SEC Case Against Harrisburg Falls Short For Exempting Finance Pros, Some Say

Seal of the U.S. Securities and Exchange Commission. (Photo credit: Wikipedia)

HARRISBURG, PA – No one answered the phone or the door at former Mayor Steve Reed’s home Tuesday nearly 24 hours after the U.S. Securities and Exchange Commission announced a settlement with Pennsylvania’s capital city over fraud charges rooted in activity during his administration.

Some public finance and securities experts saw the settlement – dubbed “toothless” by one – as a warning to municipalities that consequences await them if investors are misled by false or incomplete financial statements from local governments.

Others, however, criticized SEC for failing to hold the city’s hired advisers to account.

“Reed ran the city, (current Mayor Linda) Thompson (is running) the city,” said Mark Schwartz, a former bond lawyer who previously represented Harrisburg City Council on its ultimately rejected bankruptcy petition. “There is a ‘buck stops there’ liability for (city leaders), but the people who do the work are bond lawyers.  These are bonds that never should have been issued.  Reed cannot issue bonds on his own.  Professionals were abysmal in terms of fulfilling their responsibilities to investors and they have gotten off scot-free.  They’ve made millions.”

Read more:  http://www.pennlive.com/midstate/index.ssf/2013/05/fsec_case_against_harrisburg_l.html#incart_m-rpt-1

Scranton’s Parking-Garage Rates Won’t Decrease; Chamber Seeks Parking Input

As Scranton leaders are considering increasing hours, days and rates of downtown parking meters, some business owners want to see the city’s parking-garage rates reduced.

However, the court-appointed receiver in charge of the garages and their rates, Mike Washo, said he has no plans to lower garage rates, because a reduction would drain revenue from the authority and further burden city taxpayers to fund any shortfall that may arise from reduced rates.

“We don’t believe that any reduction in parking garage rates at this time will generate additional customers to justify the reduction in rates,” Mr. Washo said. “At the end of the day, we’ll end up with less revenue.”

In recent weeks, a plan by Scranton’s mayor and city council to hire a private firm, Standard Parking, to manage the city’s on-street parking meters has raised numerous questions and concerns among downtown businesses, residents and council members.  Citing Standard Parking’s estimates, council members think the city can net an additional $1.8 million a year by switching parking-meter management from the inactive Scranton Parking Authority to Standard Parking.  Under this plan, which was tabled Feb. 7 by council, meter hours would extend from 8 a.m. to 6 p.m. Monday through Friday to 8 a.m. to 8 p.m. Monday through Saturday.  Ten-hour meters also would increase from $1 an hour to $1.50 an hour.

Read more:  http://thetimes-tribune.com/news/scranton-s-parking-garage-rates-won-t-decrease-chamber-seeks-parking-input-1.1444474

Courtright Announces Candidacy For Scranton Mayor

The hundreds of supporters entering the front door at the Keyser Valley Community Center on Sunday to see Democrat Bill Courtright formally announce his campaign for mayor of Scranton received smiles and handshakes from the candidate himself.

Bruce Springsteen’s “Glory Days” played in the background as Mr. Courtright focused on themes of “returning the luster” and reaching out to the people of his hometown – a place of staggering municipal debt and significant skepticism about city leadership.

The city’s current tax collector and a former city councilman, Mr. Courtright, 55, of 126 Ridgeview Drive, said he will bring commitment, competence and character to City Hall.

Without going into a lot of detail, he also offered insights into his immediate priorities if elected mayor, calling for an in-depth analysis of the city’s finances and plans to create a panel of community leaders to help solve the city’s problems.

Read more:  http://thetimes-tribune.com/news/courtright-announces-candidacy-for-scranton-mayor-1.1435709

Chris Kelly: How Can Scranton Find A Talented Mayor For $50G?

Editor’s note:  And sometimes people are grossly overpaid and get lousy results, but we won’t name any names.  And sometimes you do a national search for qualified candidates (that was funded by tax dollars), offer a huge salary to attract the cream of the crop and then STILL give the job to your best pal with almost no hands-on experience.

HELP WANTED: CEO for financially distressed 146-year-old limited partnership drowning in long-term debt and enough past-due bills to choke a goat.  Successful applicant will be responsible for managing the needs, wants, safety and endless complaints of 74,000 customers while juggling chronic deficits, anemic revenues, suffocating union contracts and crippling legacy costs using a business model that hasn’t evolved since the advent of indoor plumbing.  ANNUAL SALARY: $50,000.  Seriously.  That is not a typo.

Mayor Chris Doherty’s recent announcement that he will not seek a fourth term as the CEO of Scranton was as anticlimactic as the average January sunset – bleak blue beams bleeding into blackness.  Anyone with a calendar saw it coming.

