http://watchdog.org/115443/moodys-warns-bankruptcy-scranton-city-faces-20-million-budget-gap/
Moody’s warns of bankruptcy in Scranton as city faces $20 million budget gap
By Eric Boehm | PA Independent
Scranton could be headed towards another fiscal crisis like the one that resulted in city workers having their pay cut to minimum wage in 2012, according to a major credit ratings agency.
GOING BUST: Scranton could default or face bankruptcy before the end of the year, if the city doesn’t close a $20 million budget gap, Moody’s warned Friday.
In a weekly publication, Moody’s warned investors that Scranton could be facing the threat of default or bankruptcy thanks to a $20 million budget gap for the fiscal year that begins Jan. 1. The city is supposed to approve a new budget by Nov. 15, which would have to close that deficit to balance the budget.
Without a balanced budget, the ratings agency warned that two financial institutions could withdraw from scheduled debt financing for the beleaguered northeastern Pennsylvania city.
“The resulting liquidity squeeze would leave the city with few options to meet its financial obligations, raising the threat of default or bankruptcy,” warned Moody’s analysts.
A similar crisis hit the city in July 2012, which lead to Mayor Chris Dohertycutting all city workers’ pay to minimum wage for several weeks, a move that made national headlines.
“A second liquidity crisis could have more severe effects, including additional defaults,” Moody’s warned.
Doherty is the current mayor of Scranton, but didn’t seek re-election this year and will step down from the post at the end of the year. City tax collector Bill Cortwright, a Democrat, was elected mayor Tuesday with 55 percent of the vote, beating Republican nominee Jim Mulligan.
Neither Doherty nor Cortwright returned calls Friday.
Scranton has more than $195 million in outstanding debt, according to Moody’s.
The city has been enrolled in the state’s Act 47 program for financially-struggling municipalities since 1992. A new state-approved recovery plan was put in effect in August 2012, following the last fiscal crisis.
To generate revenue necessary to address its debt, Scranton has considered taxing commuters and alcoholic drinks, though neither has been approved by the city council.
The Pennsylvania Economy League, which is overseeing Scranton’s Act 47 recovery plan, warned last month the city would have to raise taxes to avoid a default at the beginning of the 2014 fiscal year.
“The ability to provide sufficient revenue for the 2014 budget is crucial to meet employee, vendor and creditor obligations, to avoid a repeat of the 2012 cash flow crisis and to provide necessary and vital services to Scranton residents and businesses,” wrote Gerald Cross, executive director of the PEL, in a letter to Doherty and Janet Evans, city council president.
Moody’s said the state’s Act 47 recovery plan hasn’t done enough to help cities like Scranton escape their financial troubles. Lawmakers in Harrisburg have been eyeing changes to Act 47 for some time, but have been unable to reach consensus on what changes are needed.
Adding to Scranton’s financial woes is the need to borrow another $28 million to pay a court-mandated settlement with the city’s police and firefighter unions.
Scranton also faces more than $100 million in unfunded pension debt, on top of the $195 million in other debt owed.
http://www.bloomberg.com/news/2013-11-08/pennsylvania-s-scranton-risks-default-on-gap-moody-s-says-1-.html
Pennsylvania’s Scranton Risks Default on Gap, Moody’s Says
By Brian Chappatta - Nov 8, 2013 2:04 PM ET
Scranton, Pennsylvania’s sixth-most populous city, risks defaulting on its obligations if it can’t close a $20 million budget gap for next year, Moody’s Investors Service said.
The city of about 76,000 residents faces a Nov. 15 deadline to introduce a spending plan for the year beginning Jan. 1. Without closing that shortfall, Janney Montgomery Scott and Amalgamated Bank will probably withdraw from planned financing that would give the municipality positive operating cash flow, Moody’s said in a report today.
Without that funding, “the resulting liquidity squeeze would leave the city with few options to meet its financial obligations, raising the threat of default or bankruptcy,” Michael D’Arcy, a Moody’s analyst, wrote.
Scranton, about 120 miles (193 kilometers) northwest of New York, faced a similar issue in June 2012 when city council refused to pay almost $1 million on parking-authority bonds, causing the agency to default. The debt was guaranteed by the city. Another crisis “could have more severe effects,” Moody’s said.
