Negotiators failed to reach agreement last week on how much power Philadelphia's new oversight board will wield, leaving officials without a proposal to submit to the city council on Friday as originally planned.
The inability to reach an agreement on the pact threatens to delay again a deficit bond sale city officials say must take place by late October to avert insolvency. The board, known officially as the Pennsylvania Intergovernmental Cooperation Authority, must approve the power-sharing agreement before the bonds can be sold.
Members of the oversight board, several city council members, and city finance officials have been meeting for the past several weeks, trying to hammer out the terms by which the oversight board will keep Philadelphia from continuing its streak of chronic deficits and brushes with insolvency.
Ronald G. Henry, executive director of the authority, said some issues had been resolved but "there are substantive areas of disagreement."
City Finance Director David Brenner said the remaining issues are "hard to quantify. They are philosophical differences, so they don't get resolved quickly." He added that members of the oversight board serve on a voluntary basis, so it is more difficult for them to set aside the large chunks of time needed for negotiations.
"It's taking longer than some of us would like," Mr. Brenner said.
Sources involved in the negotiations say the major sticking point has been the degree of oversight and review the new authority will be granted over city governance. Suggestions that city officials should notify the board before taking action that could be considered "budget busting" have irked Mayor W. Wilson Goode, who feels such notification is too great an intrusion on his power to govern the city.
Philadelphia Controller Jonathan A. Saidel said Friday that another problem has been the authority's insistence on having some say over labor negotiations. Critics of the administration say the city has been too generous with its unions, so the board understandably wants to be notified of any new labor concessions, Mr. Saidel said.
While Mayor Goode feels such a provision would give the board more power than intended, Mr. Saidel said he would not have a problem with such a plan.
"Until we show as a city the ability to run our business as we should, we should give in to any aspect [of oversight] the PICA board wants," Mr. Saidel said.
The final step in implementing the agreement will be city council approval, a process that under council regulations takes at least two weeks after a proposal is formally submitted.
Mr. Brenner said Friday the administration now hopes to come to terms with the board early this week and get a proposal to council by the end of the week. That would mean approval could come the first week in October at the earliest, leaving the authority less than a month to sell the bonds and get the proceeds to the city in time to beat the insolvency deadline.
But Philadelphia officials have set numerous such deadlines in the past, none of which ever resulted in insolvency. As a result, board members say they are not considering the October date as terribly urgent.
"There are no deadlines looming that we feel constrained by," one authority official said. "If they hit their deadline, they have a choice of agreeing to a deal we agree with, moving the deadline -- which they have a history of doing -- or living with not making the deadline.
"The history of this city is if you can't put the ball through the goal post, you move the goal post closer," the source added. "We have a firm but polite skepticism."
Mr. Saidel said whether or not the end of October actually brings insolvency, he would be surprised if the bonds are sold by then.
"I have never seen government move that quickly and that efficiently," he said.
In addition to the power-sharing agreement, the board must approve a five-year fiscal recovery plan being drafted by city finance officials. But that plan can be introduced to the city council as a resolution, rather than a formal ordinance, thereby avoiding the two week council delay.
The authority's chairman, Bernard Anderson, said last month that the deficit bond sale will have to be at least #300 million, and possibly much more, in order to cover the city's fiscal 1991 and 1992 deficits. Originally, those shortfalls were pegged at $219 million and $42 million respectively. But updated estimates suggest last year's gap might be at least $50 million lower, resulting in a smaller bond sale.
Mr. Brenner said Friday, however, that he still expects the borrowing to be "close to $300 million."
Philadelphia has been unable to borrow long-term debt in amounts that large since last year, when its credit ratings sank to speculative-grade levels. Moody's Investors Service and Fitch Investors Service rate the debt single-B. Standard & Poor's Corp.'s rating is CCC, but the agency put the city on positive CreditWatch in June, based on the likelihood that the oversight authority will be able to bring some degree of stability to city finances.
