Philadelphia officials said yesterday investors face no immediate risk from union bargaining tactics, despite a city lawsuit that says the strategies could threaten bond payments.
The lawsuit, filed last week, centers on Philadelphia's labor contracts with its white collar unions. The contracts were supposed to expire July 1, but the Pennsylvania Labor Relations Board agreed late last month to extend them up to 60 days while a team of "fact finders" studies a series of bitter disputes holding up a new pact.
Mayor Edward G. Rendell's administration said in its lawsuit against the labor relations board, filed with the state Supreme Court, that the legal deadline for appointing fact finders passed seven months ago, so the process should be canceled. That would allow the city to get back to the business of negotiating union concessions, which are vital to meeting the fiscal 1993 goals in the city's five-year recovery plan.
The delay means the city is missing out on huge savings, about $2 million a week, which the administration is hoping to deliver from new, leaner contracts.
Postponing the process will "have a devastating impact upon the city, including layoffs, reductions in benefits, inability to make payments to holders of the city's bonds and other creditors, and the curtailment of services," the lawsuit says.
But David Cohen, Mayor Rendell's chief of staff, said yesterday there is no immediate risk that Philadelphia will miss payments to bondholders. He said the reference to city debt in the lawsuit was meant to be taken in the context of all city obligations, which would be at risk if the five-year plan fails.
Mr. Cohen explained that the five-year plan incorporates almost $100 million in savings from new union contracts in fiscal 1993. Cutting into those savings by delaying new contracts puts the budget at risk and "jeopardizes the city's ability to pay all its bills," he said.
But, Mr. Cohen added, "obviously, keeping up on debt service is among the highest priorities," and layoffs would be the first option to balance the budget if contract talks fail. "We wouldn't say we'll balance the budget by not paying bondholders," Mr. Cohen stressed.
Bernard Anderson, chairman of the city's oversight board, said he does not believe a two-month delay in securing better contract terms jeopardizes bondholders.
"I'm sorry that the mayor phrased it that way," Mr. Anderson said of the lawsuit's reference to bondholder risk. "I don't see how this would threaten the bonds in any way, quite frankly."
The city is required to meet the goals of the five-year recovery plan as part of its agreement with the oversight board, which sold $475 million of bonds for the city last month. If those goals are not met through better contract terms, then Mayor Rendell will have to make good on his threat to use layoffs to make up the difference, Mr. Anderson said.
"We intend to do our job to see that whatever settlement is agreed to is agreed to in terms that allow the budget to be balanced," he said. "If it takes laying off 2,000, that's most regrettable. But $477 million was loaned to the city of Philadelphia by investors throughout this country, and they expected that the city will balance its budget."
In a response filed yesterday to the city's lawsuit, the labor relations board said Pennsylvania legal precedent does not clarify whether the deadline for appointing fact finders is mandatory.
James Crawford, counsel to the board, added that it would have been impossible to comply with the deadline anyway, because it fell under the administration of former Mayor W. Wilson Goode. Mayor Goode was set to leave office at the time, and both he and Mayor-elect Rendell asked the unions to wait until the new administration took office in January before beginning the contract bargaining process, Mr. Crawford said.
"If we had complied with the timetable, this issue of fact finding would have been a wasteful procedure in the waning days of the Goode adminstration," he said. "That would have been too soon, and now they're saying it's too late."