Philadelphia last week announced that due to a state budget impasse, the city will not pay its vendors until Pennsylvania legislators pass a fiscal 2010 budget and approve two initiatives that would help the city balance its own budget.

Along with delaying its payments to vendors and suppliers, Philadelphia may need to postpone a borrowing that would help the city with its liquidity.

"Without legislative action very soon, the city will be unable to complete a routine cash-flow borrowing at an affordable rate as it normally does each year," according to a press release.

Philadelphia is waiting for Pennsylvania lawmakers to approve a temporary sales tax increase in the city to 8% from 7% and pass a measure that would allow the city to delay a portion of its pension contributions in fiscal 2010 and 2011.

Without those measures, Philadelphia will need to cut an additional $256 million from its fiscal 2010 budget. The state-level budget stalemate has forced the city to seek alternative solutions.

"I have made repeated trips to Harrisburg over the last several weeks and I know that lawmakers are working hard to pass a fair and balanced budget," Mayor Michael Nutter said in a press release. "That said, the delay in the state budget process is severely impacting the city's cash flow and we have no option but to take these difficult steps."

House members Friday were set to vote on H. 1416, which is a spending plan that does not include revenues and tax collections.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.