U. and city near closure of loan plan

The University and several local organizations are close to reaching an agreement with the city to loan it approximately $90 million to help pay short-term financial obligations. City Finance Director David Brenner said yesterday afternoon the details of the loan would be completed by this morning, with formal closure of the loan finished by the end of next week. And University Treasurer Scott Lederman, who has been negotiating with the city on the University's behalf, said yesterday that he expects a final agreement will be reached "very soon." Between 10 and 15 institutions are currently negotiating with the city to loan it money on a short-term basis. Lederman said yesterday a few local businesses had also joined the discussions. But the local institutions and the city still have yet to reach an agreement on two issues -- how much interest the loaning group would charge and how much money each party will loan the city. Lederman declined to reveal the size of the University's share of the loan, saying only that administrators have "kept in mind a certain number that's remained pretty much the same." Lederman said that the group would likely charge the city between 8.25 and 8.75 percent interest, although Brenner has said earlier those rates were too high. Since the city is unable to get a loan from normal markets, the city would pay higher interest rates borrowing money from the group than other cities pay for their short-term loans. The state established a financial oversight board for the city this summer that could borrow money on the city's behalf at lower interest rates. But the board is unwilling to borrow money for the city until it submits a "realistic" five-year financial plan and allows the board oversight as the city negotiates contracts. Under terms which the city and participating organizations have already approved, the city would pay back the loan on May 12. If the city is not able to repay some or all of the loan at that time, lenders would not have to pay that amount in wage taxes. Lederman said yesterday he has not been negotiating directly with city officials recently, but has been dealing with the loan underwriters who mediate the loan negotiations. He added that both sides have the same interests in mind.

Please note All comments are eligible for publication in The Daily Pennsylvanian.