$21,295,000
CITY OF PHILADELPHIA, PENNSYLVANIA
GENERAL OBLIGATION REFUNDING BONDS, SERIES 2012A
Dated: Date of Delivery Due: September 15, as shown on the inside front cover
In the opinion of Co-Bond Counsel, interest on the 2012 Bonds will be excluded from gross income for federal income tax purposes under existing statutes, regulations, rulings and court decisions, subject to the conditions described in “TAX MATTERS” herein. In addition, interest on the 2012 Bonds will not be treated as an item of tax preference under Section 57 of the Internal Revenue Code of 1986, as amended (the “Code”), for purposes of the individual and corporate alternative minimum taxes; however, under the Code, such interest may be subject to certain other taxes affecting corporate holders of the 2012 Bonds. Under the existing laws of the Commonwealth of Pennsylvania, interest on the 2012 Bonds will be free from Pennsylvania personal income taxation and Pennsylvania corporate net income taxation but such exemption does not extend to gift, estate, succession or inheritance taxes or any other taxes not levied or assessed directly on the 2012 Bonds or the interest thereon. For a more complete discussion, see “TAX MATTERS” herein.
The $21,295,000 aggregate principal amount of General Obligation Refunding Bonds, Series 2012A (the “2012 Bonds”) of The City of Philadelphia, Pennsylvania (the “City”) will be issued as fixed rate obligations in registered form in denominations of $5,000 and any integral multiple thereof (“Authorized Denominations”). Interest on the 2012 Bonds is payable semi-annually on March 15 and September 15 of each year, commencing September 15, 2012. The 2012 Bonds will mature on the dates and in the amounts, and bear interest from the date of delivery at the rates, all as shown on the inside front cover. Payments of principal of and interest on the 2012 Bonds will be made by U.S. Bank National Association, as Fiscal Agent, as described herein under “THE 2012 BONDS.”
The 2012 Bonds are being issued for the purpose of refunding certain maturities of certain series of the City’s outstanding general obligation bonds, as more particularly described herein, and for the payment of the costs relating to the issuance of the 2012 Bonds. See “PLAN OF FINANCE AND ESTIMATED SOURCES AND USES OF FUNDS” herein.
The 2012 Bonds will be initially issued in the name of Cede & Co., as nominee for The Depository Trust Company (“DTC”), which will act as securities depository for the 2012 Bonds. Purchases will be made only in book-entry form through DTC participants in Authorized Denominations, and no physical delivery of 2012 Bonds will be made to purchasers. Payments of principal, premium, if any, and interest will be made to purchasers by DTC through its participants. See “THE 2012 BONDS — Book-Entry Only System” herein.
THE 2012 BONDS ARE NOT SUBJECT TO REDEMPTION PRIOR TO MATURITY.
The 2012 Bonds are general obligations of the City, and the full faith, credit and taxing power of the City are pledged for the payment thereof.
This cover page contains information for quick reference only. It is not a summary of this issue. Investors must read the entire Official Statement, including the Appendices, which are an integral part hereof, to obtain information essential to making an informed investment decision regarding the 2012 Bonds.
The 2012 Bonds are offered when, as and if issued by the City, subject to the approval of the legality of the issuance of the 2012 Bonds by Cozen O’Connor and Law Office of Ann C. Lebowitz, Co-Bond Counsel, both of Philadelphia, Pennsylvania. Certain legal matters will be passed upon for the City by the City of Philadelphia Law Department and for the Underwriters by Dilworth Paxson LLP, Philadelphia, Pennsylvania and Law Offices of Joseph C. Reid, P.A., New York, New York. It is anticipated that the 2012 Bonds will be available for book-entry delivery to DTC in New York, New York on or about May 8, 2012.
Dated: May 2, 2012
NEW ISSUE—BOOK-ENTRY ONLY RATINGS: Moody’s: “A2”
S&P: “BBB+” Fitch: “A-” (See “RATINGS” herein)
Barclays
Janney Montgomery Scott
PNC Capital Markets LLC
MATURITIES, AMOUNTS, INTEREST RATES, PRICES OR YIELDS AND CUSIPS*
$21,295,000
City of Philadelphia, Pennsylvania
General Obligation Refunding Bonds, Series 2012A
Maturity (September 15)
Principal Amount
Interest
Rate Price Yield CUSIP*
2014 $ 1,370,000 5.000% 109.375 0.960% 717813NT2
2019 9,885,000 5.000% 118.537 2.250% 717813NV7
2021 10,040,000 5.000% 117.898 2.810% 717813NU9
*
THE CITY OF PHILADELPHIA, PENNSYLVANIA
_______________________ MAYOR
HONORABLE MICHAEL A. NUTTER ______________________
_______________________ MAYOR’S CHIEF OF STAFF
Everett A. Gillison
______________________
MAYOR’S CABINET
Richard Negrin, Esquire ... Managing Director Rob Dubow ... Director of Finance Shelley R. Smith ... City Solicitor Rina Cutler ... Deputy Mayor of Transportation and Utilities Everett A. Gillison ... Chief of Staff and Deputy Mayor for Public Safety
Alan Greenberger ………...Deputy Mayor for Economic Development and Commerce Director Donald F. Schwarz, M.D. ... Deputy Mayor for Health and Opportunity and Health Commissioner
Michael DiBerardinis ... Deputy Mayor for Environmental and Community Resources Suzanne Biemiller ... First Deputy Chief of Staff Adel Ebeid ... Chief Innovation Officer Katherine Gajewski ... Director of Sustainability Terry A. Gillen ... Director, Federal Legislative Affairs Melanie Johnson ... City Representative Amy L. Kurland ... Inspector General Joan L. Markman ... Chief Integrity Officer Lewis Rosman ... Director, Legislative and Government Affairs Lori A. Shorr, Ph.D. ... Chief Education Officer Gary P. Steuer ... Chief Cultural Officer David G. Wilson ... First Deputy Managing Director
This Official Statement does not constitute an offer to sell, or a solicitation of an offer to buy, any of the 2012 Bonds in any jurisdiction to any person to whom it is unlawful to make such an offer or solicitation in such jurisdiction. No dealer, salesperson or any other person has been authorized by the City of Philadelphia (the “City”) or the Underwriters to give any information or to make any representations, other than those contained herein, in connection with the offering of the 2012 Bonds, and, if given or made, such information or representations must not be relied upon.
This Official Statement is not to be construed as a contract or agreement among the City, the Underwriters and the purchasers or owners of any offered 2012 Bonds. The information and the opinions expressed herein are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the operation or financial condition of the City or in any of the other matters referred to herein since the date hereof or the date as of which particular information is given, if earlier.
No quotations from or summaries or explanations of provision of law and documents herein purport to be complete and reference is made to such laws and documents for full and complete statements of their provisions. Any statements made in this Official Statement involving estimates or matters of opinion, whether or not expressly so stated, are intended merely as estimates or opinions and not as representations of fact.
