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WILKES-BARRE — The city’s financial advisor Thursday night presented a series of options on restructuring bonds and borrowing $5.5 million to pay for the Solomon Creek wall repairs as a way to buy time to deal with the larger financial issues.
City council members listened as Scott Shearer, of PFM Financial Advisors LLC, returned for the special session with additional information on dealing with rising debt service payments and with portions of the crumbling walls along the creek in South Wilkes-Barre.
But Shearer, managing director with PFM in Harrisburg, warned council, Mayor Tony George and the few department heads in attendance that the proposed alternatives were a small part of what has to be done to address the big picture problems of looming multi-million dollar deficits.
“I don’t want anyone to think that is the end all, be all that’s going to solve the city’s problems. It’s not. It’s going to help,” Shearer said.
The city contributed $15,000 and secured a $60,000 state grant to pay for PFM to guide it through the state’s Early Intervention Plan for struggling municipalities and avoid the designation of a distressed city under Act 47.
In his initial appearance last week, Shearer discussed a package deal to fund the infrastructure work and make it more manageable for the city to pay back $86.2 million in existing debt.
His proposal, however, increased the overall total to $126.8 million as it extended the debt service by three years to 2039 and set a more manageable running rate of $5.7 million in annual payments, down from the more than $7 million the city owed over a 10-year period. The deal included a maximum interest rate of 6.5 percent compared to an average of 4.25 percent for the bonds to be restructured.
The $2 million the city would have paid at the higher running rate could help with its cash flow and be applied to other expenses than the debt service, Shearer pointed out.
Council tabled a vote on that proposal and asked for alternatives.
Shearer retooled the initial proposal to factor in the lower estimated cost of the wall repairs. The cost dropped by $1 million and in turn trimmed $2 million from the overall 21-year payment schedule to a total of $124.7 million.
He also presented a plan that only borrowed for the wall repairs. The debt service increased from $86.2 million to $95.3 million over the term that ended in 2036.
The other options included the issuing of new money for the repairs and varied in the amount of debt restructured:
• 35 percent restructured, debt service increased to $111.8 million
• 20 percent restructured, debt service increased to $101.9 million
The final alternative proposed restructuring 50 percent of the debt in two parts, 5 percent for two years until 2036 and then the remaining 45 percent until 2039. In both cases, the debt service would be over $120 million.
PFM looked at a number of different options and presented the ones that had the most merit, Shearer said.
“This is one that is, based on the timing of the Solomon Wall project, based on where interest rates are right now, we felt it was good to come before council at this stage for your consideration,” Shearer said of the why the initial proposal was made.
Council members took no action on the new plans and asked for more time to review them. They likely won’t put it up for a vote at next week’s regularly scheduled meeting.
The lack of action further delays the much-needed repairs, said city Administrator Ted Wampole.
He acknowledged that council was given a lot of information to digest in one sitting.
“I was kind of hoping they would take action next week,” Wampole said. “I think the picture is really clear.”
