)(31) does not contain
such specificity.
33 See Securities Act of 1933 (15 U.S.C. § 77a, et seq.); Securities Exchange Act of 1934 (15 U.S.C. § 78a, et seq.).
Generally, securities issued or guaranteed as to principal or interest by government entities such as the District (or a
public instrumentality of the District) are exempt from most of the requirements of the federal securities laws,
including the registration requirements, if the interest on the securities is excludable from gross income under the
Internal Revenue Code.
13
Finally, only section 2-1219.15(a)(14), and the two D.C. Official Code sections to which it
refers, expressly grants the NCRC the authority to incur debt. Thus, under the rule of expressio
unius est exclusio alterius and for the other reasons stated above, I conclude that section 21219.15(a)(31) confers no general borrowing authority and that the NCRC's sole authority to
incur debt is contained in D.C. Official Code §§ 2-1219.15(a)(14), 2-1219.18 and 2-1219.23
(2001).
D. The NCRC's Borrowing in 2002 Did Not Comply With All of the
Requirements of the Home Rule Act and the Council Delegation of Authority
to Issue Revenue Bonds
I understand that the NCRC executed a $6,700,000 note with the Bank in September 2002. My
stafIhas reviewed the Note and, in substance, the Note created an obligation to pay a debt. As
such, it should have been issued pursuant to the provisions of Home Rule Act section 490(a)(6)
and D.C. Official Code § 2-1219.18 (2001).34 Before issuing that debt, the NCRC must have
satisfied the following requirements:
- The NCRC Board must have adopted a resolution issuing debt. See section 490(a)(6)(B)
of the Home Rule Act. The NCRC Board, in that resolution, must have provided for the
available revenues to be pledged to secure the debt. See D.C. Official Code § 21219.18(g) (2001).
Although the NCRC Board adopted a resolution approving the loan, that resolution did not
conform to the requirements of a resolution authorizing the issue of section 2-1219.18 debt.
The Note is a limited recourse promissory note of the NCRC, which means that, in most
circumstances, the Note is secured only by the collateral referenced in the Deed of Trust.
Pursuant to the Home Rule Act and the NCRC Statute, the debt can be secured only by a limited
set of assets that are not already appropriated for another particular purpose because a debt
obligation can neither interfere with another existing appropriation nor become a general
obligation of the governmental entity issuing such debt (and therefore must be secured by
designated revenues or other assets that are not subject to another appropriation).
34 Although D.C. Official Code § 2-1219.18 (2001) contains varied references to ''taxable and tax-exempt revenue
bonds," "revenue bonds, notes, or other obligations," ''revenue bonds," "bonds or other borrowings" and "bonds",
the intent is that the provisions of D.C. Official Code § 2-1219.18 (2001) apply to all debt instruments issued by the
NCRC .. Furthermore, an argument that the requirements of D.C. Official Code § 2-1219.18 (2001) apply only to
revenue bonds, as narrowly construed, and that they do not apply to "other obligations," which is a term included in
addition to revenue bonds in the NCRC Statute's defmition of "bonds," fails. First, D.C. Official Code § 2-1219.18
(2001) of the NCRC Statute applies to ''revenue bonds, notes, or other obligations" (emphasis supplied) and refers
back to Home Rule Act section 490(a)(6)(A), which groups these three terms together and addresses them
collectively,just as this Opinion has. Furthermore, D.C. Official Code § 2-1219.18 (2001) evidences no intent to
narrowly construe the term "revenue bonds." Nor is there any other provision in the NCRC Statute delegating
Home Rule Act section 490 authority to the NCRC pursuant to which such "other obligations" could be issued. In
order to be a valid debt instrument, the Note could only be a "bond" as that term is defined in the NCRC Statute
(D.C. Official Code § 2-1219.01(8) (2005 Supp.», which defines a "bond" as ''revenue bonds, notes or other
obligations" .
