Philadelphia's long-delayed deficit bond sale now appears dead in the water until next year at the earliest, prompting Moody's Investors Service to issue a statement on Friday expressing concern about the city's inability to deal with its problems effectively.

"The city has failed to make substantial progress toward achieving long-term solutions," the rating agency said, adding that inertia persists despite significant fiscal pressure and a 1992 budget that remains unbalanced.

City Finance Director David Brenner said he can understand Moody's frustration with the slow pace of change, but he also said significant progress probably will not occur until the middle of next year.

"I don't think anything is going to really happen in a meaningful way until the labor contracts are renegotiated, and that's not going to happen until June," Mr. Brenner said. He explained that the next mayor will have to negotiate major changes in the way Philadelphia deals with its unions when the current contracts expire next summer.

In the meantime, Mr. Brenner said a private note deal the city has been negotiating with local nonprofit institutions will be priced tomorrow. Proceeds from that deal--expected to be about $100 million -- will help the city muddle through the next two months in the absence of a deficit bond sale by the oversight board.

State officials established the oversight board in June with the expectation board in June with the expectation it would quickly issue bonds on the city's behalf to pay off the substantial deficits in fiscal 1991 and 1992. City officials warned over the summer that the authority had to be set up immediately to sell its bonds, or Philadelphia would run out of cash at the end of this month.

Although the state agreed in June to establish the board, snags developed during negotiations on how much power it would wield over the city, especially with regard to the politically explosive labor negotiations.

Those problems, as well as a mayoral election next month, have stalled the process to the point where most of the people involved now believe a deficit bond deal almost certainty will have to wait until 1992, when a new mayor takes office.

"The anticipated deficit funding now appears extremely unlikely prior to the close of calendar 1991," Moody's noted. The rating agency added that "any efforts to restore confidence in the city's long-term credit position must begin with evidence of a commitment to long-term budgetary control."

Moody's, which rates Philadelphia B, warned that the longer the budget drama is allowed to stagnate, the tougher it will be for city officials to meet even their short-term cash needs.

Mr. Brenner said despite the obvious exasperation the financial community feels toward the city, he saw some positives in Moody's statement. "Those of us who wear a financial hat have to be pleased that the B rating reflects our ability to manage cash needs and the debt service that's required," he said.

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