http://thetimes-tribune.com/news/parking-authority-city-obligation-to-spa-debt-about-2m-a-year-1.1349633
Parking authority: City obligation to SPA debt about $2M a year
Published: July 28, 2012
Not only can't the Scranton Parking Authority pay back the city's $1 million bond bailout, it will need roughly $2 million from city coffers annually to cover debt payments, the parking authority solicitor said.
City council on Thursday passed a resolution demanding repayment of the $1 million the city spent last month to cover an authority bond payment. Council's initial refusal to cover the payment led to a default on authority bonds guaranteed by the city and added to the city's credit and cash crunch. The council later reversed itself and made the payment.
Authority solicitor Joseph O'Brien, in a June 21 letter to city council obtained by The Times-Tribune on Friday, offered a rough sketch of authority finances - one that depicts an agency far from able to cover its own debt.
The authority takes in about $3 million a year in revenue. Operating expenses claims about $1.2 million of that. After other nonoperating expenses, the authority will have about $1.5 million to pay toward its debt, Mr. O'Brien said.
With $3.4 million of bond payments annually, that leaves the city holding the bag for about $2 million a year for the foreseeable future, Mr. O'Brien said. According to the June 21 letter, the authority will need to pay more than $3 million in bond payments until 2039.
The bonds funded the construction and renovations of several downtown parking garages, such as the Casey, Medallion and Connell garages.
Under municipal authority law, the sponsoring entity, in this case the city, guarantees authority debt. For that reason, Mr. O'Brien depicts the authority bonds as city debt.
"This is an obligation of the city," Mr. O'Brien said. "The city is obligated to pay it. If the city doesn't make payments, the trustees and bondholders go after the city, not the authority."
City council has thundered about what it called an "excess" of $1 million in an authority bond reserve fund discovered after covering authority debt. That money is at the core of the demand for repayment in city council's resolution Thursday.
But Mr. O'Brien said those funds are required to be kept on hand in an amount at least equal to a year of bond payments. The money can only be used to pay bonds. Those funds are all invested - the excess money is actually returns on investment - mostly in the fund supporting the 2007 bonds. The money was invested in Guaranteed Investment Contracts, for which valued soared over the last three years because of the low-interest rate environment and shaky equities market.
Council can't get that money, Mr. O'Brien said, but it can be used in the Dec. 14 payment of $813,000 for the 2007 bonds.
The next debt due date for the authority is Sept. 15 for $558,000 on the 2004 bonds and $410,000 on the 2006 bonds. City council President Janet Evans said the council would not cover any more authority debt until there is a change in management at the authority.
The authority expects an internal financial report next week that will include how much money they have to make the September payments - and how much the city will have to take up.
The authority is under increased scrutiny from fidgety bond insurers, who Mr. O'Brien says are trying to figure out what, if any, remedy there is for the recent default. Also, city council has begun scrutinizing authority expenses, recently filing a Right to Know Law request for expenses on the authority credit card.
At Thursday's meeting, city council President Janet Evans read through a list of expenses on the card, including at restaurants, and noted that authority executive director Robert Scopelliti receives a stipend to cover expenses. Councilman Pat Rogan asked that the information be turned over to state authorities. When contacted, Mr. Scopelliti declined to comment.
Mr. O'Brien dismissed council's insinuations, noting the authority cut employees, salaries and expenses and that revenue is stable and improving.
"The authority also provides Mr. Scopelliti with a desk," Mr. O'Brien said, mocking the council inquiry. "The city has a $25 million hole and they are worried about who paid for lunch."
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http://thetimes-tribune.com/news/city-officials-hammer-out-revised-recovery-plan-with-33-percent-tax-increase-1.1349607
City officials hammer out revised recovery plan with 33 percent tax increase
Published: July 28, 2012
A proposed revised recovery plan that would increase Scranton property taxes 33 percent over three years could mark an end to the city's credit crisis, with a vote on the plan by city council as early as next week.
A marathon meeting Friday between administration officials and city council members resulted in a recovery plan dispatched immediately to state Department of Community and Economic Development and the Pennsylvania Economy League, city officials said. The plan will open the door to $2.2 million of funding from the state, and, more important, is expected to give banks confidence to lend to the city.
Earlier this month, DCED offered the city a $2 million, no-interest loan and $250,000 grant if council and the mayor could end their months-long stalemate and agree to a recovery plan by Aug. 1 and approve it by Aug. 15.
Mayor Chris Doherty, city council President Janet Evans, Councilman Frank Joyce, and former city business administrator Stu Renda, who volunteered his time in the absence of city business administrator Ryan McGowan, met through the morning, hammering out the details of the plan.
If DCED and the PEL find the plan acceptable, it will go on the city council agenda next week. By late Friday afternoon, PEL Executive Director Gerry Cross said he had just begun looking at the revised plan. PEL will judge the plan based on the reasonableness of projections and the balance of revenue and expenditures.
Mrs. Evans said the plan would increase city property taxes by about one-third over three years with city taxpayers looking at an increase of 12 percent in 2013, 8 percent in 2014, and 10 percent in 2015. With the median city property tax bill at $353 this year, a 12 percent tax hike in 2012 would be a $42 increase. That brings the tax bill to $395, from which an 8 percent tax hike in 2014 would add $32, bringing the bill to $427. Then, a 10 percent increase in 2015 would add $43, for a bill of $470. Over the three years, that's a $117 increase, or 33 percent.
In May, Mr. Doherty proposed a revised recovery plan with a tax increase of 78 percent, or $275, over three years.
Mr. Doherty refrained from commenting on the details of the new plan and it's unclear how the new plan makes up for the lack in revenue he originally proposed.
Mr. Joyce said department budgets will be cut and uniformed officers - police and fire - will remain at current staffing levels. Also, the plan called for no change in the garbage fee, he said.
When lenders withdrew their support from the city in the wake of a default on Scranton Parking Authority bonds, Scranton was sent into a financial crisis, forcing the mayor to cut salaries for city employees to minimum wage for one pay period. But the credit crunch brought adversaries to the table.
Mrs. Evans said both sides worked diligently toward a resolution for the benefit of taxpayers.
While Mr. Doherty lauded the spirit of cooperation in working on the plan, he stopped short of declaring a detente between himself and the city council super majority led by Mrs. Evans. "We worked together to get through this and I hope we can continue," he said. "We are elected to lead this city and move it forward."
Mrs. Evans said she would have a public hearing on the plan. She did not have a specific date.
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