The Pennsylvania Intergovernmental Cooperation Authority plans to issue about $100 million of special tax bonds in November to finance various capital projects for Philadelphia -- a deal that will probably be the agency's last issue.
The authority is scheduled to hold a board meeting on Sept. 27 to discuss the selection of attorneys and underwriters for the negotiated offering. The issue is slated for sale around the second week of November, said Ron Henry, the authority's former executive director, who is overseeing the issue.
"I don't anticipate any issues after this one," Henry said. PICA's bonding authority expires in December, but authority officials say the agency has the power to levy taxes as long as its bends are outstanding.
No request for proposals will be sent out for the bond issue. Instead, board members will make their selections from firms suggested by legislative leaders and the governor's office, an approach that many bankers say is politically driven.
Henry declined to comment on the process, other than to explain how it works.
"This is the way it's been on our other issues, and I have no reason to believe it will be any different this time around," he said.
Members of the authority's board are decided on by lawmakers and the governor.
About $90 million of various issue will finance renovation of various city buildings, including fire stations, libraries, and recreation centers, Henry said. About $7 million will go into a debt service reserve fund, with the remaining proceeds going toward underwriting costs and other fees. It is possible the issue will be insured, but no decision has been made, he said.
"We are in the process of reviewing a list of capital projects for Philadelphia right now," Henry said.
PICA, Philadelphia's fiscal oversight agency, was formed three years ago during the city's budget crisis.
Hamstrung by cash shortages, Philadelphia city could not issue debt to plug budget gaps. The authority stepped in, selling a total of more than $1.3 billion of bonds in three issues to finance capital projects and balance the budget. Meanwhile, the city 'enacted a strict five-year plan to bring its finances under control.
From a bond credit. standpoint, the strategy was mostly successful. In December 1993, Standard & Poor's Corp. upgraded the city's debt to BB from B; in April 1993, Moody's raised the city's rating to Ba from B; and in May 1993, Fitch raised it to BB from B.
Although Philadelphia officials are hopeful for an investment-grade rating by the end of the year, rating agency officials are taking a wait-and-see approach.
"It's hard to say," said Craig Atwater, vice president at Moody's Investors Service. "The city's financial progress is encouraging."
Moody's Investors Service rates the authority's debt Baa, Standard & Poor's Corp. rates the debt Aminus, and Fitch Investors Service rates it BBB-plus. The debt is secured by a 1.5% tax on the salaries and net profits earned by Philadelphia residents.