Councilman dislikes bond fee - PittsburghLIVE.com The team of underwriters, lawyers and advisers figures to earn about $2.3 million on the deal.
Doug doesn't like this deal as he isn't in the drivers seat. And, the deal puts the next mayor, perhaps Bob O' (Doug's past mentor) into the back seat once he is mayor. The debt and bond agents are going to be in the front seat, with some others, for some time yet to come.
But the more debt that is racked up by Murphy and the present council, the more our children are going to need to pay down. And, the more the bain-drain and exodus is to occur.
How that money is to be spent is another matter, to be dealt with in additional messages.
The other concern is the intention of Peduto to really walk his talk -- or not. This is a pay-to-play concern. Insiders, cronies, are getting the deal. The payout for them is high.
I hate no-bid contracts. This is a no-bid contract.
Pittsburgh is a patronage town. Pittsburgh is in the hole because we have contract patronage -- such as this deal.
This deal hurts a number of people: children who need to pay back the debt, older people because the children are not staying around to pay off the debt, families who are sure to move in and then move out again because of the debt, the marketplace who is going to shrink and go elsewhere where things are fair, etc.
The deal helps cronies who get the windfall, Mayor Murphy, and those on city council who have driven this city into its crisis.
The money from the bond's income is going to keep a new coat of lipsitck on the pig for another year so that the riots in the street don't happen while this group is still in office. This is worse than band-aid politics, as it is a band-aid on a credit-card.
These are the ones who are worried about zoning laws for quick cash bandits and neighborhood retail zoning ordinances that prohibit preditory lending outfits.
Bond deal corruption cases litter the landscape of American politics. City by city, there are bad deals that are being done. This is a prime example of what not to do.
Doug Shields, I'll stand with you on this one. We share some of the same motivations. Sadly, I think we'll stand alone.
A small vicotry came as the vote was delayed, for at least a day.
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Councilman dislikes bond fee
By Andrew Conte and Jeremy Boren
TRIBUNE-REVIEW
Tuesday, April 5, 2005
Pittsburgh might have gotten a better deal to refinance its debt if Mayor Tom Murphy had gone through a competitive bid process rather than handpicking the bond team, City Councilman Doug Shields said Monday.
He plans to challenge the mayor's $200 million refinancing proposal when it comes before the City Council today. Murphy and other council members have said they hope to save about $6.5 million, which could be used to pave streets and make repairs.
While there's nothing illegal about the mayor choosing the members of the bond team, government watchdog groups have said the practice can lead to higher prices for taxpayers.
Shields said he fears that's the case with the current proposal. The team of underwriters, lawyers and advisers figures to earn about $2.3 million on the deal.
"I think the fees are very high," said Shields, who was appointed council's finance committee chair last month. "We'll never know how much we're being overcharged because they never went out and issued a request for proposals."
Murphy has said the financially strapped city could not partner with just anyone because it only recently emerged from junk bond status. The administration chose Lehman Brothers as its bond issuer because of its experience dealing with distressed cities. A spokesman for the mayor did not return calls seeking comment yesterday.
The mayor's team includes campaign contributors and the well-connected. Lehman Brothers won the contract after it hired a $5,000-a-month consultant who introduced the firm to the Murphy administration.
Shields produced cost comparisons yesterday showing the fees on the city's refinancing deal are higher than either Pittsburgh Public Schools or Allegheny County paid on their recent bond issues.
The higher fees could be linked to the city's financial crisis, said Christopher Taylor, executive director of the Municipal Securities Rulemaking Board, a self-regulatory group for bond issuers.
"It depends on the substance and trickiness of the deals," Taylor said. "Pittsburgh is known to have problems."
That does not mean taxpayers couldn't have gotten a better deal, Shields said. By going through a competitive bid process, the city would have at least seen how much other firms would have charged.
"One of the things the bond market is known for is its creativity," said Christopher Berdnick, the Pittsburgh Public Schools finance director. "I think any number of underwriters would be able to sell this paper."
When the schools issued a request for proposals in the fall, it received offers from 13 underwriters. Only two of them wanted to charge a percentage fee as high as the one Lehman Brothers is asking.
Shields was uncertain whether he could convince any other council members to go along with him. He abstained during a preliminary vote on the proposal Wednesday -- the only member not to approve the refinancing.
"I have some calls out to people in the business to see if the rates being charged are within the industry standards," said William Peduto, the only other member who could be reached for comment. "My bigger concern is this whole practice of non-competitive bids."
Peduto introduced a bill in December that said anyone who contributes $2,000 to a city political campaign, or a business that contributes $4,000 to a campaign through a political action committee, would not be eligible for non-competitive bids from the city. The bill garnered some support and is now being reviewed by a committee of citizens, Peduto said. It's scheduled for a council vote in about a month.
"The city is being held hostage on this in the sense that basic capital services would not be able to go forward without a bond restructuring," Peduto said. "I just want to make sure that we're going to get the best deal."
Andrew Conte and Jeremy Boren can be reached at aconte@tribweb.com or (412) 765-2312.
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