Scranton, Pa., made a full, on-time payment to its pension system in what local officials consider another step to restoring credit-worthiness.
According to Mayor William Courtright, the unrated city's $9.3 million minimum municipal obligation payment Wednesday into the police, fire and non-uniform funds was one day before the state-imposed deadline and its first timely pension payment "in a number of years."
"We still have a lot of work to do, but this marks a significant step forward for the city," said Courtright.
Scranton received $3 million in state aid in September to cover the balance.
City business administrator David Bulzoni said the capital markets should view the pension payment favorably.
"We want to eliminate as many red flags as possible, and certainly a large red flag is not making your MMO payment," Bulzoni said in an interview. In addition, Scranton saved thousands of dollars by avoiding an 8% penalty.
"Even if it's a few days late, the penalty is based on a full year," said Bulzoni.
That happened last year, when Scranton could only pay $5.3 million of the $9.1 million it owed by Dec. 31, and received a nearly $300,000 levy based on a full year's worth of interest on the unpaid amount.
Scranton expects to secure a further $3.1 million in state aid for 2016 to help offset a $14.4 million MMO payment, Bulzoni added.
The city has also been exploring a sale of its sewer system and a leasing of its parking assets.
In early December the Scranton Sewer Authority held a public hearing about a plan to sell or lease the system that serves Scranton and neighboring Dunmore.
City officials in September 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.
Scranton, the 76,000-population seat of Lackawanna County in northeast Pennsylvania and the setting for the U.S. television show "The Office," 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.
Its last bond rating, a junk-level BB-minus from Standard & Poor's, was withdrawn at Scranton's request in 2011. Bulzoni said last month that the city hopes to communicate in 2016 with rating agencies about restoration.
Bulzoni said other positive moves include accurate budgeting and applying millage to debt service.
The Pennsylvania Economy League, Scranton's coordinator in the state's Act 47 workout program for distressed communities, said the on-time pension payment reflects efforts to produce revenue and restrain expenses.
"This timely payment continues the city's progress toward stability and is certainly a positive step in restoring the city's fiscal credibility," Gerald Cross, executive director of Wilkes-Barre based PEL, said in a statement.
State Auditor General Eugene DePasquale in June called the city's pension funds "severely distressed" and warned that Scranton without a remedy could go bankrupt within 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.
