The University will contribute $10 million of a $43.4 million loan to the city to help ease Philadelphia's cash crisis, City Treasurer Doug Smith said yesterday. The loan, which is being made by thirteen local commercial and non-profit institutions, is far lower than the $90 million City Finance Director David Brenner first anticipated. The loan will officially take place next Thursday, Smith said. It is due to be repaid on May 12 at 8.5 percent interest. "Our objective in doing this was to raise cash enough so that the new administration would have cash balances sufficient to make operating payments of all kinds," Smith said. The University will join several non-profit institutions -- including Drexel University, Childrens' Hospital of Philadelphia, Philadelphia College of Pharmacy and Science and the Philadelphia College of Textiles -- in loaning $33.4 million at the 8.5 percent interest rates. The commercial enterprises, such as Independence Blue Cross/Blue Shield and Wholesale Realty, Inc., will loan the city a total of $10 million at a 7.5 percent interest rate. While the University did not initiate negotiations to loan the city money, its contribution is in all likelihood the largest contributor to the loan. The University and the non-profits will charge a higher percentage rate than the commercial lenders because they must pay a higher tax rate on their investment, Smith said. Should the city not be able to pay back the loan in part or in full, the University would be forgiven its wage taxes to the extent of the default. University Treasurer Scott Lederman said yesterday the University had made a decision on how much it was loaning the city, but he would not specify the amount or confirm the deal. The sum administrators considered loaning the city has remained constant, Lederman said earlier this month. A year ago, the University prepaid $10 million in wage taxes -- an amount equaling the University's tax obligation over nine months. At the time, it was joining another group of local institutions which paid a total of $30 million in wage and property taxes. Some of the same institutions are participating in the current loan deal. Smith said the negotiations between the lenders and the city had gone smoothly, particularly considering the difficulties the city normally faces working with investment firms. "This proceeded pretty much on schedule," Smith said. "[With private investors] we didn't have to price it and sell it in one day." "[Colleges and universities] need to go back to [their boards]," Smith added. "We're not dealing with individual funds or individuals who can make that decision."Comments powered by Disqus
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