City Budget
City Council held hearings on a plan to float a $4 billion dollar bond to shore up a severely underfunded city worker pension plan.
By Peter Crimmins
WHYY News, March 25, 2008
At Monday's City Council budget hearings for the office of the Finance Director, Councilman Bill Green asked finance director Rob Dubow whether he thought it was smart to be seeking this bond issue in such a volatile market.
Several municipal agencies across the nation have experienced difficulty with the so called auction-rate market for bonds resulting in sharp increases in interest rates and higher costs.
"The auction-rate market has been failing, the fixed-rate market has not been failing," said Dubow. "I don't think it makes it likely that we will have problems."
The Nutter administration is counting on the relative stability of the fixed-rate market combined with the current low interest rate to allow the city to borrow money for the pension fund at a lower rate than it is currently paying.
Uri Monsoon of the Pennsylvania Intergovernmental Cooperation Authority, the state agency that oversees the city's budget, warns that the plan depends on the city making careful investments of the proceeds from the bond issue.
"The pension liability is a real problem. You're talking about a $3.5 billion liability," said Monsoon. "There's no such thing as free money. Once we assess the risk and City Council assess the risk, we can see the best option."
The City will submit the bond plan to City Council and PICA for further analysis.
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