Eleven years into Mr. Doherty’s reign, the Electric City remains powered more by wishful thinking than objective reality.  More than 20 years after it blundered into the roach motel that is the state’s Act 47 Distressed Cities Recovery program, Scranton is still stuck.  Mr. Doherty promised escape from distressed status by the end of his first term.  He failed, but he had a lot of help.

Read more:   http://thetimes-tribune.com/opinion/editorials-columns/christopher-j-kelly/chris-kelly-how-can-scranton-find-a-talented-mayor-for-50g-1.1428801

Scranton School Board Passes Budget With No Tax Increase

Map of Pennsylvania highlighting Lackawanna County (Photo credit: Wikipedia)

Scranton residents will see one tax bill stay the same for 2013.

The Scranton School Board on Thursday night unanimously approved a $120.4 million budget that calls for no tax increase.

With a city tax increase of about 25 percent and a 4 percent increase in Lackawanna County taxes, Scranton school directors said they wanted to give residents a break.

Directors had been looking at a tax increase of 1.35 percent, but with interest rates for tax anticipation notes coming in lower than expected, finding additional health care savings and using $1.18 million in capital improvement money to pay down debt, officials balanced the budget.

Read more:  http://thetimes-tribune.com/news/scranton-school-board-passes-budget-with-no-tax-increase-1.1422154

Allentown’s Bond Rating Downgraded To A3 With A Negative Outlook

English: City of Allentown from east side (Photo credit: Wikipedia)

Allentown‘s bond rating has been downgraded from A2 to A3 with a negative outlook, Moody’s Investors Service announced this week.

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.

Read more: http://www.mcall.com/news/local/allentown/mc-allentown-pa-bond-rating-downgrade-moodys-20121012,0,5203322.story

A More Simplified Way Of Explaining The U.S. Economy/Debt‏

Editor’s note:  This came in my email today and I liked the comparison between the home budget versus the national budget.  I don’t know anybody who would run their household budget the way our government runs the national budget.  I think this applies across the aisle!

This rather brilliantly cuts thru all the political doublespeak we get.  It puts it into a much better perspective.

Lesson # 1:
* U.S. Tax revenue: $2,170,000,000,000
* Fed budget: $3,820,000,000,000
* New debt: $ 1,650,000,000,000
* National debt: $14,271,000,000,000
* Recent budget cuts: $ 38,500,000,000

Let’s now remove 8 zeros and pretend it’s a household budget:
* Annual family income: $21,700
* Money the family spent: $38,200
* New debt on the credit card: $16,500
* Outstanding balance on the credit card: $142,710
* Total budget cuts so far: $3.85

Got It ?????

OK, now Lesson # 2:

Here’s another way to look at the Debt Ceiling:

Let’s say, you come home from work and find there has been a sewer backup in your neighborhood….and your home has sewage all the way up to your ceilings.

What do you think you should do ……

Raise the ceilings, or pump out the crap?

Reading School District Debt Called Near Its Limit

Map of Berks County, Pennsylvania, United States Public School Districts (Photo credit: Wikipedia)

The financial picture for the Reading School District isn’t pretty.

That news should come as no surprise as the district is fresh off a rough budget process that saw dozens of employees laid off and five schools closed.

But exactly where the district stands may not have been crystal clear.

That’s why the business office put together a special presentation this week to fill the Reading School Board in on the district’s financial trends.

Read more: http://readingeagle.com/article.aspx?id=412937

Fitch Ratings Keeps US At Top ‘AAA’ Credit Rating

WASHINGTON — Fitch Ratings has retained the U.S. at its top ‘AAA‘ credit rating but also left the outlook negative, citing the failure of Congress and the Obama administration to forge an agreement on reducing the budget deficit.

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.

Read more here:http://www.centredaily.com/2012/07/10/3257350/fitch-ratings-keeps-us-at-top.html#storylink=cpy

Bank Yanks Loan Offer To Scranton After City Council Allows Parking Authority To Default

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.

Read more: http://thetimes-tribune.com/news/bank-yanks-loan-offer-to-scranton-after-council-allows-parking-authority-to-default-1.1324183

Moody’s Withdraws Lackawanna County’s Bond Rating

Image via Wikipedia

More than six months after Lackawanna County asked Moody’s Investors Service to withdraw its bond rating, the rating agency has complied.

It is what happened in the interim that the county hoped to avoid.

In the past 12 weeks, the county has borrowed $21 million to clear its books of unfunded debt, including repayment of last year’s tax anticipation loan; increased property taxes 38 percent to balance its 2012 budget; and completed the overdue audit of its 2010 finances.

