Philadelphia's treasurer said on Friday that the city may fall short of its goal of selling all $150 million of deficit notes offered last week in a private placement.
"I think we will fall short of what we originally intended," said Douglas Smith, the city's treasurer. He added, however, that they will continue to accept orders for the notes until tomorrow.
Mr. Douglas said the city may see a total of $70 million of the notes, due May 12, placed with investors. The city's last deficit note sale was a $110 million offering privately placed with a pension fund.
Because the notes are being sold to cover cash-flow needs, Mr. Douglas said, "to give ourselves any kind of level of comfort, we would need to do about $50 million to $60 million."
Meanwhile, the board members of the Pennsylvania Intergovernmental Cooperation Authority, an oversight panel created to sell deficit bonds for cash strapped Philadelphia, are scheduled to meet on Nov. 15, its chairman said. Bernard E. Anderson, the chairman, said an agenda for the meeting has not been developed.
Returning to the note sale, last Tuesday evening, the city, with A.H. Williams & Co. as underwriter, tentatively priced $90 million of taxable notes at par to yield 8.50% and $60 million of tax-exempt notes at par to yield 7.50%.
Mr. Douglas said, "We are leaving the book open [on the sale] until" tomorrow. "There are a number of people who gave gone to their boards to discuss the purchase. They haven't said yes and they haven't said no," he noted.
By Friday afternoon, 14 not-for-profit investors had tentatively committed themselves to $50 million of the taxable notes, with three or four may be waiting in the wings, according to Anthony M. Griffith, a vice president with A.H. Williams. The University of Pennsylvania, one the largest employers in the city, was considered to have purchased a large portion of the taxable notes, sources said.
And about eight investors have expressed an interest in the tax-exempt portion of the deal, Mr. Griffith added. This note issue and the outstanding deficit notes are secured with wage tax revenues collected from employers in Philadelphia.
Investor's questions about the issue and the city's fiscal health made the sales offering slow going, as underwriters and city officials attempted to answer them.
The size of the note issue was increased to $150 million of taxable and tax-exempt notes from $90 million of taxable notes after corporations expressed interest in buying city notes, but only if they were tax-exempt. Mr. Douglas said. The deal was originally tailored for not-for-profit institutions.
Asked why the fiscally troubled city would incur additional debt service costs if it did not need the revenues generated by increasing the size of the note offering, Mr. Douglas said increasing the size of the issue was part of a strategy to ensure enough money was raised.
"What we don't raise on one side, we would raise on the other," he said.
As for the Pennsylvania Intergovernmental Cooperation Authority board meeting, Mr. Anderson said, "We will review where we are with the status of" an agreement between the state and the city that authorizes the board to sell deficit bonds for the city. Mr. Anderson added that the board will also address administrative matters pertaining to the board's personnel.
The PICA board's executive director, Ronald G. Henry, said an agenda for the meeting would be developed over the next few weeks based on "whether we get a draft [fiscal] plan" and the outcome of a review by the board's lawyers of an agreement between the state and the city that authorizes a deficit bond sale. The board must approve the city's five-year fiscal plan before it can sell bonds.