IN CONNECTION WITH THE OFFERING OF THE 2012 BONDS, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE 2012 BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZATION, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME WITHOUT PRIOR NOTICE. THE UNDERWRITERS MAY OFFER AND SELL THE 2012 BONDS TO CERTAIN DEALERS AT PRICES LOWER THAN THE PUBLIC OFFERING PRICES STATED ON THE INSIDE COVER PAGE HEREOF AND SAID PUBLIC OFFERING PRICES MAY BE
CHANGED FROM TIME TO TIME BY THE UNDERWRITERS.
THIS OFFICIAL STATEMENT CONTAINS STATEMENTS WHICH, TO THE EXTENT THEY ARE NOT RECITATIONS OF HISTORICAL FACT, CONSTITUTE FORWARD-LOOKING STATEMENTS, AS SUCH TERM IS DEFINED IN SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. IN THIS RESPECT, SUCH FORWARD-LOOKING STATEMENTS ARE IDENTIFIED BY THE USE OF THE WORDS ESTIMATE, PROJECT, ANTICIPATE, EXPECT, FORECAST, INTEND OR BELIEVE OR THE NEGATIVE THEREOF OR OTHER VARIATIONS THEREON OR COMPARABLE TERMINOLOGY. SUCH FORWARD-LOOKING INFORMATION INVOLVES IMPORTANT RISKS AND UNCERTAINTIES THAT COULD RESULT IN THE ACTUAL INFORMATION BEING SIGNIFICANTLY DIFFERENT FROM THAT EXPRESSED IN THIS OFFICIAL STATEMENT. POTENTIAL INVESTORS SHOULD SPECIFICALLY CONSIDER THE VARIOUS FACTORS WHICH COULD CAUSE ACTUAL EVENTS OR RESULTS TO DIFFER MATERIALLY FROM THOSE INDICATED BY SUCH LOOKING STATEMENTS. SUCH FORWARD-LOOKING STATEMENTS SPEAK ONLY AS OF THE DATE OF THIS OFFICIAL STATEMENT. THE CITY DISCLAIMS ANY OBLIGATION OR UNDERTAKING TO RELEASE PUBLICLY ANY UPDATES OR REVISIONS TO ANY FORWARD-LOOKING STATEMENT CONTAINED HEREIN TO REFLECT ANY CHANGES IN THE CITY’S EXPECTATIONS WITH REGARD THERETO OR ANY CHANGE IN EVENTS, CONDITIONS OR CIRCUMSTANCES ON WHICH ANY SUCH STATEMENT IS BASED.
IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE CITY AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THE 2012 BONDS WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS OFFICIAL STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS Page INTRODUCTION ... 1 General ... 1 THE 2012 BONDS ... 2 General ... 2
Transfer and Exchange ... 3
Constitutional Debt Limit ... 3
Authorization ... 4
Book-Entry Only System ... 4
Discontinuation of Book-Entry Only System ... 7
Security... 7
Remedies of Bondholders ... 7
PLAN OF FINANCE AND ESTIMATED SOURCES AND USES OF FUNDS ... 8
FISCAL YEAR DEBT SERVICE REQUIREMENTS ... 10
UNDERWRITING ... 11
LEGALITY FOR INVESTMENT ... 11
RATINGS ... 11
TAX MATTERS ... 12
Federal Tax Exemption ... 12
Pennsylvania Tax Matters ... 13
VERIFICATION ... 13
CERTAIN LEGAL MATTERS... 13
NO LITIGATION ... 14
FINANCIAL ADVISORS ... 14
CERTAIN RELATIONSHIPS ... 14
CONTINUING DISCLOSURE UNDERTAKING ... 14
MISCELLANEOUS ... 15 APPENDIX A Government and Financial Information
APPENDIX B City Socioeconomic Information
APPENDIX C Comprehensive Annual Financial Report of the City of Philadelphia for the Year Ended June 30, 2011
OFFICIAL STATEMENT
relating to
$21,295,000
City of Philadelphia, Pennsylvania
General Obligation Refunding Bonds, Series 2012A
INTRODUCTION
General
This Official Statement, including the cover page and Appendices hereto, provides information with respect to the issuance by The City of Philadelphia, Pennsylvania (the “City”) of $21,295,000 aggregate principal amount of its General Obligation Refunding Bonds, Series 2012A (the “2012 Bonds”). This introduction is a brief description of certain matters set forth in this Official Statement and is qualified by reference to the entire Official Statement, including the Appendices hereto.
Reference should be made to the material under the caption “THE 2012 BONDS” for a description of the 2012 Bonds, including the book-entry system applicable thereto. Appendix A provides information regarding the City, including relevant statutory provisions, financial information, litigation information, the relationship with the Pennsylvania Intergovernmental Cooperation Authority (“PICA”), and a summary of the City’s current Five-Year Plan approved by PICA. Appendix B contains socio-economic and demographic information about the City. Appendix C contains the Comprehensive Annual Financial Report of the City for the fiscal year ended June 30, 2011. Certain information contained herein regarding the City is for periods prior to or subsequent to June 30, 2011. As a result, certain of the information in Appendix C is, at times, at variance with corresponding information concerning the City in Appendix A. Appendix D contains the proposed form of opinion of Co-Bond Counsel with regard to the 2012 Bonds. Appendix E contains the form of Continuing Disclosure Agreement with respect to the 2012 Bonds.
The 2012 Bonds are being issued for the purpose of refunding certain maturities of certain series of the City’s outstanding general obligation bonds, as more particularly described herein, and for the payment of the costs relating to the issuance of the 2012 Bonds. See “PLAN OF FINANCE AND ESTIMATED SOURCES AND USES OF FUNDS.”
Certain factors that may affect an investment decision concerning the 2012 Bonds are described throughout this Official Statement. Persons considering a purchase of the 2012 Bonds should read this Official Statement, including the cover page and Appendices, which are an integral part hereof, in its entirety. All estimates and assumptions of financial and other information are based on information currently available, are believed to be reasonable and are not to be construed as assurances of actual outcomes. All estimates of future performance or events constituting “forward-looking statements” may or may not be realized because of a wide variety of economic and other circumstances. Included in such forward-looking statements are numbers and other information from adopted and proposed budgets of the City, including the City’s proposed Twenty-First Five-Year Plan (as defined in Appendix A). Accordingly, no assurance is given that any projected future results will be achieved.
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that the City is not obligated to update such information, and that the information may not provide all information that may be of interest to investors. The information contained on the City Investor Website does not constitute an offer to buy or sell securities, nor is it a solicitation therefor. The information contained on the City Investor Website is not incorporated by reference in this Official Statement and persons considering a purchase of the 2012 Bonds should rely only on information contained in this Official Statement or incorporated by reference herein.
The quotations from and summaries and explanations of the Constitution and laws of the Commonwealth of Pennsylvania (the “Commonwealth”) and ordinances and resolutions of the City contained herein do not purport to be complete and are qualified in their entirety by reference to the official compilations thereof, and all descriptions and summaries of the 2012 Bonds are qualified in their entirety by reference to the definitive form of the 2012 Bonds. Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Bond Committee Resolution (as defined herein).