14
If the Note is a debt instrument, the security for such debt must be limited to assets lawfully
available for the repayment of the Note, must be specified by the NCRC Board in its approval
resolution, and must not include any revenues that are appropriated for other purposes. Yet, the
Note contains (1) terms providing for recourse liability, and (2) uncapped environmental
indemnities, fee-shifting provisions, and cost-shifting provisions.
2. The debt must fund a project eligible under Home Rule Act section 490(a)(I) in
furtherance of the NCRC's established statutory purposes and may not be used to make a
monetary grant. See D.C. Official Code § 2-1219.18(a) (2001).
Based on statements made by the NCRC, I believe the debt proceeds have been spent in
accordance with purposes permitted under section 490(a)(1) of the Home Rule Act.
- The NCRC must have submitted to the Council a resolution of project approval
accompanied by a summary description of the proposed project and a listing of the public
purpose benefits to be derived from the proposed undertaking for a 45-day period of
Council review. The Council must have approved or disapproved the project by
resolution within such 45-day period. See D.C. Official Code § 2-1219.l8(b)(1) (2001).
The NCRC did not obtain the required Council resolution approving the project to be financed. - The debt cannot constitute an indebtedness of the District and cannot be a general
obligation of the District, nor can the debt be secured by a pledge of the full faith and
credit of the District. The debt instrument must have contained a statement setting forth
these limitations. See D.C. Official Code § 2-1219.18(p) (2001).
The NCRC failed to satisfy certain technical requirements set forth under D.C. Official Code §
2-1219.18 (2001) regarding the express statements that must be set forth on the face of the debt
instrument, including the D.C. Official Code § 2-1219 .18(p) (2001) requirement of a disclaimer
of a pledge of the full faith and credit of the District of Columbia.
Thus, because the proper statutory procedures were not followed, and because the Note does not
comply with the Home Rule Act and D.C. Official Code § 2-1219.18 (2001), the debt was not
properly authorized by District law.
E. Failure to Properly Issue Debt Creates Negative Consequences, But the
NCRC Can Correct the Deficiencies
If government debt is not validly authorized, such ultra vires debt generally is void and
unenforceable and loses its federal tax-exemption. 35 Furthermore, because the Note was not
issued in compliance with either section 490 of the Home Rule Act or the delegated section 490
35 See Scofield Engineering Co. v. City o/Danville, 35 F.Supp. 668 (W.D.Va. 1940), affd 126 F.2d 942 (4
th
Cir.
1942); Chemical Bank v. Washinl,ton Public Power Supply, 99 Wash. 2d 772,666 P.2d 329 (1983). See also
McQuillin Mun Corp § 43.20 (3 r Ed): "In the exercise of the power to issue bonds, it is generally held that all
mandatory provisions of the applicable law must be observed in all substantial respects, otherwise bonds issued in
disregard of essential legal requirements may be shown to be invalid."
15
authority contained in D.C. Official Code § 2-1219.18, the Note did not receive the exemption
from the appropriations requirement under section 446 of the Home Rule Act accorded to
revenue bonds properly issued under section 490. Because the Note appears to have been issued
for a period greater than one fiscal year without appropriations for payment, the obligations
undertaken pursuant to the Note, as well as payments made under it, in all probability violated
both the Federal ADA and the D.C. ADA.
Some corrective actions are not available. First, a Council resolution alone cannot correct the
deficiencies in the Note. Home Rule Act section 490(a)(6)(A) requires a Council act to delegate
the Council's borrowing authority to the NCRC. The NCRC Statute, specifically D.C. Official
Code §~ 2-1219.18 and 2-1219.23, is the only Council act that meets that requirement for the
NCRC. 6 Thus, if the NCRC issues debt without complying with the procedures set forth in
those sections, the debt would not have been issued pursuant to a Council act. 37 To retroactively
approve the Note, the Council must either adopt an act retroactively amending the NCRC Statute
to allow the issue of debt pursuant to the procedures used by the NCRC for the Note or adopt an
act retroactively approving the Note, which action also constitutes an amendment of the NCRC
Statute. But because the Council cannot amend an act except by adoption of another act, prior or
subsequent approval by Council resolution would not suffice to satisfy the requirements of
section 490 of the Home Rule Act.