The city, which is in Pennsylvania’s program for distressed localities, has $195 million of long-term debt, including about $77 million of fixed-rate general obligations and $49.5 million of the guaranteed parking securities, according to Moody’s.
Scranton unlimited-tax general-obligation bonds maturing in September 2028 traded Nov. 4 at an average yield of 6.14 percent, or 2.76 percentage points more than benchmark munis, data compiled by Bloomberg show. That’s the widest spread since Sept. 19.
Delayed Statements
The city said in a filing last month that it failed to submit its audited financial statements for last year. It said in September the documents would be done by the end of October. It now projects they’ll be completed by Nov. 30.
Janney was scheduled to underwrite a Scranton bond sale this year that was subsequently delayed, and has made its participation contingent on a balanced 2014 budget, according to Moody’s. Amalgamated is the only bidder for a note sale scheduled for January, the ratings company said.
A voice-mail left with Scranton’s business administration department wasn’t immediately returned.
Keith Pilkington, a spokesman for New York-based Amalgamated, didn’t immediately return an e-mail requesting comment on the report. A voice-mail left with the marketing services department at Philadelphia-based Janney wasn’t returned.
Tuesday, November 12, 2013 2:20 AM
Moody's Warns of Scranton Bankruptcy; Fitch Downgrades Chicago Citing Pension Problems; Liberal Fantasyland
It is truly pathetic watching politicians flop like fish out of water trying to prevent something that was clearly inevitable long ago.
Please consider Moody’s warns of bankruptcy in Scranton as city faces $20 million budget gap.
Please consider Moody’s warns of bankruptcy in Scranton as city faces $20 million budget gap.
Moody’s warned investors that Scranton could be facing the threat of default or bankruptcy thanks to a $20 million budget gap for the fiscal year that begins Jan. 1. Scranton has more than $195 million in outstanding debt, according to Moody’s.Tax Hike is Pure Idiocy
A similar crisis hit the city in July 2012, which lead to Mayor Chris Doherty cutting all city workers’ pay to minimum wage for several weeks, a move that made national headlines.
“A second liquidity crisis could have more severe effects, including additional defaults,” Moody’s warned.
To generate revenue necessary to address its debt, Scranton has considered taxing commuters and alcoholic drinks, though neither has been approved by the city council. The Pennsylvania Economy League, which is overseeing Scranton’s Act 47 recovery plan, warned last month the city would have to raise taxes to avoid a default at the beginning of the 2014 fiscal year.
Scranton also faces more than $100 million in unfunded pension debt, on top of the $195 million in other debt owed.
Adding to Scranton’s financial woes is the need to borrow another $28 million to pay a court-mandated settlement with the city’s police and firefighter unions.
The numbers say everything that needs to be said. It is absolutely impossible for Scranton to dig out of this hole, I do not care how much taxes are raised.
All tax hikes can do is harm more working class citizens for the benefit of undeserving public union workers.
Liberal Fantasyland
Whatever judge awarded the police and fire workers $28 million is an idiot or a genius, depending on his or her intent.
If the intent of the ruling was to make it clear to everyone on the planet that the only solution for Scranton was bankruptcy, then the judge succeeded.
If as I suspect, the judge actually thought police and fire fighters would receive $28 million, then the judge is living in liberal fantasyland.
Fitch Downgrades Chicago Citing Pension Problems
Yahoo!Finance reports Fitch downgrades Chicago bond ratings
Fitch dropped the rating from AA- to A- on $8 billion in general obligation bonds, backed by property taxes.Scranton is several steps deeper in the hole than Chicago, but the problems are quite similar. Neither city can possibly pay pension promises.
It also dropped the rating on $497 million in sales tax bonds — paid for by both the city's local sales tax and its share of the state sales tax. And the rating was downgraded on $200 million in commercial paper notes, financed by a general obligation pledge from any available city fund.
Friday's downgrade stems from "the lack of meaningful solutions" to the city's pension situation. City and fire pension programs have no more than 30 percent of the money needed to cover obligations.
