City Council facing new crisis of power

When banks and unions approved a $150 million loan late last month, the City of Philadelphia temporarily staved off bankruptcy. And while a cash crisis will likely resurface this summer, the City Council faces another more immediate crisis -- a crisis of power. Under the terms of last month's loan, the City Council is required to ask the state legislature to create an advisory board to watch over city finances. And last week, shortly before the January 31 deadline, State Senator Vincent Fumo (D-Phila.) introduced a bill in the state legislature asking for an "intergovernmental cooperation authority" that would handle money for the city and posses undefined "supervisory powers." The loan, made by a consortium of banks and the state teachers and city pension boards, has been a source of controversy for many involved. Some council members are hesitant to relinquish their legislative autonomy and some dependents on the city pension fund have little faith in the city to meet its payments. The bank consortium, led by CoreStates International, put the requirement of state oversight in the agreement, according to CoreStates spokesperson Greg Feistman. Under the terms of the loan agreement, the city initially received $105 million on January 17, but would only get the remaining $45 million of the loan when they petitioned the state legislature for the official advisory board. The request by the banks was intended to act as a "check," Feistman said, to ensure that the city handles its finances responsibly. The banks' request was interpreted by many, including the police and firefighter unions, as an attempt to bring in state officials who could stabilize the crisis.. But even though the council has made the request that will secure the remaining $45 million, the state legislation leaves room for the council to try to retain its power. Several City Council members have stated that they do not intend to relinquish their control of the city's finances. Council member David Cohen said this week that he had never agreed with the banks' request. "We were only complying with a technical request that never should have been made," Cohen said. "It's not the interest of banks to set governmental policy. We should have paid no attention whatever to the request." The vagueness of the council's legislative request has not gone unnoticed. The police and firefighter unions strongly opposed the initial loans, and both have said they are disappointed with the council. "The loan was precedent setting," said Les Yost, president of the International Association of Firefighters Local 22. "We have never loaned money before and we shouldn't now." Rob Baxter, a spokesperson for the police union, said this week that both unions are currently fighting in state court to prevent further loans from being given out by the pension board to the city. John Weston, the attorney representing the two unions, said yesterday that he doubts the city will be able to make its payments. Weston said that the union had previously attempted to obtain a preliminary injunction to prevent the pension board from granting the loan. That injunction was not granted, and while the unions were appealing the decision last month, the pension board granted the loan. But Weston said that the unions are still appealing the decision. He said that if the appeal is successful and the city misses a payment on the loan, the board would be prohibited from making further loans to the city. "The pension board is in charge of making investments for the fund. No one knows at this time whether or not they will pay us back," said Weston. "This wasn't the best investment they could have made." Police and firefighter union representatives said that one of their most important concerns is the fact that they do not receive Social Security payments after they retire. The only pension available to retired officers comes from the fund. If the fund is depleted, many retirees may have no other income on which they can depend. "I think it's a sham," said Ed McMullen, a retired police officer. "It's a scam to get into our pensions. I mean, the pension fund has $1.6 billion in it, but it doesn't take long to use all that if you go through it at $200 million a clip." In their battle to keep their pensions secure, the unions ran a commercial on radio station KYW for several days in December asking for support in their fight. To produce the commercial, the unions hired Tony Schwartz -- the creator of Lyndon Johnson's famous 1964 "Daisy" campaign commercial, which ruthlessly attacked opponent Barry Goldwater's Vietnam War stance. What role the City Council would play in the proposed state advisory board has been a thorny issue. Despite council members' demands that they be significantly involved in the board, many feel that it should play a smaller role, if not left out altogether. Jim Kenney, chief of staff for Senator Fumo, said that the council is not in a position to make demands. "The members [of the City Council] can say they don't want the board to have all-encompassing powers," Kenney said this week. "But when you don't have any money, you aren't in a position to tell the person lending you the money what to do." Kenney also said that he does not feel the board will function as the ultimate authority. "I dont think the board is going to tell the city how many pencils to purchase, but it will have a say," said Kenney. "We have shown that [the City Council is] not capable of handling [the budget] on their own." Public Policy and Management Professor Anita Summers said the council should play a lesser role on the proposed board. "Anyone close to the scene, in the middle of the city, has too much political stake in this," Summers said this week. "The only possible way the city can get out of bankruptcy is with an oversight board, because only they can have the distance to deal with the unions and things of that nature." The $150 million loan to the city comes due on March 15. But on June 30 the city will face another $130 million payment to the pension board because the city postponed its annual fall contribution. Summers said that even if the city makes the payments on time it will not get them out financial hot water. "They will have just temporized the problem," Summers said. "It does nothing to solve the real problem."

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