Philadelphia borrowed $165 million from investors by selling general obligation bonds last week, priced mostly to yield 7 percent or more. Pennsylvania borrowed $300 million two weeks ago, and paid just over 5%. But Pennsylvania has a better credit rating.
Compared to the city's previous bond sales, "it's a little higher because of the turmoil in the market," said city finance director Rob DuBow. "But it's important to bring the cash in to keep our capital projects flowing,." including repairs to police and fire stations and recreation centers. Better to borrow now, than go without and hope for cheaper money next year. "We're not sure it will get better soon."
Morgan Stanley led the underwriters for the sale. The city also spent $4.267 million on "bond issuance costs," including fees for four law firms -- Cozen O'Conner and Booth & Tucker LLP, co-bond counsel, and Greenberg Traurig LLP and Andre C. Dasent. (All four were donors to Mayor Nutter last year -- but, among big Philadelphia law firms, who wasn't?) By comparison, Pennsylvania's "bond issuance" costs for its larger issue came in at just $250,000, said state revenue director Rick Dreher. (UPDATE: We're not sure these numbers are strictly comparable. For example, PA didn't list its underwriters' counsel or how much they were paid.)
"We did well, compared to some other cities," said Dasent, who said his office has worked on Philadelphia bond sales since 1985. He said his next finance job is with the city-owned Philadelphia Gas Works, which is trying to avoid "tens of millions of dollars" in extra debt service by restructuring its finances. Christopher Booth said he's worked on bond issues since the early 1990s, and that his current firm, which specializes in civil litigation, has been doing bond work since it helped with the Eagles and Phillies stadium deals, soon after it was founded in 2000.