Mike "Mish" Shedlock
https://www.planning.org/news/daily/story.htm?story_id=192050887
( Think this tax base can take higher taxes ? )
Food stamp use explodes, up 75 percent in five years
Citizens' Voice, The (Wilkes-Barre, PA), 2013-11-11
Nov. 11--Food stamp distribution in the Scranton/Wilkes-Barre metro area exploded by 75 percent between 2007 and 2012.
The number of households receiving federal assistance under the Supplemental Nutritional Assistance Program ballooned to 35,256 in 2012 from 20,195 in 2007, Census Bureau data reveal.
SNAP stamp benefits in 2012 went to 14 percent of the residences in Lackawanna County, 17 percent in Luzerne County and 20 percent in Wyoming County. More than 90,300 people in the metro area participate in the food-stamp program, according to federal data cited by U.S. Sen. Bob Casey's office.
"Those numbers are staggering," said Teri Ooms, director of the Institute for Public Policy and Economic Development, a regional research and analysis organization. "This is the eroding of the middle class."
Escalating anti-hunger assistance in the region emerges in an atmosphere of growing hardship. Poverty is rising. The population is aging. Income gains are minimal and food prices are climbing.
"This is a crucial time of need in our community," said Michael Hanley, executive director at United Neighborhood Centers of Northeastern Pennsylvania, which provides programs and services to needy people in six counties. "It is very difficult to be poor. They are playing by the rules, but they still can't make it."
The expansion in food-stamp rolls occurs as benefits were reduced this month after targeted federal economic stimulus funding expired and Congress appears prepared to cut SNAP funding.
Food-stamp benefits averaged $4.28 daily in Pennsylvania in 2012.
"What can you get for $4.28?" Hanley said. "You can hardly get a McDonald's meal for that."
With the stimulus conclusion, maximum individual state monthly benefits dropped on Nov. 1 to $189 from $200. For a family of four, maximum monthly assistance decreased to $632 from $668.
The reductions will eliminate more than $10.1 million annually in metro area SNAP benefits, U.S. Department of Agriculture data show.
As members of Congress consider an extension of the Farm Bill, which funds the SNAP program, Republicans are calling for reductions of up to $40 billion over the next decade and some Democrats seem open to cuts of about $4 billion.
"We don't want to acknowledge that there is a real need out there," Hanley said. "It's a time when we should be bolstering it, not taking away from it. Children are going to be hungry."
During a food distribution on Friday at the Peckville Assembly of God in Blakely, Michael Paluch said the $16 a month in food stamps he receives make putting food on the table a little easier for him.
"I never thought I would be in this situation," said Paluch, 76, a retired industrial worker from Forest City. "Expenses are out of control. It's too much."
Rob Mosser and Beth Kuchak, a couple from Scranton who draw $276 in monthly SNAP benefits, stopped at the Blakely distribution for fresh produce and baked goods.
They worry about the impact of further reductions in benefits.
"We would have to give up a lot because I'm the only one in the house with income," said Mosser, 40, who collects disability benefits resulting from a work-related injury.
Kuchak, 36, said she has been out of work for about a month and does not qualify for unemployment benefits.
"I'm trying to find a job, but there's nothing out there," she said. "We can't even buy Thanksgiving food."
In November 2012, the U.S. Department of Agriculture estimated 83 percent of U.S. food stamp recipients live in poverty. Half of Pennsylvania households receiving SNAP aid in 2012 had at least one child age 18 or younger, 29 percent had a resident age 60 or older and 50 percent had at least one person with a disability.
"The vast majority of people simply do not know who the poor are," said Monsignor Joseph Kelly, secretary of human services for the Diocese of Scranton.
The region has had the state's highest unemployment for 3 1/2 years and limited job opportunities leave many people underemployed. About one in seven workers in the state are jobless, hold part-time positions because they cannot find full-time jobs or are unemployed but want to work.
