Financially distressed Scranton, Pa., received $14.7 million through a private placement Thursday with Janney Capital Markets.
The issuance consists of $9.75 million in Series 2012C general obligation bonds and $4.91 of Series 2013A general obligation notes. The larger amount will cover court-approved unfunded debt, while the smaller series will refund a portion of 2013 debt service on Series 2003 bonds.
Scranton, the 76,000-population seat of Lackawanna County in northeastern Pennsylvania, had struggled to access the capital markets since its City Council on June 1 let the Scranton Parking Authority default on a $1 million bond payment — a step toward dismantling the authority — although the council restored the funds later that month.
In early July, Mayor Chris Doherty paid city workers the federal minimum wage during a cash crunch.
“I think Scranton’s come a long way. I think it’s a very good story," said Tom Henson, Janney’s head of public finance. “The problem in the summer was that whole thing with the parking authority. Scranton has always lined up to meet its obligations.”
Janney Capital Markets is a division of Philadelphia’s Janney Montgomery Scott.
In conjunction with authorizing the $9.75 million of debt, the Lackawanna County Court of Common Pleas also authorized a real estate tax increase to be imposed annually at a sufficient level above the current levy to meet the debt service requirement on the Series 2012C bonds.
On Monday, a three-judge panel of the Lackawanna Court will consider a petition by city officials to implement a 1% commuter tax. A split vote among the judges is possible. A further increase in real estate taxes would cover revenue shortfalls, should the court not allow the commuter tax or should Pennsylvania’s General Assembly not enact a countywide sales tax.
Doherty has proposed a $110 million spending plan — a 29% increase — for fiscal 2013. The council is expected to give the budget a second reading next Thursday and consider adopting it on Dec. 13.
The city’s revised recovery plan, which Doherty and the council updated in August, identified new revenues to fund the 2013 debt service on the Series 2012C bonds, These funds will be deposited into the debt service reserve fund with the paying agent in January.
Scranton has belonged to the state-sponsored distressed communities program, known commonly as Act 47, since 1992.
Henson called Scranton’s level of borrowing “fairly modest” compared with cities of similar size. He also praised Doherty and the City Council for mending their political differences, collaborating on a new recovery plan and an overhaul of the Scranton Parking Authority, and resolving to avoid bankruptcy.
Henson also cited $100 million in expansion and construction commitments from Danville, Pa.-based Geisinger Health System. “You have other people coming in, too, with economic development projects,” he said.