Second, Home Rule Act section 490(a)(6)(B) provides: "Revenue bonds, notes or other
obligations issued by a District instrumentality under a delegation of authority described in
[section 490(a)(6)(A) of the Home Rule Act] shall be issued by resolution of that instrumentality,
and any such resolution shall not be considered to be an act of the Council." In addition, D.C.
Official Code § 2-1219.18(b) (2001) requires a Council resolution approving the issue ofNCRC
debt. Thus, the NCRC cannot substitute its approval resolution for either the Council act
delegating, or amending its delegation of, borrowing authority to the NCRC or the Council
resolution approving the issue of the debt.
However, District law contains ways to cure the deficiencies in the Note and Deed of Trust.
First, the NCRC may issue new debt for the same purpose as the Note in accordance with the law
and use the proceeds to repay the Note, although this does not cure the deficiencies with the
(i.e., between approval by act, rather than
resolution, of Council in the event of government borrowing), is fundamental because an act passed by Council
gives Congress the opportunity to review the District's attempt to create borrowing authority during the normal
congressional layover period required for the passage of an act of the Council, whereas neither a Council nor a
NCRC resolution provides this opportunity. This must be read in the context of section 490(a)(6)(A), which
requires a Council act to delegate borrowing authority to a District instrumentality. A properly adopted Council act
delegating debt authority to an instrumentality would constitute the requisite Council act under the Home Rule Act
and would obviate the need for the Council to approve, by act, the delegated instrumentality's subsequent issue of
section 490 debt in compliance with the provisions of the Home Rule Act and the Council delegation act.
37 On this point, section 490(a)(6)(A) of the Home Rule Act cautions that "[a]ny instrumentality may exercise the
authority and the powers incident thereto delegated to it by the Council as described in the first sentence of this
paragraph [authorizing Council delegations of the authority to issue revenue bonds] only in accordance with this
paragraph and shall be consistent with this paragraph and the terms of the [Council act of] delegation." (Emphasis
supplied.)
36 The distinction emphasized by section 490(k) of the Home Rule Act
16
Note. 38 Second, the NCRC may properly approve the entire existing debt package (with altered
documents to comply with applicable law as described above) and substitute the new debt
package for the existing debt package as a novation. 39 Third, another District instrumentality
may properly authorize debt and substitute itself for the NCRC in the Note and Deed of Trust.
In addition, the Council may delegate additional, limited or different borrowing authority to the
NCRC and create a different set of requirements applicable to that debt, such as requiring no
subsequent Council approval or expedited Council approval. To do so, the Council must adopt an
act delegating such authority, and that act must specify those undertakings for which the debt
may be used, which debt must comply with Home Rule Act section 490.
IV.
THE NCRC LACKS AUTHORITY TO ESTABLISH SPECIAL FUNDS BEYOND
THE ESTABLISHMENT OF FUNDS PERMITTED UNDER SECTION 490 OF
THE HOME RULE ACT BECAUSE SUCH AUTHORITY CANNOT BE
DELEGATED BY THE COUNCIL
The broad authorization to the NCRC to establish special funds, granted pursuant to D.C.
Official Code § 2-1219.17 (2001), represents an impermissible attempt by the Council to
delegate a non-delegable duty. Section 450 ofthe Home Rule Act (D.C. Official Code § 1204.50 (2001)) provides: "The Council may from time to time establish such additional special
funds as may be necessary for the efficient operation of the government of the District." This
provision grants the Council the authority to segregate funds from the General Fund, which is
used to pay the operating expenses of the government. Id However, unless permitted in the
Home Rule Act, the Council does not have the authority to delegate this power. Nevertheless,
the Council, in the NCRC Statute, attempted not only to create a special fund in which the
NCRC could deposit certain monies and keep them separate from the General Fund, but to
delegate to the NCRC the ability to create additional special funds not necessarily associated
with Home Rule Act section 490 debt, separate and apart from the General Fund. See D.C.
