Philadelphia officials and their bond advisers are working to find a way to save a $148 million bond plan for a new criminal justice complex after the city council last week approved a proposal they said had the potential to scuttle the deal.
The proposal, in the form of an amendment to legislation authorizing the bond sale, gives the council the authority to review final construction plans for the center and approve or reject the deal under certain conditions.
When the amendment was approved last Wednesday, the bond counsel for the deal -- Pepper, Hamilton & Scheetz -- warned city officials the amendment was too all-encompassing and would make it all but impossible to allow a clean bond opinion, according to city officials.
James J. Prendergast, an attorney at Pepper Hamilton handling the courthouse deal, could not be reached for comment Friday.
But Ralph J. Saggiomo, a vice president at Kidder, Peabody & Co., the proposed underwriter for the deal, said he believes the problems created by the council's amendment are not insurmountable. He said the dire initial pronouncements might have been overstated.
"After a lot of research, "it's not as problematic as it was originally said to be," Mr. Saggiomo said. He explained that many deals, including Philadephia's recent convention center bond plan, included provisions authorizing similar council oversight. Those provisions are counterbalanced by others that grant protection to bondholders, he explained.
I'm not saying this is a done deal," Mr. Saggiomo said. "But it's certainly not dead either."
City Finance Director David Brenner, basing his remarks on early advice from bond counsel last week, said he thought the amendment effectively killed the deal, unless the city council votes to repeal the amendment at a meeting slated for Thursday.
But Mr. Brenner also said additional consultation with advisers this week will help straighten out what effect the amendments will have on the plan.
Failure to win approval for a workable bond plan could also have serious consequences for Philadelphia's fiscal 1992 budget, Mr. Brenner warned. The new deal would include a refunding of outstanding debt, with provisions to defer debt service for two years. Mr. Brenner said this year's budget counts on $10 million of savings from that source, and initial estimates for overall deferred debt service came in at about $63 million.
Another potential budget buster -- if the court plan fails -- could come from the courts themselves. Philadelphia is under court order to build additional prison cells, and a $25,000-a-day fine has been accruing in the absence of a plan to accommondate the order, according to Mr. Brenner. He said the city could be forced to pay that fine immediately if the city council amendment is seen to be another delay in meeting the terms of the order.
"If we don't have a plan pretty soon, we're going to have a very unhappy judge on our hands," Mr. Brenner said, referring to U.S. District Judge Norma L. Shapiro, who is overseeing the case requiring the city to build new prison space.
An aide to Councilman John Street, who introduced the amendment, said the intention was not to kill the courthouse and prison complex, but simply to apply a degree of oversight to an expensive project. "City officials have done projects without this [oversight], and I think the council just wants to make sure taxpayers don't get cheated, again," said Edna Irving, Mr. Street's legislative aide. Ms. Irving said she did not think the city council has any intention of changing the construction specifications or rejecting the deal after the bonds are sold.
But Councilman Angel Ortiz said he believed Mr. Street, a Democrat, was motivated by a desire to curry favor with council Republicans in his attempt to win the council presidency in an election next year. City Republicans reportedly favor building the criminal justice complex at another location.