The Pennsylvania Intergovernmental Cooperation Authority (PICA) demanded the agreement as one of two conditions for borrowing the estimated $170 million the city needs to continue operating beyond November.
The power to borrow money for the city is the authority's biggest lever. A Council member involved in the negotiations over the new agreement said the mayor who ignored PICA's advice on a contract or expenditure would run the risk of antagonizing the agency to the point of withholding money needed by the city.
The second condition, a five-year financial plan that is acceptable to the authority, is being drafted by the Goode administration and is expected to be finished within the next 10 days.
Neither condition was included in the state legislation that created the authority earlier this year to provide the debt-ridden city access to the
financial markets. The law gave the agency broad oversight powers highlighted by the ability to refuse to borrow money on the city's behalf.
But members of PICA have insisted upon the conditions as a way to exert greater pressure on city officials to spend within their means.
"It wasn't an attempt to wrench power from them or anything like that," John J. Egan Jr., a member of the authority, said yesterday. "We just thought it was important to be able to stop problems before they happened as opposed to reacting to them."
"I don't think anybody was bullied on this," said Councilman Brian J. O'Neill Jr., who represented Council Republicans in the negotiations. "But the authority wanted things spelled out, and for the most part, they got them spelled out."
O'Neill said the agreement gives the authority the kinds of powers necessary "to help get our finances back under control."
He added that a mayor could ignore the authority's advice on a contract or expenditure only at his own peril.
City officials, including members of the Goode administration and Councilman John F. Street, had balked at the authority's demands, contending that the agency was reaching for powers beyond its scope. They maintained that the agency's insistence that it be alerted to financial decisions in advance could undermine the mayor's authority.
Mayor Goode declined to comment yesterday, saying it would be inappropriate to discuss the agreement before Council members had a chance to review it.
Democratic mayoral candidate Edward G. Rendell Jr. said through a spokesman that he had "no problem" with the requirement that a mayor notify the authority before entering into large contracts.
Rendell "plans on making such fundamental changes in the government that he would expect the authority to be standing on the sidelines applauding him as opposed to interfering in what he was trying to do," the spokesman said.
The Republican mayoral contender, Joseph M. Egan, said it was ''unfortunate" that the city's chief executive would have to relinquish such a power. He added that it was a result of "a generation of fake budgets by Democratic administrations that cost the city its credibility."
Under the agreement, hammered out late Thursday and yesterday, the city must give the authority advance notice of proposed contract settlements with employee unions. The city also would be required to show how these proposed contracts would affect the city budget.
The arrangement stops short of making the authority an actual party to the negotiations between the city and unions representing city employees. But the effect would be to give the agency a strong voice in those negotiations.
In addition, the city would be obligated to alert the authority to expenditures of $1 million or more, with a projection of the impact they would have on the budget.
Another concession granted by the city requires the mayor to provide the greatest assistance possible in the authority's efforts to obtain financial and other information from city departments and quasi-city agencies. That would enable the authority to perform audits and other performance reviews.
If introduced as scheduled today, the proposed agreement could be formally approved by Council within two weeks.