Scranton Parking Could Default on Several Counts
The Scranton, Pa., City Council agreed Thursday to reconsider covering a $1 million debt payment to the Scranton Parking Authority, which is now in default.
But council solicitor Boyd Hughes, reading notices of default from bond trustee Bank of New York Mellon and bond insurer Radian Asset Assurance Inc., said a takeover of the SPA could occur within 30 days because the agency has defaulted on four other counts.
They include failure to submit an independent audit and an annual budget of facilities prepared by a consulting engineer, failing to keep financial records separate from city records and have the city controller certify them in an annual audit, and failing to have an engineer perform an annual review of the physical status of the facilities.
“The requirements under the trust agreement, the Parking Authority hardly ever complied with,” Hughes said. “Now if they don’t do it, within 29 days of today, the event of default will become a default and at that point the trustee and the insurance company can come in and get a receiver appointed and take over the facilities and run them.”
The council will discuss the debt payment further at next Thursday’s regular meeting.
Scranton resident Gary Lewis, a possible City Council candidate next year, said nondisclosure could trigger a technical default of $300 million of debt overall.
“The SPA is a big part of the city’s operations, but they’ve been operating on their own little nexus,” said Lewis, a consultant with financial advisory firm Deloitte.
Messages seeking comment were left with Parking Authority executive director Robert Scopelliti, and with Radian,
Scranton, the seat of Lackawanna County in northeast Pennsylvania, has $156 million of debt outstanding. It also owes an estimated $95 million to its grants administration arm, the Office of Economic and Community Development, and the state, as well as roughly $50 million to other parties, including a settlement to retired firefighters under a state Supreme Court ruling.
Lewis also said nondisclosure puts the city in violation of a Municipal Securities Rulemaking Board stipulation that it comply with Securities and Exchange Commission requirements.
“As of today, both the city and the authority have failed to appropriately disclose the SPA default as well as required annual audits,” Lewis told the council.
Hughes also said that the SPA’s need for a bailout was a material change that prompted M&T Bank to back out of a $16 million loan agreement the city needs to balance its budget.
According to Hughes, M&T was the only bank interested in floating bonds for that expense.
The city, part of the state’s Act 47 program for distressed communities for 20 years, must also revise its recovery plan to attract banks, but a council motion Thursday to bring it to a full vote ended in a 2-to-2 stalemate.
The fifth member, president Janet Evans, was unable to attend the meeting.