Dowd Debt Letter2ICA

==Letter from Patrick Dowd to Members of the ICA==
:December 11, 2008
Barbara McNees
Regional Enterprise Tower
425 Sixth Avenue, Suite 1100
Pittsburgh, PA 15219-1811
Dear Chairperson McNees,
Thank you for the letter. I appreciate getting a glimpse of the direction you and the Mayor intend for the reduction of the City’s long-term debt obligations.
However, I am troubled by the fact that the ICA would place the City Council in the difficult position of having to vote on the budget in the absence of a defeasance agreement that would enable the City to legitimately write off the $51 million in proposed debt service reduction. While some might call my concerns merely technical, I am remain convinced that if we are going to change the culture of city government we need to resolve details like this before they become public issues. As you are well aware, I have been asking about the “restricted fund in the nature of an irrevocable trust” since the ICA approved the budget in late October. I remain convinced that this agreement could be presented before Tuesday, when the Council is required to give final approval to the budget.
While I am neither an attorney nor an accountant, I would humbly suggest that the agreement contain among others the following basic provisions.
1. The creation of a formal relationship between the city and a financial agent
2. The creation of an escrow or defeasance account that is an unequivocal irrevocable trust with the purpose of reducing the City’s debt service in FY2011, FY2012, and FY2013
a. Defeasing specific portions of the City of Pittsburgh General Obligation Debt (specified or to be specified in the next 6 months)
b. Purchasing on the secondary market specific portions of the City of Pittsburgh General Obligation Debt (specified or to be specified in the next 6 months)
c. Paying principal and interest on specific portions of the City of Pittsburgh General Obligation Debt (specified or to be specified in the next 6 months)
3. The exact number of dollars to be transferred into the account and on what date
4. The specification of the investment restrictions (the investment of these dollars will be consistent with the City’s investment policy, that they are near liquid, etc) and details as to how the proceeds from investments will be used
5. The specification of the financial agent’s fees and expenses and how they will be covered and reported
6. The requirement of the quarterly reporting (probably in the Act 47 report) of the activity of the fund I look forward to your response.
Sincerely,
From: Patrick Dowd
cc: Members of the Intergovernmental Cooperation Authority
Members of City Council
John Blake, DCED
Fred Reddig, DCED
Luke Ravenstahl, Mayor
Yarone Zober, Chief of Staff
==Links==
Original letter link posted at Google Documents. 
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