Philadelphia borrowed $165 million from investors by selling general obligation bonds last week, priced mostly to yield 7 percent or more. Pennsylvania borrowed $300 million two weeks ago, and paid just over 5%. But Pennsylvania has a better credit rating.
Compared to the city's previous bond sales, "it's a little higher because of the turmoil in the market," said city finance director Rob DuBow. "But it's important to bring the cash in to keep our capital projects flowing,." including repairs to police and fire stations and recreation centers. Better to borrow now, than go without and hope for cheaper money next year. "We're not sure it will get better soon."
Morgan Stanley led the underwriters for the sale. The city also spent $4.267 million on "bond issuance costs," including fees for four law firms -- Cozen O'Conner and Booth & Tucker LLP, co-bond counsel, and Greenberg Traurig LLP and Andre C. Dasent. (All four were donors to Mayor Nutter last year -- but, among big Philadelphia law firms, who wasn't?) By comparison, Pennsylvania's "bond issuance" costs for its larger issue came in at just $250,000, said state revenue director Rick Dreher. (UPDATE: We're not sure these numbers are strictly comparable. For example, PA didn't list its underwriters' counsel or how much they were paid.)
"We did well, compared to some other cities," said Dasent, who said his office has worked on Philadelphia bond sales since 1985. He said his next finance job is with the city-owned Philadelphia Gas Works, which is trying to avoid "tens of millions of dollars" in extra debt service by restructuring its finances. Christopher Booth said he's worked on bond issues since the early 1990s, and that his current firm, which specializes in civil litigation, has been doing bond work since it helped with the Eagles and Phillies stadium deals, soon after it was founded in 2000.
NOTE: This item originally referenced "general obligation pension bonds." These were G.O. bonds -- in no way were they pension bonds.
Instead of taking out a payday loan, the city could cash its uncashed paycheck and collect some of the half a billion in unpaid property taxes owed it. There's $522 million in uncollected property taxes, which must gall those of you who pay in full, on time, but hey, you must be idiots. Here's the money the city needs to do, well, everything: http://www.hallwatch.org/proptax/about/redelinq/stats/summary— CleanupPhilly- It's good for local law firms when we issue bonds aka borrow, but it's bad for the Carnegie libraries that have to close when the mayor freaks out when he finally looks at a spreadsheet and says YAHHHHHHHHH! Debt service is a huge part of the $4 billion budget, so adding to that is like borrowing money to go bankrupt, don't cha think?— CleanupPhilly
- The day we elect a single politician who has the slightest comprehension how to run a business or even a household will be the day I PLOTZ.— CleanupPhilly
- "Holy Corey Kemp" Robin would say to Batman!... Joe, sounds like the math is that the City spent $4 milion more than the State of PA for about the same end product. $4 million could save some Firemen to serve the Citizens. It is hard to forget the days (and some try to forget too quickly) of the Federal Probe that followed Corey Kemp, and John White. Is this the same deal for lawyers but without free dinners, hotels and trips to the Superbowl?? Where are the controls to keep this is in check?? ...or are you just spinning a tale.— John Jr.
- John, it looks to me like Philadelpia spent more on selling $165M in bonds than PA spent in selling nearly twice as large an issue. But I need more info to make sure this is a full comparison. We'll be looking at these expenses more in the New Year. As to "where are the controls": we quote the city and state finance officials, but they ultimately serve at the pleasure of elected officials. Sunlight, in the form of public disclosure, is a pretty good disinfectant, no? As for "spinning a tale": well, making dry finance readable -- that's my job. Best wishes, Joe D.— Joe D
- We can just start collecting overdue property taxes by foreclosing on the vacant and empty properties in the valuable neighborhoods, of which there are many in Philly. From Fishtown to SWCC, from Bella Vista to West Philly, there are properties that are in probate that can request a stop of sheriff sale even though no one lives there. It's a legal misuse of the certificate of residential occupancy, or CERDO. Judges Darnell Jones and Keogh allow it, but this has to change. The city needs the money, and the estate can haggle over the money left over from the sold property as it sits in escrow after the city is paid property taxes, water, gas, and fines. That's how other places do it. Read a copy of a CERDO request to stop a sheriff sale yourself at www.phillysheriff.com— CleanupPhilly
- Borrowing like idiots without doing any meaningful collection of overdue accounts is what got us into this mess. What business would let $522 million sit owed and not collect at sheriff sale if it had the means and legal authority to get first dibs? This is from the Dept. of Revenue, so why is it so taboo to discuss going after it? http://www.hallwatch.org/proptax/about/redelinq/stats/summary— CleanupPhilly
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