THE 2012 BONDS
General
The 2012 Bonds will be dated the date of their original issuance and delivery and will bear interest at fixed rates and mature on such dates as set forth on the inside cover page of this Official Statement. Interest on the 2012 Bonds will be payable on each March 15 and September 15, commencing September 15, 2012 (each, an “Interest Payment Date”). Interest on the 2012 Bonds shall be computed on the basis of a 360-day year, consisting of twelve 30-day months.
Any interest on a 2012 Bond which is due and payable but is not punctually paid or duly provided for on an Interest Payment Date shall cease to be payable to the person in whose name such 2012 Bond is registered on the bond register (“Registered Owner”) on the relevant Record Date (defined below) and such defaulted interest will be paid to the person in whose name such 2012 Bond is registered in the bond register at the close of business on a special record date which shall be fixed by U.S. Bank, National Association, Philadelphia, Pennsylvania, a national banking association formed under the laws of the United States of America (the “Fiscal Agent”). The Fiscal Agent shall cause notice of the date and amount of the proposed payment of defaulted interest and the special record date therefor to be mailed to each Registered Owner of a 2012 Bond, at its respective address appearing in the bond register, not less than ten (10) days prior to the special record date. The full text of the 2012 Bonds is included in the resolution adopted by the Mayor, City Controller and City Solicitor or a majority of them (the “Bond Committee”) on May 2, 2012 (the “Bond Committee Resolution”), a copy of which is on file with the Fiscal Agent. See “THE 2012 BONDS — Authorization”.
The 2012 Bonds will be issued as registered bonds in denominations of $5,000 and any integral multiple thereof (“Authorized Denominations”). The 2012 Bonds are not subject to redemption prior
to maturity.
Interest on the 2012 Bonds will be paid by check `of the Fiscal Agent. The Fiscal Agent will pay such interest by check mailed to the person in whose name the 2012 Bonds are registered on the registration books of the City maintained by the Fiscal Agent, as bond registrar, at the address appearing
thereon at the close of business on the fifteenth (15th) day immediately preceding each Interest Payment
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Street, Philadelphia, Pennsylvania, upon presentation and surrender of the 2012 Bonds. While the 2012 Bonds are issued and registered in book-entry only form, interest and principal shall be payable in the manner described under the heading “Book-Entry Only System” herein.
Transfer and Exchange
2012 Bonds may be surrendered for registration of transfer or for exchange to the Fiscal Agent, as bond registrar, duly endorsed, or accompanied by a written instrument of transfer in form and with guaranty of signature satisfactory to the bond registrar and executed by the Registered Owner or the Registered Owner’s attorney-in-fact. The bond registrar is required to execute and deliver to and in the name of the designated transferee one or more new fully registered 2012 Bonds of the same maturity and stated interest rate, in Authorized Denominations and of the same aggregate principal amount as the 2012 Bonds so surrendered. No service charge will be made for any transfer or exchange, except that the Registered Owner requesting the transfer or exchange shall be required to pay any tax or governmental charge payable in connection herewith. When the book-entry system is in effect, transfers of Beneficial Owners’ interests in the 2012 Bonds will be accomplished by book entries made by DTC and, in turn, by the DTC Participants who act on behalf of the Beneficial Owners. See “Book-Entry Only System” herein.
Constitutional Debt Limit
General obligation debt of the City is of two types: (i) debt (herein called “Tax-Supported”) which is subject to the limitation of the Constitution of the Commonwealth (the aggregate limit on such debt equals 13.5% of the average annual assessed value of taxable real property in the City during the ten (10) years immediately preceding the year in which debt is incurred (of which no more than 3% may be non-electoral debt)); and (ii) debt (herein called “Self-Supporting”) which, having been incurred for revenue producing facilities reasonably expected to yield revenue in excess of operating expenses sufficient to pay the interest and sinking fund charges thereon, is excluded from the computation of debt for the purposes of the constitutional debt limit. The amount of such Self-Supporting general obligation debt to be so excluded must be determined by the Court of Common Pleas of Philadelphia County upon petition by the City. Self-Supporting debt is general obligation debt of the City and ranks equally in all respects with Tax-Supported general obligation debt, the only distinction being that it is not used in the calculation of the constitutional debt limit and revenues are expected to be generated by the facilities in amounts sufficient to cover their debt service. Self-Supporting debt, however, is not secured by a lien on any particular revenues. Approximately $184,535 principal amount of the 2012 Bonds will constitute Self-Supporting debt, and the balance will be Tax-Supported debt. The issuance of the 2012 Bonds will not cause the City’s indebtedness to exceed the constitutional debt limit. See “DEBT OF THE CITY” in Appendix A herein.
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The City is also authorized to issue revenue bonds pursuant to The First Class City Revenue Bond Act of 1972. Currently, the City issues revenue bonds to support the Division of Aviation, the Water Department and the Philadelphia Gas Works. Bonds so issued are excluded for purposes of the calculation of the constitutional debt limit. See “Security” herein.
Authorization
Under Article 9, Section 12 of the Constitution of the Commonwealth and the Acts of General Assembly of the Commonwealth of June 25, 1919, P.L. 581, as amended and June 11, 1941, P.L. 113, amended December 8, 1985, P.L. 324 (together, the “Act”), the City is authorized to issue bonds to refund bonds previously issued to secure indebtedness of the City. Pursuant to the Act, the Council of the City has enacted an Ordinance (Bill No. 100654) on November 18, 2010 (the “Ordinance”) authorizing borrowings by the issuance and sale of bonds (including the 2012 Bonds) for the purpose of refunding certain general obligation bonds of the City.
The Ordinance, which was signed by the Mayor on November 22, 2010, authorizes the Bond Committee, to issue and sell on behalf of the City up to $320,000,000 aggregate principal amount (exclusive of costs of issuance of the 2012 Bonds, including, but not limited to, underwriters’ discount, costs of liquidity and/or credit enhancement, original issue discount or redemption premiums, if any, or similar items) of general obligation bonds of the City in one or more series, for the purpose of refunding certain general obligation bonds of the City, including the Refunded Bonds (hereinafter defined). The City has previously issued $114,570,000 of refunding bonds pursuant to the Ordinance.
By the Bond Committee Resolution adopted on May 2, 2012, the Bond Committee authorized the issuance of $21,295,000 principal amount of the 2012 Bonds, and determined the terms of the 2012 Bonds, including the interest rates and maturity dates.
Book-Entry Only System
The information set forth herein concerning The Depository Trust Company, New York, New York (“DTC”) and the book-entry system described below has been extracted from materials provided by DTC for such purpose, is not guaranteed as to accuracy or completeness and is not to be construed as a representation by the City or the Underwriters. The websites referenced below are included for reference only and the information contained therein is not incorporated by reference in this Official Statement.
DTC will act as securities depository for the 2012 Bonds under a book-entry system with no physical distribution of the 2012 Bonds made to the public. The 2012 Bonds will initially be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee), or such other name as may be requested by an authorized representative of DTC. One fully-registered bond certificate will be issued for the aggregate principal amount of the 2012 Bonds of each maturity and will be deposited with DTC.
