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Luzerne County government currently owes $316 million in debt repayments, including interest, through 2029.
A proposed restructuring would balloon that debt by up to $68 million, to a maximum $383.9 million for the same time period, documents show.
But County Manager C. David Pedri stressed Monday the restructuring would be scrapped if the final figures ended up that high. The maximum projections are required by law, but in no way represent what the county is planning, he noted.
The county’s financial adviser, Harrisburg-based Public Financial Management (PFM), would not recommend such a deal, and it wouldn’t be signed by the county manager or council chair, Pedri insisted. His proposal has promised the restructuring would yield savings or have no negative impact on debt repayments.
“Of course we wouldn’t agree if it’s not in the best interest of the county. We won’t hurt the county’s position,” Pedri said.
Without concrete numbers, the public and officials are at a loss to evaluate the proposal.
PFM representative Scott Shearer is expected to present more likely estimates of the restructuring’s impact on the debt at Tuesday’s council meeting, Pedri said.
As evidence of the difference between projections and actual amounts, county Budget/Finance Division Head Brian Swetz said the county’s 2015 restructuring initially was tallied at $166.7 million and ended up at approximately $125 million.
The administration is asking council to vote Tuesday to introduce two ordinances restructuring five bonds dating to 2005, 2008 and 2009. A public hearing must be held at a future date, tentatively planned for Aug. 22, if the ordinance receives at least four of 11 votes as required for introduction.
‘We are healthy’
The restructuring was pursued in light of the county’s recent credit rating boost.
County officials held a media conference in the courthouse Monday to herald the rating as a sign of fiscal recovery.
Standard & Poor’s announced Friday it has increased the county’s rating from BB+ to BBB-, moving the county from a speculative to investment-grade position. The agency also changed the county’s outlook from negative to stable.
Pedri said he welcomes the positive development, a divergence from frequent “doom and gloom.”
“Finally, Luzerne County is being recognized for its hard work,” Pedri said, describing S&P as a very tough critic. “It means that we are healthy, and we are getting healthier.”
He credited the work of county employees; job growth at the Hanover Industrial Estates in Hanover Township and elsewhere; two years of on-time audits containing surpluses; the recent receipt of $4 million from settling baseball franchise litigation with Lackawanna County; and county council’s approval of solid budgets.
Council Chairwoman Linda McClosky Houck was pleased to help celebrate and acknowledge a county success. She said she has worked with council colleagues since the customized home rule government took effect in January 2012 to address fiscal problems and stop “kicking the can down the road.”
“We’ve made difficult and contentious decisions, but we have worked to make some progress in the county, and it’s very gratifying to see an agency like S&P recognize that progress,” she said.
The rating helps bond buyers weigh the stability of potential county investments without the protection of county-purchased bond insurance.
S&P cited the county’s improved budgeting practices and structural reforms since the agency downgraded the county rating in November 2015. S&P also pointed to the hiring of Pedri as county manager, council’s repeal of a homestead tax break that reduced the county’s real estate tax receipts, and the adoption of a structurally balanced 2017 budget.
Energy savings
Kingston resident Brian Shiner, who attended the announcement with two other citizens, viewed the upgrade as encouraging. However, he has reservations about the restructuring package and its possible detrimental increase in overall debt.
According to newly issued reports, the county’s annual debt repayments currently hover around $26 million through 2028 and then decrease to $3.9 million in 2029, the final year.
In comparison, the worst-case scenario for restructuring indicates the annual payments would be $24 million in 2017, range from $30.5 million to $33.7 million from 2018 through 2027, drop to $26.7 million in 2028 and close out at $14 million in 2029.
Pedri said there would be some increase in payments because the proposed restructuring absorbs the $7.9 million cost of suggested energy-efficiency improvements. A guaranteed savings of $12.9 million over 20 years will cover this increase, he said.
The energy-savings figure was tallied by the McClure Company, which has an office in Wilkes-Barre. The company is recommending a range of lighting upgrades; “building envelope” improvements to windows and other exterior features for improved thermal comfort; mechanical insulation; plumbing upgrades and other work. That includes a new central heating system for the courthouse to allow abandonment of old and deteriorating underground piping that is part of a steam tunnel system with the Water Street prison.