FBI Probe Won’t Slow Scranton’s Exit From Financial Distress Designation
SCRANTON — An FBI investigation that included January raids of Scranton Mayor Bill Courtright’s home and his City Hall office won’t prevent the city from achieving a successful exit from state Act 47 financial oversight later this year, officials said.
Designated as financially distressed under state Act 47 since 1992, Scranton has made a financial turnaround with Courtright at the helm since 2014. The city’s Act 47 recovery coordinator, Pennsylvania Economy League, has been planning since last summer to give a green light for the city to finally shed the distressed label at some point later this year.
On Jan. 9, the FBI executed search warrants at the mayor’s office and his West Mountain home. Courtright’s private attorney, Paul Walker, has said they believe the investigation relates to campaign finance and that the mayor denies any wrongdoing. Courtright previously said he’s not resigning because of the FBI matter.
At city council’s meeting last week, resident Joan Hodowanitz asked whether the FBI probe would derail the city’s anticipated exit from Act 47 oversight.
“I can’t believe that PEL could say with a straight face it has no impact” on the city’s recovery, she said.
PEL Executive Director Gerald Cross said the FBI matter won’t delay the city’s Act 47 exit.
“No. Why would it?” Cross said in a phone interview Thursday. “The city’s financial recovery is a series of actions that have been taken and as long as they are continued to maintain revenue and contain legacy costs, there’s no reason the city can’t continue on the path it’s on.”
Courtright referred a request for comment to city solicitor Jessica Eskra.
“Obviously, we can’t predict the future. But absolutely our goal is to safeguard the financial stability we’ve built up over the last several years and continue our plan to exit distressed status,” Eskra said.
The FBI matter also has come across the radar of credit ratings firm Standard & Poor’s, which graded Scranton’s creditworthiness in bond issuances in 2016-17, city Business Administrator David Bulzoni said in interviews last week.
Standard & Poor’s has an annual conference call scheduled for today with Bulzoni and city financial consulting firm PFM Financial Advisors.
In advance of the conference call, S&P asked a few questions, including whether city recovery is on track, if more debt is on the horizon and whether city officials could provide any additional information about the FBI situation involving the mayor, Bulzoni said.
S&P asking about the FBI probe did not surprise Bulzoni, who noted he does not have any additional information to provide.
Credit ratings affect how much interest a municipality pays when it borrows money. A higher credit rating reflects financial stability and translates into lower interest rates. A lower credit rating — or worse, no rating at all — reflects distress or uncertainty and translates into higher interest rates.
The city lost an investment-grade rating several years ago, during a time of worsening fiscal distress. Debt incurred in a 2012-13 post-default environment did not have any credit rating and came with high interest rates.
In 2016, Standard & Poor’s rated a city long-term bond issuance as “BB,” two notches below the start of investment-grade ratings but better than not having any credit rating.
In 2017, S&P elevated the city’s bond rating one notch to BB+, Bulzoni said.
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