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transactions, in deposited securities through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor’s rating of AA+. The DTC rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org.
Purchases of the 2012 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the 2012 Bonds on DTC’s records. The ownership interest of each actual purchaser of each 2012 Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the 2012 Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the 2012 Bonds, except in the event that use of the book-entry system for the 2012 Bonds is discontinued.
To facilitate subsequent transfers, all 2012 Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of 2012 Bonds with DTC and their registration in the name of Cede & Co., or such other DTC nominee does not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the 2012 Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such 2012 Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of 2012 Bonds may wish to take certain steps to augment transmission to them of notices of significant events with respect to the 2012 Bonds, such as defaults and proposed amendments to the bond documents. For example, Beneficial Owners of 2012 Bonds may wish to ascertain that the nominee holding the 2012 Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners, or in the alternative, Beneficial Owners may wish to provide their names and addresses to the bond registrar and request that copies of the notices be provided directly to them.
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Participants to whose accounts the 2012 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).
Payments of principal of, premium, if any and interest on the 2012 Bonds will be made to Cede & Co. or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the City or its agent, on the payable date in accordance with their respective holdings shown on DTC’s records. Payments by Direct Participants and Indirect Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Direct and Indirect Participants and not of DTC (or its nominee), the City or its agent subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, premium, if any, and interest to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Fiscal Agent, disbursement of such payments to Direct Participants shall be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants.
In the event of insolvency of DTC, if DTC has insufficient securities in its custody (e.g., due to theft or loss) to satisfy the claims of its Direct Participants with respect to deposited securities and is unable by application of: (i) cash deposits and securities pledged to DTC to protect DTC against losses and liabilities; (ii) the proceeds of insurance maintained by DTC and/or its Direct Participants or Indirect Participants; or (iii) other resources, to obtain securities necessary to eliminate the insufficiency, no assurances can be given that Direct Participants will be able to obtain all of their deposited securities.
THE CITY, THE FISCAL AGENT AND THE UNDERWRITERS CANNOT AND DO NOT GIVE ANY ASSURANCES THAT DTC WILL DISTRIBUTE TO ITS PARTICIPANTS OR THAT DIRECT PARTICIPANTS OR INDIRECT PARTICIPANTS WILL DISTRIBUTE TO BENEFICIAL OWNERS OF THE 2012 BONDS (A) PAYMENTS OF THE PRINCIPAL OF, OR INTEREST ON, THE 2012 BONDS, OR (B) CONFIRMATION OF OWNERSHIP INTERESTS IN THE 2012 BONDS, OR (C) NOTICES, OR THAT THEY WILL DO SO ON A TIMELY BASIS, OR THAT DTC, DIRECT PARTICIPANTS OR INDIRECT PARTICIPANTS WILL SERVE AND ACT IN THE MANNER DESCRIBED IN THIS OFFICIAL STATEMENT. THE CURRENT “RULES” APPLICABLE TO DTC ARE ON FILE WITH THE SECURITIES AND EXCHANGE COMMISSION AND THE CURRENT “PROCEDURES” OF DTC TO BE FOLLOWED IN DEALING WITH ITS PARTICIPANTS ARE ON FILE WITH DTC.
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2012 BONDS; OR (E) ANY ACTION TAKEN BY DTC OR ITS NOMINEE AS THE REGISTERED OWNER OF THE 2012 BONDS.
Discontinuation of Book-Entry Only System
DTC may determine to discontinue providing its service with respect to the 2012 Bonds at any time by giving notice to the Fiscal Agent and discharging its responsibilities with respect thereto under applicable law. In addition, the City may determine to discontinue the book-entry only system. In the event that the book-entry only system for the 2012 Bonds is discontinued, bond certificates will be printed and delivered.
Security
The 2012 Bonds are general obligations of the City payable from taxes and other general revenues of the City. The full faith, credit and taxing power of the City are irrevocably pledged for the prompt and full payment, when due, of the principal of and interest and premium, if any, on the 2012 Bonds and all other general obligation debt of the City. See “DEBT OF THE CITY” in Appendix A. The City is also empowered by statute to issue revenue bonds and, as of February 29, 2012 had outstanding $1,904,200,000 aggregate principal amount of Water and Wastewater Revenue Bonds, $1,141,715,000 aggregate principal amount of Gas Works Revenue Bonds, and $1,417,055,000 aggregate principal amount of Airport Revenue Bonds. Such revenue bonds are secured by a pledge of the revenues of the City’s water and sewer system, revenues of the Philadelphia Gas Works and revenues of the City’s airport system, respectively, constituting a first lien on such revenues. The City also issued certain general obligation bonds to fund water and sewer and airport facilities which have been determined to be Self-Supporting. Subject to such priority in application of revenues as is required by law for such revenue bonds and to covenants made with respect to revenue bonds, and excluding grants in aid, trust funds and sinking funds designated for application to specific purposes, all revenues and funds of the City support its general obligation debt, including the 2012 Bonds. See Appendix A for certain financial information regarding the City and Appendix C for the City’s Comprehensive Annual Financial Report for the fiscal year ended June 30, 2011.
Remedies of Bondholders
Should a Registered Owner fail to receive payment of principal and interest when due and payable, a suit may be brought by such Registered Owner against the City to seek a judgment for the unpaid amount.
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The rights and remedies of bondholders could be limited by the provisions of Chapter 9 of the United States Bankruptcy Code, which permits, under prescribed circumstances, a public agency or instrumentality of a state to file a petition for relief, in the nature of an adjustment in the repayment of debts, in a bankruptcy court of the United States, other reorganization and insolvency proceedings, and general principles of equity, whether asserted in a proceeding at law or in equity.
The Pennsylvania Intergovernmental Cooperation Authority Act for Cities of the First Class, Act No. 1991-6, approved June 5, 1991 (the “PICA Act”), prohibits the City from filing a petition for relief under Chapter 9 of the United States Bankruptcy Code as long as PICA has outstanding any bonds issued pursuant to the PICA Act. As of the close of business on February 29, 2012, the principal amount of PICA bonds outstanding was $494,710,000. If no such bonds were outstanding, the PICA Act requires approval in writing by the Governor of the Commonwealth for a filing under Chapter 9 by the City. If the provisions of the PICA Act relating to the authorization by the Governor for the City to file a petition under Chapter 9 of the United States Bankruptcy Code were invoked, such provisions could limit the enforcement of bondholders’ rights and remedies. See “SUMMARY FINANCIAL INFORMATION — Pennsylvania Intergovernmental Cooperation Authority” and “DEBT OF THE CITY — PICA Bonds” in Appendix A herein.