Official Code § 2-1219.17 (2001).
As noted above, this is an impermissible attempt to delegate a non-delegable duty. In Hampton
v. United States, 276 U.S. 394, 405-06 (1928), the Supreme Court discusses the maxim
"Delegata potestas non potest delegari,,,4o and explains that such maxim "is well understood and
has had wider application in the construction of our Federal and State Constitutions than it has in
private law," and that it is especially applicable to agency law. It is a breach of fundamental
constitutional law if the legislative branch, in this case the Council, attempts to transfer its
legislative authority to either of the other two branches of government. Id. Although the
separation of powers is not absolute, in "determining what it may do in seeking assistance from
38 The new debt cannot be a tax-exempt refunding obligation because such an obligation may refund only valid,
existing tax-exempt bonds. However, under certain circumstances, the new debt could be tax-exempt if it qualified
as a timely reimbursement of qualified taxable debt.
39 NCRC could also reaffirm and continue the existing debt by: a) amending the existing Note to include the
mandatory provisions, b) adopting a resolution authorizing issuance of the reformed Note, c) obtaining a Council
resolution approving the Project, and d) obtaining a Council act retroactively approving the Note. However,
although not significantly different from the second option, this process is more cumbersome than the alternatives
described in the accompanying text.
th
40 A delegated power cannot be delegated. Black's Law Dictionary 512 (5 ed. 1979).
17
another branch, the extent and character of that assistance must be fixed according to common
sense and the inherent necessities of the governmental co-ordination." Id. at 406. The
legislature may vest authority in the executive branch in some circumstances. Id. There is a
strong distinction, however, between the power to make the law and conferring the authority to
make a decision on how to execute that law. Id. at 407. Here, the Council did not respect this
distinction when it passed D.C. Official Code § 2-1219.17 (2001).
The plain language of the provision delegates to NCRC the Council's exclusive power to create
special funds, and does so without limiting the number of special funds the NCRC can create, or
the purposes for which they can be created. See D.C. Official Code § 2-1219.17 (2001). The
procedures enacted for the NCRC to establish funds are broadly written so as to have
indiscernible boundaries. Id. The NCRC has discretion as to whether or not it establishes
additional special funds, and if so, how many and for what purposes. Id. By vesting such
unbridled discretion in the NCRC, the Council has clearly given legislative functions to a nonlegislative authority. The Council has not merely "conferred upon [the NCRC] an authority and
discretion, to be exercised in the execution of the law, and under the pursuance of it, which is
entirely permissible," but has "delegated to the [the NCRC] any authority or discretion as to what
the law shall be." State v. Chicago, Milwaukee & St. Paul Railway Company, 38 Minn. 281, 301
(1888). This delegation is a breach of the long-standing principle of separation of powers.
While section 490 of the Home Rule Act permits the Council to grant the NCRC the authority to
create special funds associated with the issuance of revenue bonds, it does not permit the broad
grant of authority set forth in D.C. Official Code § 2-1219.17 (2001). Furthermore, if the NCRC
fails to comply with the requirements in those sections of the Home Rule Act that contemplate
the establishment of special funds incidental to the issuance of revenue bonds, the NCRC does
not have the authority to create even those limited special funds.
*
*
*
If you have any questions concerning this Opinion, please do not hesitate to call me at 724-1520,
Bruce E. Brennan, Acting Deputy Attorney General for the Commercial Division, at 442-9834,
or Wayne C. Witkowski, Deputy Attorney General for the Legal Counsel Division, at 724-5524.
Sincerely,
~~~
Interim Attorney General for
the District of Columbia
EAAlcfb, mjk, wcw, sbl, ajp
18
·
.
cc:
Ed Reiskin
Interim City Administrator
Alfreda Davis
Chief of Staff to the Mayor
Len Becker
General Counsel to the Mayor
Stanley Jackson
Deputy Mayor for Planning and Economic Development
Natwar Gandhi
Chief Financial Officer
Ronald Evans
Chair, Board of Directors, National Capital Revitalization Corporation
19