U. joins group which may loan city $90 million

The University has joined a consortium which might loan $90 million to Philadelphia, Senior Vice President Marna Whittington said last night. The University, along with at least 10 other non-profit institutions, is negotiating the loan with city officials to temporarily fill the almost-empty city coffers, City Finance Director David Brenner said yesterday. Whittington would not disclose the size of the University's share in the loan. Brenner said he expects the organizations and the city to reach an agreement by the end of the week. The money would be used to tide the city over until its oversight authority is willing to issue bonds on the city's behalf. Any money the University loans to the city would be paid back by May, Brenner said. The authority must gain several powers from the city before it will issue bonds on the city's behalf. The authority's bond issue is critical to the city because the organization can borrow money at much lower interest rates than the city itself. Brenner said the non-profits are interested in loaning the city money for two reasons: receiving a good return on a short-term investment and helping the city avert financial ruin. "[Non-profit organizations] based in Philadelphia probably have more than a passing interest in the success of the city itself," Brenner said. Whittington said last semester the growth and stability of the University and the fate of the city are "inextricably linked." Brenner said he was approached almost two weeks ago by representatives of various not-for-profit organizations offering to loan the city money. Whittington said the University was not one of the instigators of the offer, saying that administration officials were asked to participate in it. She said she told Brenner that if "all of the parties on the city side agreed," the University would be interested in lending the city money. Whittington added that University Treasurer Scott Lederman, who is discussing the possible loan with the city, attended a meeting with other interested groups and city officials on Friday. Lederman was unavailable for comment yesterday. If the University loans the city money, it would not be the first time it has stepped in to help the city avoid cash flow problems. Last November, the University prepaid $10 million in wage taxes, which covered the University's tax burden through June. The amount of interest the non-profits would charge the city is a "key item to be negotiated," Brenner said. The last time the city borrowed money for short-term solvency, it agreed to pay 9.25 percent, but Brenner said the non-profits should charge less because interest rates have come down since the summer. Whittington said she expects the city to borrow the money at the "prevailing interest rate." If the University loans money to the city, the money would come from cash reserves which are continually placed in short-term investments, Whittington said.

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