Map of Pennsylvania highlighting Luzerne County (Photo credit: Wikipedia)
WILKES-BARRE. PA — Mayor Tom Leighton is touting the city’s new “positive outlook” rating from a national credit rating company, and representatives of a local bond broker and financial services company say the city has reason to celebrate.
Standard & Poor’s Rating Services revised its outlook on the city’s outstanding general obligation bonds from A- negative to A- positive, according to a recently released S&P report.
It’s noteworthy, the mayor says, because “it saves taxpayers hundreds of thousands of dollars and allows us the flexibility to invest in our city, improve our infrastructure and create jobs for our citizens.”
Pete Shelp, a certified financial planner at Janney Montgomery Scott, a stock and bond brokerage and financial services firm in Kingston, said Thursday a higher credit rating could save the city considerable cash.
Map of Pennsylvania highlighting Lackawanna County (Photo credit: Wikipedia)
With wary banks watching Scranton‘s finances closely, Mayor Chris Doherty today proposed a $130.5 million budget for 2014 that would dramatically raise real estate taxes, the garbage collection fee and parking-meter rates and penalties.
A real estate tax increase of 56.7 percent would be one of the largest, if not the largest, tax hikes ever in the city. A trash collection fee increase of 68.5 percent – from the current $178 a year to $300 a year – would be the largest garbage fee hike ever.
The large spikes are all necessary to close a $20 million operating deficit for 2014 and restore the city’s creditworthiness with lenders, Mr. Doherty said.
A map of Pittsburgh, Pennsylvania with its neighborhoods labeled. For use primarily in the list of Pittsburgh neighborhoods. (Photo credit: Wikipedia)
The credit rating agency Standard & Poor’s has bumped up Pittsburgh’s credit rating three notches to A, a move that could save the city money on future borrowing by improving the city’s credit profile.
The agency cited a number of factors in moving the city’s credit rating up from BBB. First, it said the city’s resilient economy and “deep and diverse economic base” which allowed the city to fare relatively well during the economic downturn. It also cited the presence of two state-appointed oversight boards that have kept close tabs on the city’s budget since the state of Pennsylvania declared it financially distressed nearly a decade ago.
S&P analyst Andrew Teras also cited the city’s debt management, increase in reserves and ability to manage long-term liabilities, like pensions.
The district’s favorable A-plus credit rating achieved by years of good financial management, a Standard and Poor’s rating services report stated, is one reason the district was able to reduce the original 4.36 percent interest rate and obtain the savings.
Market conditions providing 40-year low bond interest rates were another reason.
“The savings are higher than the estimate we had in September,” Business Manager Michelle Krebs said.
According to Moody’s, the new rating reflects the city’s approximately $120.3 million debt as well as “four consecutive operating deficits which have largely been driven by aggressive budgeting of city revenues and reserve appropriations to balance the budget.”
Investors use credit ratings such as Moody’s to determine the risk of a municipality’s defaulting on debt payments. A lower rating can force municipalities to pay higher interest rates to compensate for the risk, increasing the cost of borrowing.
Allentown’s weak socioeconomic profile — a sizable and mature urban tax base with below-average “socioeconomic indices” — and limited financial flexibility are challenges to the city, according to Moody’s.
Fitch says that uncertainty over federal tax and spending policies related to the so-called fiscal cliff “weighs on the near-term economic outlook” and raises the prospect of another recession.
A massive budget showdown could begin after the elections in November and stretch well into next year, despite the threat of the fiscal cliff – $500 billion in impending tax increases and spending cuts.
Fitch also says the burden of government debt on the economy will continue to rise and could hurt growth if an agreement isn’t reached on the deficit.
SCRANTON, PA – The Lackawanna County Court set a hearing date more than a month away on Mayor Chris Doherty’s lawsuit to get his financial recovery plan implemented, effectively increasing pressure on the mayor and city council to resolve the issue through negotiations.
The Aug. 3 court date allows council solicitor Boyd Hughes the legally required time to respond to the city’s lawsuit, a court official said. The suit asks the court to order the mayor’s recovery plan implemented or to order a council vote on it.
But with the city running out of money, facing increasingly impatient creditors and the mayor unilaterally slashing 398 employees’ pay to the federal minimum wage of $7.25 an hour to save money, the far-off court hearing date at least temporarily dashed hopes for a quick resolution.
“It can’t wait until August,” city Councilman Bob McGoff said by telephone after the hearing. “I think what it means is that the mayor and the council president need to get together before Aug. 3.”
The effect of Scranton City Council allowing the Scranton Parking Authority to default on a debt was immediate on Friday, officials said.
The bank that the city had been hoping to get financing from to be able to keep the city afloat this year, M&T Bank, backed out first thing Friday morning because of the default, said Mayor Chris Doherty and city Business Administrator Ryan McGowan.
On Thursday night, council voted against covering a $940,000 SPA debt that was due Friday, thus allowing the authority to default even though the city had backed the debt.
“The city defaulted on the guarantee. This default has left us with nowhere to go,” Mr. McGowan said of the city’s hopes for getting loans.
Editor’s note: No city in Pennsylvania made either list.
According to 24/7 Wall Street the best run city in America is Virginia Beach, VA. This city of 439,172 residents has a Aaa credit rating, a low crime rate, a low poverty rate and 93.1 percent of the adult population have graduated from high school. These among other factors catapulted Virginia Beach to the top of the list. Irvine, CA and Madison, WI rounded out the top three.
On the other end of the spectrum (definitely the list you DO NOT want to be on) is Miami, FL. This city of 400,892 people has a high crime rate, a high poverty rate and a very low percentage of adults who graduated from high school (68.2 percent). Other members of the wall of shame are Detriot, MI, Newark, NJ. and Cleveland, OH.
North Penn taxpayers should be rejoicing today. Their school district refinanced bonds from 2003. By taking advantage of lower interest rates and competition from lenders, the district will save $1,067,000.00! WOW! This savings will be realized in the 2011 & 2012 fiscal years.
Kudos to North Penn officials for planning ahead and being thrifty with taxpayer money during a recession!