But all of that financial housekeeping came too late for Moody’s, which quietly withdrew its rating on the county’s $202.7 million in outstanding general obligation bonds two weeks ago after downgrading the debt to the equivalent of junk status back in September.

Read more: http://thetimes-tribune.com/news/moody-s-withdraws-lackawanna-county-s-bond-rating-1.1270446#ixzz1m6HXW5GI

York-Based Bon-Ton Store’s Bonds Being Shunned By Investors

Investors are shunning Bon-Ton Stores Inc.‘s bonds – a bad sign for the York-based department store chain with seven stores in the Lehigh Valley.

In contrast, other retailers have recently gained from rising consumer confidence in the U.S.

Bon-Ton’s $480 million of 10.25 percent notes due in March 2014 lost 2.8 percent last month, the worst performance of any bonds in the Bank of America Merrill Lynch U.S. High Yield Super Retail Index, which climbed 1.7 percent overall. Moody’s Investors Service put its Caa1 rating for the securities on “negative outlook” on Dec. 1, citing the company’s “persistent underperformance.”

Read more: http://www.mcall.com/business/mc-allentown-bontton-20120103,0,3027398.story

Corbett Signs Legislation To Allow Harrisburg Financial Takeover

Image via Wikipedia

Pennsylvania Governor Tom Corbett has signed legislation that will allow a state takeover of Harrisburg’s financial affairs. The capital of Pennsylvania is drowning in debt from a failed retrofit of the city’s incinerator.  Harrisburg is over $300 million in debt. 

Harrisburg was accepted into the Act 47 Program for financially distressed municipalities but City Council failed to authorize the recommendations made by the Act 47 team.  Neither was the city able to come up their own plan to emerge from certain bankruptcy.  

Disgusted with the inability of city leadership to move forward, Pennsylvania State Senator Jeff Piccola introduced legistion to allow the Commonwealth of Pennsylvania to take control of Harrisburg’s finances.  This legislation was signed by the governor this morning.

Harrisburg Mayor Linda Thompson’s Recovery Plan Gets Cool Reception From City Council

Harrisburg, Pa – It may be a difficult road ahead for Harrisburg’s latest financial recovery plan, as several council members tonight voiced significant concerns over Mayor Linda Thompson’s Act 47 alternative.

 

Councilman Brad Koplinski complained that the mayor did not explore the potential of implementing a 1 percent, county-wide sales tax, nor did her plan include any concessions from bond insurer AGM…

 

To read the rest of the article and other coverage of Harrisburg’s Act 47 status, click here:

http://www.theburgnews.com/

 

 

Investors Come Forward With Harrisburg Incinerator And Parking Deals

Image via Wikipedia

A new player has entered the “who wants the Harrisburg incinerator” sweepstakes while the Lancaster County Solid Waste Authority ups their ante.

New York investor Jacob Frydman has offered a deal that includes leasing the incinerator and the city’s parking system.  Frydman and company are mainly interested in the parking system.  They are offering a deal that would net Harrisburg $240 million.  Of course this means parking rates and trash rates will instantly increase as somebody has to shoulder the debt and the investor needs to show a profit.

The Lancaster County Solid Waste Authority has upped their offer to $124 million and would increase tipping fees for county residents while reducing fees for city residents, who pay much more.  The goal would be to have city and county residents paying the same for trash service in twenty years.  Lancaster has no interest in the parking system.

The Act 47 team will also have a plan for the incinerator debt as well.  They may suggest an entirely different scenario than either of these two proposals.

Borders Bookstores File For Chapter 11 Bankruptcy Protection

Image via Wikipedia

Borders filed for Chapter 11 bankruptcy protection at the U.S. Bankruptcy Court in New York on Wednesday.

Borders is hemorrhaging cash at the rate of $2 million dollars a day from underperforming stores.  Borders intends to close 200 of its 642 stores nationwide.  The closures will come in the next few weeks.  Clearance sales could start as early as this weekend.

Borders will receive $505 million in debtor-in-possession financing from GE Capital Partners and others to help with the reorganization.  Borders owes over $100 million to various publishers.  Book sales nationwide fell 5 percent in 2010.  Borders controls 14.3 percent of the book selling market.  Barnes & Noble, on the other hand, controls 29.8 percent of the market which is helping them survive the economic downturn.

Borders has been in business since 1971, when it started out with one used bookstore in Ann Arbor, Michigan.  Borders was owned by Kmart Corp. from 1992 until 2006.  Borders committed a fatal error when it opted out of their e-commerce contract with Amazon.com in 2001.  This decision made it possible for Barnes & Noble to eventually double Borders market share.