Federal data point to other factors contributing to increasing regional food stamp use:
n Poverty is rising, with Lackawanna's rate increasing to 14.7 percent in 2012, from 13.5 the prior year, and Luzerne County's rate at 16.4 percent, up from 15.5 percent.
n The population continues to get older. The median age in the metro area in 2010 was 42.2, up from 39.6 in 2000.
n Regional wages, which have trailed state and national averages historically, advanced just 3.7 percent between 2009 and 2011. Average salaries nationally grew by 6 percent over the same period and state wages expanded by 6.4 percent.
n Food costs have risen about 20 percent since 2006.
"A simple thing like a loaf of bread or a gallon of milk has increased exorbitantly," Monsignor Kelly said. "People simply aren't making ends meet."
Food stamp use statewide expanded by the same percentage as the local advanced and the national proportion jumped by 65 percent during the same span. In 2012, 1.8 million residents of Pennsylvania collected $2.77 billion in SNAP assistance. From 2007 to 2012, food stamp distribution increased by 75 percent in Lackawanna County, 69 percent in Luzerne County and 155 percent in Wyoming County.
"Poverty, especially in this region, is huge," Ooms said. "It's scary."
Despite the growth of food stamp distribution and severe stress on the area's food pantry network, many area residents regularly struggle to avoid hunger.
A USDA food-security report issued in September said 17.6 million U.S. households do not have constant access to enough nutrients to maintain a healthy lifestyle. About 630,000 people in Pennsylvania -- 12.3 percent of households -- lack food security, the report concludes.
Regional food instability is higher than the state average, according to federal statistics provided by the Philadelphia Coalition Against Hunger, a nonprofit advocacy group. Fourteen percent of Luzerne County's population confronts food-access challenges, the group reported, and 13 percent of residents of Lackawanna and Wyoming counties face similar scarcity.
Although benefits rolls have swelled since the recession of 2007-09, about 470,000 Pennsylvanians who qualify for food stamps have not applied, according to federal data cited recently by the hunger coalition.
The state has no estimate on the number of people who qualify for food stamps but have not sought aid, said Carey Miller, a spokeswoman for the Department of Public Welfare, which administers Pennsylvania's program.
"If they don't apply, we don't know if they are eligible," she said.
Programs extending the buying power of low-income people, such as food stamps, quickly boost the economy through a spending and respending cycle. Each dollar issued in food stamps generates about $1.74 in spending activity, according to Moody's Analytics, an economic forecasting and consulting company in West Chester.
The number of households receiving federal assistance under the Supplemental Nutritional Assistance Program ballooned to 35,256 in 2012 from 20,195 in 2007, Census Bureau data reveal.
SNAP stamp benefits in 2012 went to 14 percent of the residences in Lackawanna County, 17 percent in Luzerne County and 20 percent in Wyoming County. More than 90,300 people in the metro area participate in the food-stamp program, according to federal data cited by U.S. Sen. Bob Casey's office.
"Those numbers are staggering," said Teri Ooms, director of the Institute for Public Policy and Economic Development, a regional research and analysis organization. "This is the eroding of the middle class."
Escalating anti-hunger assistance in the region emerges in an atmosphere of growing hardship. Poverty is rising. The population is aging. Income gains are minimal and food prices are climbing.
"This is a crucial time of need in our community," said Michael Hanley, executive director at United Neighborhood Centers of Northeastern Pennsylvania, which provides programs and services to needy people in six counties. "It is very difficult to be poor. They are playing by the rules, but they still can't make it."
The expansion in food-stamp rolls occurs as benefits were reduced this month after targeted federal economic stimulus funding expired and Congress appears prepared to cut SNAP funding.
Food-stamp benefits averaged $4.28 daily in Pennsylvania in 2012.
"What can you get for $4.28?" Hanley said. "You can hardly get a McDonald's meal for that."
With the stimulus conclusion, maximum individual state monthly benefits dropped on Nov. 1 to $189 from $200. For a family of four, maximum monthly assistance decreased to $632 from $668.
The reductions will eliminate more than $10.1 million annually in metro area SNAP benefits, U.S. Department of Agriculture data show.
As members of Congress consider an extension of the Farm Bill, which funds the SNAP program, Republicans are calling for reductions of up to $40 billion over the next decade and some Democrats seem open to cuts of about $4 billion.