PLAN OF FINANCE AND ESTIMATED SOURCES AND USES OF FUNDS
The City will use the proceeds of the 2012 Bonds to (i) currently refund the City’s outstanding General Obligation Refunding Bonds, Series 1998 maturing on May 15, 2020, currently outstanding in the principal amount of $10,715,000 (the “1998 Bonds”); (ii) currently refund the City’s outstanding General Obligation Bonds, Series 2001 maturing on September 15, 2021, currently outstanding in the principal amount of $11,155,000 (the “2001 Bonds”), (iii) advance refund the City’s outstanding General Obligation Bonds, Series 2003A maturing on February 15, 2015, currently outstanding in the principal amount of $2,355,000 (the “2003A Bonds” and, together with the 1998 Bonds and the 2001 Bonds, the “Refunded Bonds”), and (iv) to pay the costs of issuing the 2012 Bonds (the “Refunding Project”). Proceeds of the 2012 Bonds will be applied, on the date of issuance of the 2012 Bonds, to the payment of the redemption price of, including accrued interest on, the 1998 Bonds and the 2001 Bonds, which are being optionally redeemed on such date.
Proceeds of the 2012 Bonds will be deposited in an escrow fund established under an Escrow Deposit Agreement dated as of May 1, 2012 between the City and U.S. Bank National Association, as escrow agent, and will be applied to the payment of the redemption price of and interest on the 2003A Bonds to and including February 15, 2013, which is the date fixed for redemption. See “VERIFICATION” herein.
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Set forth below is a summary of the estimated sources and uses of funds for the 2012 Bonds.
Sources
Principal Amount $21,295,000
Net Original Issue Premium 3,757,779
TOTAL $25,052,779
Uses
Refunding of the 1998 Bonds and the 2001 Bonds
$22,195,056
Deposit to Escrow Fund for the 2003 Bonds 2,475,628
Costs of Issuance* 382,095
TOTAL $25,052,779
______________
*
Includes legal fees, underwriters’ discount, printing costs, rating agency fees, fiscal agent fees, escrow agent fees, financial advisor fees and other closing costs and expenses.
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FISCAL YEAR DEBT SERVICE REQUIREMENTS
Set forth below is the schedule of the City’s fiscal year debt service payments on Tax-Supported bonds, including the 2012 Bonds, in each fiscal year of the City ending June 30.
Period Ending June 30 Debt Service on the 2012 Bonds Current Annual General Obligation Debt Service(1)(2)(3) Aggregate General Obligation Debt Service 2012 $108,945,114 $108,945,114 2013 $ 907,995 115,797,926 116,705,921 2014 1,064,750 115,772,183 116,836,933 2015 2,400,500 113,468,508 115,869,008 2016 996,250 111,816,745 112,812,995 2017 996,250 111,714,126 112,710,376 2018 996,250 111,503,420 112,499,670 2019 996,250 111,396,909 112,393,159 2020 10,634,125 100,281,798 110,915,923 2021 502,000 100,174,923 100,676,923 2022 10,291,000 90,038,160 100,329,160 2023 101,215,141 101,215,141 2024 101,039,973 101,039,973 2025 100,794,773 100,794,773 2026 93,314,638 93,314,638 2027 93,023,510 93,023,510 2028 93,424,361 93,424,361 2029 63,735,186 63,735,186 2030 76,582,250 76,582,250 2031 76,683,859 76,683,859 2032 76,759,591 76,759,591 2033 37,859,322 37,859,322 2034 23,072,009 23,072,009 2035 23,071,922 23,071,922 2036 23,071,241 23,071,241 2037 23,070,025 23,070,025 2038 23,068,734 23,068,734 2039 23,069,188 23,069,188 2040 10,018,900 10,018,900 2041 10,021,413 10,021,413 2042 _____________ 10,020,413 10,020,413 TOTALS(4) $29,785,370 $2,273,826,258 $2,303,611,628 _____________________
(1) For outstanding bonds as of June 30, 2011; amounts include Tax-Supported and Self-Supporting debt. (2) Excludes debt service on the Refunded Bonds.
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UNDERWRITING
The 2012 Bonds are being purchased by the Underwriters named on the cover page of this Official Statement, for whom Citigroup Global Markets Inc. is acting as the representative, subject to certain terms and conditions set forth in a Bond Purchase Contract between the City and the Underwriters, at a purchase price of $24,921,473.24, which reflects the par amount of the 2012 Bonds, plus original issue premium of $3,757,779.15, less an underwriters’ discount of $131,305.91. The 2012 Bonds are offered for sale to the public at prices set forth on the inside front cover page of this Official Statement. The 2012 Bonds may be offered and sold to certain dealers (including the Underwriters and other dealers depositing 2012 Bonds into investment trusts) at prices lower than such offering prices, and such public offering prices may be changed from time to time by the Underwriters without prior notice.
Citigroup, Inc., parent company of Citigroup Global Markets Inc., one of the Underwriters, has entered into a retail brokerage joint venture with Morgan Stanley. As part of the joint venture, Citigroup Global Markets Inc. will distribute municipal securities to retail investors through the financial advisor network of a new broker-dealer, Morgan Stanley Smith Barney LLC. This distribution arrangement became effective on June 1, 2009. As part of this arrangement, Citigroup Global Markets Inc. will compensate Morgan Stanley Smith Barney LLC for its selling efforts with respect to the 2012 Bonds.
Loop Capital Markets LLC (“Loop Capital”) has entered into an agreement (the “Distribution Agreement”) with UBS Financial Services Inc. (“UBS”) for the retail distribution of certain municipal securities offerings, including the 2012 Bonds, at the original issue prices. Pursuant to the Distribution Agreement, Loop Capital may share a portion of its underwriting compensation with respect to the 2012 Bonds with UBS.
The Underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, principal investment, hedging, financing and brokerage activities. Certain of the Underwriters and their respective affiliates have, from time to time, performed and may in the future perform, various investment banking services for the City for which they received or will receive customary fees and expenses.
In the ordinary course of their various business activities, the Underwriters and their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (which may include bank loans and/or credit default swaps) for their own account and for the accounts of their customers and may at any time hold long and short positions in such securities and instruments. Such investment and securities activities may involve securities and instruments of the City.
LEGALITY FOR INVESTMENT
Under the Pennsylvania Probate, Estates and Fiduciaries Code, the 2012 Bonds are authorized investments for fiduciaries, as defined in that code, within the Commonwealth. The 2012 Bonds are legal investments for Pennsylvania savings banks, banks, trust companies and insurance companies and are acceptable as security for deposits of funds of the Commonwealth.
RATINGS
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respectively. Such ratings reflect only the view of each such credit rating agency. An explanation of the significance of each of such ratings and any outlook may only be obtained from the rating agency furnishing the same.
A rating is not a recommendation to buy, sell or hold securities. There is no assurance that any such credit rating will continue for any given period of time or that it will not be revised or withdrawn entirely by such credit rating agency if, in its judgment, circumstances so warrant. Neither the City nor the Underwriters have undertaken any responsibility to assure the maintenance of any rating. The City has agreed, in the Continuing Disclosure Agreement, to report actual rating changes on the 2012 Bonds. See “CONTINUING DISCLOSURE UNDERTAKING” herein and Appendix E. Any such downward change in or withdrawal of such credit rating may have an adverse effect on the marketability or market price of the 2012 Bonds.
