There we were a week ago, bracing for tough talk from Mayor Nutter about the city's growing financial problems, expecting program cuts and belt-tightening.

Then, with a wave of his wand, Master Mike unveils his first budget and . . . poof! Suddenly doves are flying all over the room, bearing good things for citizens - more cops, street trees, and ambulances; better health and recreation centers, tax cuts for all.

And here's the real wizardry: He's transformed the city's biggest financial problem – its troubled pension fund – into a spewing fountain of cash, funding service increases right and left.

How? He borrows.

In a transaction called a "pension obligation bond," the city plans borrow $4.5 billion. Most of the borrowed cash gets dumped into the pension fund, which invests it and gets a healthy balance sheet.

Because the pension fund is flush, the city dramatically lowers its required annual payments to the fund. And even after we pay our bond holders every year, there's money left over for services and tax cuts.

Magic, indeed. Should we believe our eyes here?

I want a long second look. Any time somebody tells me the answer to a financial problem is to borrow a big heap of money, I get nervous.

I spoke Thursday to Duquesne business professor James Burnham, a former staffer at the federal reserve and director of World Bank who wrote a 2003 article about pension obligation bonds for a government financial officers magazine. It was called "Risky Business?"

Burnham says these deals amount to borrowing money to invest in the stock market. Sometimes it works out. Sometimes it doesn't. But he said you don't want to take risks if you're already stretched.

"You're doubling up, like in a poker game," Burnham said. "You're asking somebody to lend you money so you can throw more chips into the game."

Burnham noted that the federal government regards pension bonds as financial arbitrage, where you borrow money to invest at a profit, so the Treasury Department won't allow cities to issue them as tax-exempt debt.

And it's interesting that when a recent Pew Charitable Trusts study listed 13 steps Philadelphia could take to deal its the pension fund problem, a pension obligation bond wasn't one of them.

In full disclosure, I have to confess that in 20 years of reporting on city budgets and bond deals, it's the finances of pension funds that always gives me a headache. This stuff is dizzyingly complicated. So I also spent time on the phone Friday with Standard & Poors pension bond guru Peter Block. He noted that Philadelphia's credit rating isn't great and that there are risks in these deals. But he said they've usually worked out for cities who've done them, because over the long haul stocks tend to do better than bonds.

And I've talked with Nutter's new budget director Steve Agostini, who seems as sharp and public-spirited as they come. He may yet convince me this is a good idea.

But a problem we face is that the Nutter team doesn't expect to have the transaction ready to go until later in the year, while Council has to decide this spring whether we can afford the new spending it yields. Council needs to see more details and scrutinize them closely. That didn't happen in 1999, when the city did a $1.25 billion pension bond deal without a skeptical question from anybody (including me, an omission I regret).

The city borrowed that money and plopped it in the stock market, which promptly tanked.

City officials say we've finally made those losses back, but imagine the market crashing when you've got four and a half billion borrowed dollars in play.

So here's my prescription: Nutter's financial team should work up a detailed, written explanation of the transaction soon, explaining its potential impact decades down the road.

And City Council should hire an independent, skeptical, downright ornery expert to scrutinize the deal and run the numbers every which way, so we know what the risks are. Magic is fun, but we want to see all the angles on this one. *