Philadelphia's oversight board last week gave the city its first installment of bond proceeds to pay off the fiscal 1992 deficit, which city officials now say is smaller than previous estimates.
The board, known as the Pennsylvania Intergovernmental Cooperation Authority, also sent Philadelphia about $22 million to use toward long-deferred capital projects.
The city received a total of $85.9 million, representing a portion of the proceeds available from PICA's $475 million revenue bond sale last June.
About $64.3 million must be used to begin paying off the $71.4 million budget deficit. Last spring the gap for fiscal 1992, which ended June 30, was pegged at almost $95 million, and the oversight board allocated that amount of bond proceeds for deficit payoffs.
"A deficit for fiscal 1992 substantially lower than that which was projected in May is positive for Philadelphia," Ronald G. Henry, the board's executive director, said in a statement. But Henry added that Philadelphia "should not anticipate using any extra money borrowed by PICA ... to avoid coming to terms with its underlying financial problems."
The unexpected $23.5 million can be used for other purposes, as long as they are approved by board members.
Under the board's trust indenture, PICA must pay the city 90% of the deficit certified in the annual report by the city finance director. The report, which Finance Director Stephen P. Mullin filed last week, puts the deficit at $71.4 million.
The oversight board said it expects to disburse the remaining 10%, or about $7.1 million, after City Controller Jonathan A. Saidel completes his final audit for the year in December.
In May, the authority approved Philadelphia's list of capital projects it hoped to fund with bond proceeds. Last week's $22 million disbursement is the first of what is expected to be a total of about $120 million for that purpose.
Under the terms of its agreement with the oversight board, Philadelphia can use bond proceeds for capital projects only if they are deemed emergencies or if they help the city achieve its long-term fiscal recovery goals.
The initial disbursement approved includes $10.7 million for improvements to the local mass transit system and $3.2 million for waterproofing and structural work at Veterans Stadium.
Henry said the information city officials submitted in support of the capital fund disbursement "shows Philadelphia is beginning to have better control over the capital spending process."
But he added that the city's ability to administer capital programs "leaves much room for improvement, and still shows an absence of the financial and managerial control which should be routine."
In addition to the $85.9 million disbursed last week, the oversight board gave the city $153.4 million at the time of the June bond closing to cover the deficit for fiscal 1991, as well as $20 million to capitalize a productivity bank the city wants to use to fund projects to improve operations. Another $8 million is needed for this year's expected budget gap.
The rest of the proceeds are being used for the $47.5 million debt service reserve fund and to pay other fees and charges associated with the bond sale.