TAX MATTERS
Federal Tax Exemption
The Internal Revenue Code of 1986, as amended (the “Code”) contains provisions relating to the tax-exempt status of interest on obligations issued by governmental entities which apply to the 2012 Bonds. These provisions include, but are not limited to, requirements relating to the use and investment of the proceeds of the 2012 Bonds and the rebate of certain investment earnings derived from such proceeds to the United States Treasury Department on a periodic basis. These and other requirements of the Code must be met by the City subsequent to the issuance and delivery of the 2012 Bonds in order for interest thereon to be and remain excludable from gross income for purposes of federal income taxation. The City has covenanted to comply with such requirements.
In the opinion of Co-Bond Counsel, interest on the 2012 Bonds will be excluded from gross income for purposes of federal income taxation under existing statutes, regulations, rulings and court decisions. The opinion of Co-Bond Counsel is subject to the condition that the City complies with all applicable federal income tax law requirements that must be satisfied subsequent to the issuance of the 2012 Bonds in order that interest thereon continues to be excluded from gross income. The City has covenanted to comply with all such requirements. Failure to comply with certain of such requirements could cause the interest on the 2012 Bonds to be includable in gross income retroactive to the date of issuance thereof. Interest on the 2012 Bonds is not treated as an item of tax preference under Section 57 of the Code for purposes of the individual and corporate alternative minimum taxes; however, under the Code, to the extent that interest on the 2012 Bonds is a component of a corporate holder’s "adjusted current earnings," a portion of that interest may be subject to the corporate alternative minimum tax.
The 2012 Bonds have been sold with original issue premium. An amount equal to the excess of the initial public offering price of a 2012 Bond as shown on the inside cover hereof over its stated redemption price at maturity constitutes premium on such 2012 Bond. A purchaser of a 2012 Bond must amortize any premium over such 2012 Bond’s term using constant yield principles. The amount of amortized bond premium (i) reduces the holder’s basis in such 2012 Bond for purposes of determining gain or loss for federal income tax purposes upon the sale or other disposition of such 2012 Bond and (ii) is not allowed as a deduction for federal income tax purposes to the holder. Purchasers of 2012 Bonds, whether at the time of the initial issuance or subsequent thereto, should consult their own tax advisors with respect to the determination and treatment of premium.
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including, but not limited to, foreign corporations, certain S corporations, recipients of social security and railroad retirement benefits, financial institutions and property or casualty insurance companies. Co-Bond Counsel expresses no opinion regarding any other federal tax consequences relating to the 2012 Bonds or the receipt of interest thereon, and prospective purchasers should consult their own tax advisors as to collateral federal income tax consequences.
No assurance can be given that amendments to the Code or other federal legislation will not be introduced and/or enacted which would cause the interest on the 2012 Bonds to be subject, directly or indirectly, to federal income taxation or adversely affect the market price of the 2012 Bonds or otherwise prevent the holders of the 2012 Bonds from realizing the full current benefit of the federal tax status of the interest thereon.
Pennsylvania Tax Matters
In the opinion of Co-Bond Counsel, under the existing laws of the Commonwealth, the interest on the 2012 Bonds is free from Pennsylvania personal income taxation and Pennsylvania corporate net income taxation, but such exemption does not extend to gift, estate, succession or inheritance taxes or any other taxes not levied or assessed directly on the 2012 Bonds or the interest thereon. Profits, gains or income derived from the sale, exchange or other disposition of the 2012 Bonds are subject to state and local taxation within the Commonwealth.
This summary is based on laws, regulations, rulings and decisions now in effect, all of which may change. Any change could apply retroactively and could affect the continued validity of this summary.
Prospective purchasers should consult their tax advisors about the consequences of purchasing or holding the 2012 Bonds.
VERIFICATION
AMTEC Corporation of Avon, Connecticut and Ross & Company, PLLC (a Certified Public Accountant) of Louisville, Kentucky (together, the “Verification Agent”) will deliver to the City, on or before the date of the delivery of the 2012 Bonds, its report (the “Verification Report”) indicating that it has verified the mathematical accuracy of the information provided by the City and its representatives with respect to the refunding requirements of the 2003A Bonds. Included within the scope of its engagement will be a verification of (a) the mathematical accuracy of the computations of the adequacy of the cash and maturing principal of the securities to be placed in an escrow account to meet the scheduled payment of interest on the 2003A Bonds until redemption and the payment of the redemption price of the 2003A Bonds on February 15, 2013; and (b) the mathematical accuracy of the computations supporting the conclusion of Co-Bond Counsel that the 2012 Bonds are not “arbitrage bonds” under the Code and the regulations promulgated thereunder.
The verification performed by the Verification Agent will be based solely upon data, information and documents provided to the Verification Agent by the City and its representatives. The Verification Report will state that the Verification Agent has no obligation to update the Verification Report for events occurring, or data or information coming to their attention, subsequent to the date of the Verification Report.
CERTAIN LEGAL MATTERS
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Office of Ann C. Lebowitz, both of Philadelphia, Pennsylvania, Co-Bond Counsel. The proposed form of opinion of Co-Bond Counsel is included herein as Appendix D. Certain legal matters will be passed upon for the City by the City of Philadelphia Law Department and for the Underwriters by Dilworth Paxson LLP, Philadelphia, Pennsylvania and Law Offices of Joseph C. Reid, P.A., New York, New York.
The various legal opinions to be delivered concurrently with the delivery of the 2012 Bonds express the professional judgment of the attorneys rendering the opinions as to the legal issues explicitly addressed therein. In rendering a legal opinion, the attorney does not become an insurer or guarantor of that expression of professional judgment, of the transaction opined upon, or of the future performance of parties to the transaction. Nor does the rendering of an opinion guarantee the outcome of any legal dispute that may arise out of the transaction.
NO LITIGATION
Upon delivery of the 2012 Bonds, the City of Philadelphia Law Department shall furnish an opinion, in form satisfactory to Co-Bond Counsel, to the effect, among other things, that, except for litigation which in the opinion of the City of Philadelphia Law Department is without merit and except as disclosed in the Official Statement, there is no litigation or other legal proceeding pending in any court or, to the best of its knowledge, threatened in writing to restrain or enjoin the issuance or delivery of the 2012 Bonds or challenging the validity of the proceedings of the City with respect to the authorization, issuance, sale and provision for payment of the 2012 Bonds or in any way contesting the validity or enforceability of the 2012 Bonds.
FINANCIAL ADVISORS
Public Financial Management, Inc. of Philadelphia, Pennsylvania and Acacia Financial Group, Inc. of Marlton, New Jersey are acting as co-financial advisors (together, the “Financial Advisors”) to the City in connection with the issuance of the 2012 Bonds. The Financial Advisors have assisted in the preparation of this Official Statement and in other matters relating to the planning, structuring and issuance of the 2012 Bonds. They have received and reviewed but have not independently verified information in this Official Statement for accuracy or completeness (except, as to each Financial Advisor, the information in this section). Investors should not draw any conclusions as to the suitability of the 2012 Bonds from, or base any investment decisions upon, the fact that the Financial Advisors have advised the City with respect to the 2012 Bonds. The Financial Advisors’ fees for this issue are contingent upon the sale and issuance of the 2012 Bonds.