"We don't want to acknowledge that there is a real need out there," Hanley said. "It's a time when we should be bolstering it, not taking away from it. Children are going to be hungry."
During a food distribution on Friday at the Peckville Assembly of God in Blakely, Michael Paluch said the $16 a month in food stamps he receives make putting food on the table a little easier for him.
"I never thought I would be in this situation," said Paluch, 76, a retired industrial worker from Forest City. "Expenses are out of control. It's too much."
Rob Mosser and Beth Kuchak, a couple from Scranton who draw $276 in monthly SNAP benefits, stopped at the Blakely distribution for fresh produce and baked goods.
They worry about the impact of further reductions in benefits.
"We would have to give up a lot because I'm the only one in the house with income," said Mosser, 40, who collects disability benefits resulting from a work-related injury.
Kuchak, 36, said she has been out of work for about a month and does not qualify for unemployment benefits.
"I'm trying to find a job, but there's nothing out there," she said. "We can't even buy Thanksgiving food."
In November 2012, the U.S. Department of Agriculture estimated 83 percent of U.S. food stamp recipients live in poverty. Half of Pennsylvania households receiving SNAP aid in 2012 had at least one child age 18 or younger, 29 percent had a resident age 60 or older and 50 percent had at least one person with a disability.
"The vast majority of people simply do not know who the poor are," said Monsignor Joseph Kelly, secretary of human services for the Diocese of Scranton.
The region has had the state's highest unemployment for 3 1/2 years and limited job opportunities leave many people underemployed. About one in seven workers in the state are jobless, hold part-time positions because they cannot find full-time jobs or are unemployed but want to work.
Federal data point to other factors contributing to increasing regional food stamp use:
n Poverty is rising, with Lackawanna's rate increasing to 14.7 percent in 2012, from 13.5 the prior year, and Luzerne County's rate at 16.4 percent, up from 15.5 percent.
n The population continues to get older. The median age in the metro area in 2010 was 42.2, up from 39.6 in 2000.
n Regional wages, which have trailed state and national averages historically, advanced just 3.7 percent between 2009 and 2011. Average salaries nationally grew by 6 percent over the same period and state wages expanded by 6.4 percent.
n Food costs have risen about 20 percent since 2006.
"A simple thing like a loaf of bread or a gallon of milk has increased exorbitantly," Monsignor Kelly said. "People simply aren't making ends meet."
Food stamp use statewide expanded by the same percentage as the local advanced and the national proportion jumped by 65 percent during the same span. In 2012, 1.8 million residents of Pennsylvania collected $2.77 billion in SNAP assistance. From 2007 to 2012, food stamp distribution increased by 75 percent in Lackawanna County, 69 percent in Luzerne County and 155 percent in Wyoming County.
"Poverty, especially in this region, is huge," Ooms said. "It's scary."
Despite the growth of food stamp distribution and severe stress on the area's food pantry network, many area residents regularly struggle to avoid hunger.
A USDA food-security report issued in September said 17.6 million U.S. households do not have constant access to enough nutrients to maintain a healthy lifestyle. About 630,000 people in Pennsylvania -- 12.3 percent of households -- lack food security, the report concludes.
Regional food instability is higher than the state average, according to federal statistics provided by the Philadelphia Coalition Against Hunger, a nonprofit advocacy group. Fourteen percent of Luzerne County's population confronts food-access challenges, the group reported, and 13 percent of residents of Lackawanna and Wyoming counties face similar scarcity.
Although benefits rolls have swelled since the recession of 2007-09, about 470,000 Pennsylvanians who qualify for food stamps have not applied, according to federal data cited recently by the hunger coalition.
The state has no estimate on the number of people who qualify for food stamps but have not sought aid, said Carey Miller, a spokeswoman for the Department of Public Welfare, which administers Pennsylvania's program.
"If they don't apply, we don't know if they are eligible," she said.
Programs extending the buying power of low-income people, such as food stamps, quickly boost the economy through a spending and respending cycle. Each dollar issued in food stamps generates about $1.74 in spending activity, according to Moody's Analytics, an economic forecasting and consulting company in West Chester.
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