English: Senator Bob Casey (D-PA) meets with Pittsburgh Mayor Luke Ravenstahl. (Photo credit: Wikipedia)
After eight years of austerity, the city of Pittsburgh today will argue before a state panel that it has clawed its way to financial recovery and needs fewer mentors looking over its shoulder.
A public hearing on ending the city’s financially distressed status, and disbanding one of its oversight groups, begins at 4 p.m. in the city council chamber.
As of Friday, officials hadn’t decided whether to televise the hearing.
Mayor Luke Ravenstahl and his team will have 20 minutes to argue that establishing a trust fund for retiree health care, improvements to the capital budget process and bond rating upgrades, among other factors, warrant the city’s exit from Act 47, the law that imposes monitoring and financial restrictions on distressed municipalities.
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.
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.
Due to the charges against Jerry Sandusky, a major credit agency is reviewing Penn State’s Aa1 bond rating for a possible downgrade. Moody’s Investors Service stated on Friday they have put Penn State’s bond rating under review due to the damage of the university’s reputation by the child sexual abuse scandal.
Moody’s will assess things like lawsuits brought against the university, enrollment decline, loss of donations and any change in the university’s status with the Commonwealth of Pennsylvania.
Needless to say, this action could negatively impact Penn State and the university’s ability to recover from the scandal. Penn State is a major employer in Pennsylvania. According to Wikipedia,”The university is now the largest in Pennsylvania, and in 2003, it was credited with having the second-largest impact on the state economy of any organization, generating an economic effect of over $17 billion on a budget of $2.5 billion.”