The Financial Advisors are financial advisory and consulting organizations and not organizations engaged in the business of underwriting, marketing or trading of municipal securities or any other negotiable instruments.
CERTAIN RELATIONSHIPS
Dilworth Paxson LLP, co-counsel to the Underwriters, represents the City in matters unrelated to this financing.
CONTINUING DISCLOSURE UNDERTAKING
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Certification, L.L.C., as dissemination agent for the benefit of the Registered Owners (as defined in such agreement) from time to time of the 2012 Bonds, to be dated the date of original delivery and payment for the 2012 Bonds, the form of which is annexed hereto as Appendix E. The City has complied with its continuing disclosure undertakings for each of the past five years.
MISCELLANEOUS
This Official Statement is made available only in connection with the sale of the 2012 Bonds and may not be used in whole or in part for any other purpose. This Official Statement is not to be construed as a contract or agreement between the City, the Underwriters and the purchasers or owners of any of the 2012 Bonds. Any statements made in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended merely as opinions and not as representations of fact. No representation is made that any of the opinions or estimates will be realized. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there is no change in the affairs of the City since the date hereof.
The attached Appendices are integral parts of this Official Statement and should be read in their entirety together with the foregoing statements.
The City makes no representations or warranties to investors as to the accuracy or timeliness of any other information available on the City Investor Website or any other website maintained by the City, nor any hyperlinks referenced therein.
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The City has authorized the execution and distribution of this Official Statement. This Official Statement has been duly executed and delivered by the following officers, constituting a majority of the Bond Committee, on behalf of the City of Philadelphia.
CITY OF PHILADELPHIA
By: /s/ Michael A. Nutter Name: Michael A. Nutter
Title: Mayor
By: /s/ Alan L. Butkovitz Name: Alan L. Butkovitz
Title: City Controller
By: /s/ Shelley R. Smith Name: Shelley R. Smith
Title: City Solicitor
Approved:
By: /s/ Rob Dubow Name: Rob Dubow
APPENDIX A
TABLE OF CONTENTS
APPENDIX A
GOVERNMENT AND FINANCIAL INFORMATION
THE GOVERNMENT OF THE CITY OF PHILADELPHIA
General
The City of Philadelphia, Pennsylvania (the “City” or “Philadelphia”), was incorporated in 1789 by an Act of the General Assembly of the Commonwealth of Pennsylvania (the “Commonwealth”) (predecessors of the City under charters granted by William Penn in his capacity as proprietor of the colony of Pennsylvania may date to as early as 1684). In 1854, the General Assembly of the Commonwealth, by an act commonly referred to as the Consolidation Act, made the City’s boundaries coterminous with the boundaries of Philadelphia County (the same boundaries that exist today) (the “County”), abolished all governments within these boundaries other than the City and the County and consolidated the legislative functions of the City and the County. Article 9, Section 13 of the Pennsylvania Constitution abolished all county offices in the City and provides that the City performs all functions of county government and that laws applicable to counties apply to the City.
Since 1952, the City has been governed under a Home Rule Charter authorized by the General Assembly of the Commonwealth (First Class City Home Rule Act, Act of April 21, 1949, P.L. 665, Section 17) and adopted by the voters of the City. The Home Rule Charter, as amended and supplemented to this date, provides, among other things, for the election, organization, powers and duties of the legislative branch (the “City Council”); the election, organization, powers and duties of the executive and administrative branch; and the basic rules governing the City’s fiscal and budgetary matters, contracts, procurement, property and records. The Home Rule Charter, as amended, also provides for the governance of The School District of Philadelphia (the “School District”) as a home rule school district. Certain other constitutional provisions and Commonwealth statutes continue to govern various aspects of the City’s affairs, notwithstanding the broad grant of powers of local self-government in relation to municipal functions set forth in the First Class City Home Rule Act.
Under the Home Rule Charter, as currently in effect, there are two principal governmental entities in the City: (1) the City, which performs ordinary municipal functions as well as traditional county functions; and (2) the School District, which has boundaries coterminous with the City and has responsibility for all public primary and secondary education.
The court system in the City, consisting of Common Pleas, Municipal and Traffic Courts, is part of the Commonwealth judicial system. Although judges are paid by the Commonwealth, most other court costs are paid by the City, with partial reimbursement from the Commonwealth.
Elected and Appointed Officials
The Mayor is elected for a term of four years and is eligible to succeed himself for one term. Each of the seventeen members of the City Council is also elected for a four-year term which runs concurrently with that of the Mayor. There is no limitation on the number of terms that may be served by members of the City Council. Of the members of the City Council, ten are elected from districts and seven are elected at-large, with a minimum of two of the seven representing a party or parties other than the majority party. The District Attorney and the City Controller are elected at the mid-point of the terms of the Mayor and City Council.
Government Accountability Office (formerly known as the General Accounting Office), and GAAS, Generally Accepted Auditing Standards promulgated by the American Institute of Certified Public Accountants. As of February 29, 2012, the Office of the City Controller had 117 employees, including 65 auditors, 20 of whom were certified public accountants.
The City Controller post-audits and reports on the City’s and the School District’s comprehensive Annual Financial Reports, federal assistance received by the City and the performance of City departments. The City Controller also conducts a pre-audit program of expenditure documents required to be submitted for approval, such as invoices, payment vouchers, purchase orders and contracts. Documents are selected for audit by category and statistical basis. The Pre-Audit Division verifies that expenditures are authorized and accurate in accordance with the Home Rule Charter and other pertinent legal and contractual requirements before any moneys are paid by the City Treasurer. The Pre-Audit Technical Unit, consisting of auditing and engineering staff, inspects and audits capital project design, construction and related expenditures. Other responsibilities of the City Controller include investigation of allegations of fraud, preparation of economic reports, certification of the City’s debt capacity and the capital nature and useful life of the capital projects, and opining to the Pennsylvania Intergovernmental Cooperation Authority (“PICA”) on the reasonableness of the assumptions and estimates in the City’s five-year financial plans.
The principal officers of the City’s government appointed by the Mayor are the Managing Director of the City (the “Managing Director”), the Director of Finance of the City (the “Director of Finance”), the City Solicitor (the “City Solicitor”), the Deputy Mayor for Planning and Economic Development and Director of Commerce (the “Director of Commerce”) and the City Representative (the “City Representative”). These officials, together with the Mayor and the other members of the Mayor’s cabinet, constitute the major policy-making group in the City’s government.
The Managing Director, in coordination with the Deputy Mayors for Public Safety, Health and Opportunity, Transportation and Utilities, Economic Development and Environmental and Community Resources, and the Director of Commerce, is responsible for supervising the operating departments and agencies of the City that render the City’s various municipal services. The Director of Commerce is charged with the responsibility of promoting and developing commerce and industry. The City Representative is the Ceremonial Representative of the City and especially of the Mayor. The City Representative is charged with the responsibility of giving wide publicity to any items of interest reflecting the activities of the City and its inhabitants, and for the marketing and promotion of the image of the City.
