Philadelphia May Issue Notes in Effort Some Say Sidesteps Oversight Panel
Philadelphia officials confirmed Friday they have been privately negotiating a $90 million temporary note sale that critics say could be an effort to postpone a planned deficit bond sale until Mayor W. Wilson Goode leaves office in January.
City Controller Jonathan A. Saidel blasted the idea in a letter to Mayor Goode on Friday and said he would work vigorously to keep the city from borrowing the money.
"I oppose and will not sign any documents in its furtherance," Mr. Saidel wrote, adding that he had "crept along with these stopgap measures for too long."
Instead, Mr. Saidel said, the city should continue to pursue its plan to use its oversight board, the Pennsylvania Intergovernmental Cooperation Authority, to sell between $200 million and $300 million of deficit bonds next month.
Before those bonds can be sold, the board must first approve a five-year fiscal recovery plan, and critics of the mayor suggested Friday that the private note sale is an attempt by the administration to generate enough cash to take the city through the end of the year. That would allow Mayor Goode, who leaves office in January, to avoid the tough measures the five-year plan will force on the city.
"This note idea is so the current administration can leave office without having to make the difficult decisions that producing a sensible five-year plan would require," one source close to the situation said.
Another source involved in the negotiations on the power-sharing agreement said members of the oversight board "wish that the city had devoted as much time to preparing the city's five-year plan as they devoted to devising creative ways to avoid it."
But City Finance Director David Brenner strongly rejected that assertion Friday, saying the city is still actively pursuing the five-year plan and expects the oversight board's bonds to be sold next month as planned.
A power-sharing agreement required before the bonds can be sold has already been introduced in council, Mr. Brenner pointed out, adding that the extra $90 million is simply an attempt to be prudent about the city's cash-flow needs over the next several weeks.
Samuel G. Hopkins, a co-financial adviser to PICA, said the board wants the city to go forward with the five-year plan and bond sale immediately.
"A note sale at this time would reduce the incentive to get this done," Mr. Hopkins said.
Ronald Henry, PICA's executive director, said the board has no position yet on the private note sale idea and said it may choose not to take one.
Bernard Anderson, chairman of the oversight board, said PICA has no official position yet, but said he personally is "surprised at the attempt by the city to go to market again the very time when serious effort is being made to move on the five-year plan.
"I think it would be quite regrettable for the city to raise that amount of money and have to pay what is clearly going to be a very high price for such bonds."
Mr. Anderson refused to speculate on whether Mayor Goode has political motivations for the private note deal. But he said if an attempt is made to wait until the next administration takes office, that would make life "extremely difficult for the next mayor." Mr. Brenner said the private negotiations involve several nonprofit colleges and universities, working through A.H. Williams, which approached the city recently expressing interest in a note deal. The latest note deal the city executed was $100 million, at an interest rate of more than 9%, and Mr. Brenner said the institutions were attracted by that rate.
He said the decision on the deal has not been made, nor has the size of the potential note sale been finalized.
Mr. Brenner added that, if the oversight board chooses to oppose the note sale, the city probably would not pursue it. Although he pointed out the board cannot force the city to kill the plan.