City Hall Plans To Issue $400 Million In Bonds. That’s A Lot.
An article at Bloomberg makes more clear what city officials were doing last week in their closed-door meeting with prospective bondholders: The city wants to issue $400 million in new general obligation bonds—that is, add about $400 million in debt—in a nearly unprecedented move: “It would be the largest fixed-rate, long-term issue for the city since at least 1990,” Bloomberg observes.
$218 million of that money would go to finance capital projects around town, but the remainder—$182 million—would go to “retire” old debts held by the city. Basically, it’s a refinancing of the city’s debt at a time when interest rates are still pretty low.
There are some obstacles: Philly has by far the lowest credit rating of any of the nation’s five biggest cities—three steps below the next lowest—which means it will cost City Hall more to pay off the new debt than it would if we were, say, New York, and had our house relatively in order. Oh yeah, city worker pension funds are only 47 percent funded—well below the 80 percent threshhold considered healthy by observers. We’ve also got a higher unemployment rate than those cities, and the financial troubles faced in particular by the school district are alarming to investors. Basically, we’re considered a slightly better bet to pay off our debts than your Cousin Lester, the one with the gambling problem.
However, apparently bondholders are impressed by Mayor Michael Nutter’s fiscal acumen: Officials told bond investors Philly will end up with a $128 million budget surplus at the end of this year, after running a $137 million deficit in 2009.