The City Solicitor is head of the Law Department and acts as legal advisor to the Mayor, the City Council, and all of the agencies of the City government. The City Solicitor is also responsible for all of the City’s contracts and bonds, for assisting City Council, the Mayor, and City agencies in the preparation of ordinances for introduction in City Council, and for the conduct of litigation involving the City.
The Director of Finance is the chief financial and budget officer of the City and is selected from three names submitted to the Mayor by a Finance Panel. The Director of Finance is responsible for the financial functions of the City including development of the annual operating budget, the capital budget, and capital program; the City’s program for temporary and long-term borrowing; supervision of the operating budget’s execution; the collection of revenues through the Department of Revenue; and the oversight of pension administration as Chairperson of the Board of Pensions and Retirement. The Director of Finance is also responsible for the appointment and supervision of the City Treasurer, whose office manages the City’s debt program and serves as the disbursing agent for the distribution of checks and electronic payments from the City Treasury and the management of cash resources.
Michael A. Nutter, Mayor, was sworn in as the City’s 98th Mayor on January 7, 2008. He won
the Democratic nomination in a five-way primary election. Elected to Philadelphia City Council in 1992, the Mayor represented the City’s Fourth Council District for nearly fifteen years. He was reelected and was sworn in for his second term as Mayor on January 2, 2012. During his time in City Council, he engineered groundbreaking ethics reform legislation, led successful efforts to pass a citywide smoking ban, worked to lower taxes for Philadelphians and to reform the City’s tax structure, and labored to increase the number of Philadelphia police officers patrolling the streets and to create a Police Advisory Board to provide a forum for discussion between citizens and the Police Department. Mayor Nutter received his B.A. from the Wharton School of Business at the University of Pennsylvania in 1979.
Everett A. Gillison, Chief of Staff to the Mayor and Deputy Mayor for Public Safety, was
appointed Chief of Staff by Mayor Nutter on October 19, 2011. Mr. Gillison has served as Deputy Mayor for Public Safety since January 7, 2008, and will continue in his role as Deputy Mayor for Public Safety in addition to his role as the Mayor’s Chief of Staff. Mr. Gillison previously served as a Senior Trial Lawyer for the Defender Association of Philadelphia where he worked for more than 30 years.
Rob Dubow, Director of Finance, was appointed on January 7, 2008. Prior to his appointment,
Mr. Dubow was the Executive Director of PICA. He has also served as Chief Financial Officer of the Commonwealth, from 2004 to 2005 and as Budget Director for the City, from 2000 to 2004.
Nancy E. Winkler, City Treasurer, was appointed City Treasurer effective January 31, 2011.
Prior to her tenure with the City, Ms. Winkler worked for over twenty-eight years with Public Financial Management (the PFM Group), from 1990 to 2011 as Managing Director, with responsibility to manage the firm’s municipal, state and authority practices in New York and Maryland.
Government Services
Municipal services provided by the City include: police and fire protection; health care; certain welfare programs; construction and maintenance of local streets, highways, and bridges; trash collection, disposal and recycling; provision for recreational programs and facilities; maintenance and operation of the water and wastewater systems (the “Water and Wastewater Systems”); the acquisition and maintenance of City real and personal property, including vehicles; maintenance of building codes and regulation of licenses and permits; maintenance of records; collection of taxes and revenues; purchase of supplies and equipment; construction and maintenance of airport facilities; and maintenance of a prison system. The City owns the assets that comprise the Philadelphia Gas Works (“PGW” or the “Gas Works”). PGW serves residential, commercial, and industrial customers in the City. PGW is operated by Philadelphia Facilities Management Corporation (“PFMC”), a non-profit corporation specifically organized to manage and operate PGW for the benefit of the City.
On February 13, 2012, Mayor Michael Nutter released an analysis prepared by Lazard Freres & Co, LLC, the City's strategic advisor, recommending that the City “pursue a process to transfer ownership and operation of PGW to a private entity via a strategic sale.” The City is in the process of procuring advisors to assist with such process. A sale would require the approval of City Council. The City is not obligated to sell PGW if the process does not produce the desired results.
Local Government Agencies
Mayoral-Appointed or Nominated Agencies.
PIDC/PAID. The Philadelphia Industrial Development Corporation (“PIDC”) and its affiliate,
the Philadelphia Authority for Industrial Development (“PAID”), coordinate the City’s efforts to maintain an attractive business environment and to attract new businesses to the City and retain existing ones. Of the thirty members of the board of PIDC, seven are City officers or officials (the Mayor, the Director of Commerce, the President of City Council or a designee, the Chairman of the City Planning Commission, the City Solicitor, the Managing Director, and the Director of Finance), fifteen are nominated jointly by the President of the Greater Philadelphia Chamber of Commerce and the Director of Commerce, and eight are nominated by the President of the Greater Philadelphia Chamber of Commerce. The board of PAID is appointed by the Mayor.
PMA. The Philadelphia Municipal Authority (formerly The Equipment Leasing Authority of
Philadelphia) (“PMA”) was originally established for the purpose of buying equipment and vehicles to be leased to the City. PMA’s powers have been expanded to include, without limitation, the construction and leasing of municipal solid waste disposal facilities, correctional facilities, and other municipal buildings. The PMA is governed by a five-member board appointed by City Council from nominations made by the Mayor.
PEA. The Philadelphia Energy Authority (“PEA”) was established by the City and incorporated
in 2011 for the purpose of facilitating and developing energy generation projects, facilitating and developing energy efficiency projects, the purchase or facilitation of energy supply and consumer energy education. The PEA is authorized to participate in projects on behalf of the City, other government agencies, institutions and businesses. The PEA is governed by a five-member board of energy professionals appointed by City Council from four nominations made by the Mayor and one nomination from City Council.
Redevelopment Authority. The Philadelphia Redevelopment Authority (formerly known as the
Redevelopment Authority of the City of Philadelphia) (the “PRA”), supported by Federal funds through the City’s Community Development Block Grant Fund and by Commonwealth and local funds, is responsible for the redevelopment of the City’s blighted areas. The PRA is governed by a five-member board appointed by the Mayor and must submit its budgets to the City for review and approval.
Housing Authority. The Philadelphia Housing Authority (the “Housing Authority”) is
responsible for developing and managing low and moderate income rental units and limited amounts of for-sale housing in the City. The Housing Authority is normally governed by a five-member board with two members appointed by the Mayor, two appointed by the City Controller and a tenant member elected by the other members; however, on March 4, 2011, the U.S. Department of Housing and Urban Development (“HUD”) took control of the Housing Authority for approximately a year, subject to extension, under the terms of a Co-operative Endeavor Agreement (“CEA”). On August 4, 2011, Michael P. Kelly was appointed Executive Director of the Housing Authority by the board. Mr. Kelly had previously acted as interim executive director and as administrative receiver for the Housing Authority at the request of HUD. On February 29, 2012, the HUD receivership of the Housing Authority was extended by agreement of HUD and the Mayor of the City pursuant to the terms of the CEA for a period which is expected to be less than one year.
Hospitals Authority. The Hospitals and Higher Education Facilities Authority of Philadelphia
