City, U. group strike deal on how to guarantee $90 mil loan

The city has reached an agreement with several non-profit institutions on how to guarantee the non-profits' $90 million loan to the city. Yet the non-profits -- city universities and hospitals -- and the city have not cleared the main roadblock in finalizing the loan -- the interest rate the institutions will charge. University Treasurer Scott Lederman said yesterday the hospitals and universities would charge in "the area" of 8.5 percent interest, but the city's finance director said he wants to see a lower rate. The University is one of at least ten institutions which are discussing loaning the city money to fill its empty coffers. The University has not decided how much money it might lend, Lederman said yesterday. Under the terms already agreed on, if the city were unable to repay part the loan, the University and the other institutions would not have to pay the owed amount when their wage taxes come due. Lederman said the University is still awaiting legal documentation on the city's proposals, which either the University General Counsel's office or outside counsel would review. City Finance Director David Brenner said the negotiations were progressing smoothly, although he disputes claims that an interest rate has been settled. "There really hasn't been an interest rate on the table," Brenner said. But Lederman said an 8.5 percent interest rate would be a reasonable rate "given the credit involved." Both Lederman and Brenner said any agreement would likely be closed within the next two weeks. "We had a briefing two weeks ago and we looked at some of their cash flow statements," Lederman said. "We're trying to avoid their running out of money [while maintaining] the fiducial responsibility for the cash we have." City officials are looking to borrow money on their own until the state authority overlooking the city's finances is willing to borrow money on the city's behalf. The authority's president said the authority will remain on the sidelines while the city borrows money. However, City Controller Jonathan Saidel said he wants to stop the city from borrowing the money because it will allow the city to avoid facing its underlying financial problems.

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