Legal News

With JPMorgan Loan, City Restores Payments to Vendors

By Brian Harris

By Amaris Elliott-Engel
Of the Legal Staff

The city of Philadelphia will start paying thousands of vendors again after securing a $275 million loan from JPMorgan Chase.

Earlier this summer, the city stopped almost all vendor payments except for employees, debt service and emergency matters to conserve cash flow. The city is facing $700 million in reductions in municipal governance unless a bill to raise the city sales tax and adjust pension payments is approved by the state.

During Mayor Michael Nutter's press conference today, Nutter said he couldn't specify whether the vendors who will be paid would include the Defender Association of Philadelphia and court-appointed counsel. The mayor's press office said they would check into whether the lawyers who represent indigent defendants would be among the vendors getting paid because of the loan.

The loan is only a silver lining as the Nutter administration and the rest of city government still waits for action in Harrisburg on sales tax and pension reduction bill. The state Senate passed the bill with amendments last month. The state House of Representatives has pledged to vote on the amended bill Sept. 8. If the House passes the bill and Gov. Edward G. Rendell signs the bill by Sept. 10, the city will squeak by without having to lay off 3,000 municipal workers, including 1,000 cops, reduce garbage service to twice a week and close all of the city's libraries and recreation centers. Nutter has also said the city would stop paying for the court system, which the state Supreme Court has ruled is a state government responsibility.

The delay in passing the city's sales tax bill has cost the city $20 million in projected sales tax revenues, and it is possible that another $10 million from projected sales tax revenue in October will be lost because it will take four weeks after the sales tax bill becomes law to get the increase in place.

JPMorgan will charge 3 percent interest for the loan until Dec. 1. After Dec. 1, the loan's interest rate will go up to 8 percent. However, the city hopes to refinance the loan on the public market before Dec. 1 in the anticipation that the sales tax-pension bill will be passed by then.

Full post as published by The Legal Intelligencer Blog on September 01, 2009 (boomark / email).