Scranton, Pa., Plan Envisions Rating Agencies' Return

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Unrated Scranton, Pa., is taking steps to regain the good graces of the capital markets, said its mayor and business administrator.

"We're trying to open the lines of communication with the rating agencies to the point where we can probably begin that discussion sometime next year," business administrator David Bulzoni told reporters on a conference call on Monday.

Scranton, the 76,000-population seat of Lackawanna County in northeast Pennsylvania, has been working to restore its credit reputation since the City Council defaulted on a $1 million, city-guaranteed parking authority bond payment in June 2012. The city has since repaid the debt.

The city's last bond rating, a junk-level BB-minus from Standard & Poor's, was withdrawn at Scranton's request in 2011.

"We're in much better shape than a year ago," Mayor William Courtright told reporters on a conference call Monday. Courtright last year laid out a three-year plan in conjunction with consultants HJA Strategies of Hackensack, N.J., and Public Financial Management of Philadelphia.

Courtright's proposed $132.2 million budget for fiscal 2016 is before the City Council, which is expected to vote on the spending plan Dec. 3. It calls for a 5.7% property tax increase, down slightly from the anticipated 6%. The three-year plan called for tax hikes of roughly 18% for fiscal 2015 followed by 6 percent for each of the following two years.

Scranton still faces a debt that the Pennsylvania Economy League, its coordinator under the state-sponsored Act 47 workout program for distressed communities, has estimated at $1.6 million.

"The capital markets, when they look at Scranton, will look at how well they implement their recovery plan," William Rhodes, the public finance chairman at Philadelphia law firm Ballard Spahr LLP, said in July.

The budget is a bridge toward financial stability in the city, said Bulzoni, who plans to leave early next month to return to private banking. He came on board when Courtright, a former city tax collector and local businessman, took office in January 2014.

"We've taken some significant steps to improve the city's perception in the capital markets," said Bulzoni. "We've applied millage to debt service and we took care of debt that was defaulted. We've taken in a financial advisor of note in PFM, and HJA has provided some excellent guidance.

"And we're working on significant asset monetizations."

Scranton two months ago chose 501(c)(3) nonprofit National Development Council to run its parking garages and meters under a 40-year public-private partnership lease agreement designed to eliminate most related city-guaranteed debt. City officials are also exploring a sale of the sewer system.

Scranton is also working to control its chronic pension underfunding. State Auditor General Eugene DePasquale has categorized the city's pension funds as "severely distressed" and even warned that Scranton without a fix could go bankrupt in two years.

A DePasquale audit released in June said that unauthorized double-pension payouts helped dropped the city's funding level from 78% to 23% over the last decade.

City Solicitor Jason Shrive said Monday that city and union officials are discussing the pension funding problem.

"It's a mandatory subject of collective bargaining," he said. "We are working our hardest to reform the pension system. Further than that, I can't comment at this point."

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