News

October 7, 2008

County faces battle to borrow

Plea in court for permission to borrow almost $16 million meets with resistance.

By Jennifer Learn-Andes jandes@timesleader.com
Luzerne County Reporter
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When Luzerne County commissioners went to court to borrow $17 million for debt in 2004, the proceeding lasted a half hour, if that, before the request was granted by Judge Michael Conahan.

Not this time. County Court of Common Pleas Judge Ann Lokuta announced Monday she would hold a full “evidentiary hearing” on the county’s request to borrow $15.9 million for the 2008 deficit.

Ten county managers testified for more than four hours Monday, describing a multitude of public safety and criminal justice services that couldn’t be provided if the request is not granted.

Lokuta continued the hearing to 11:15 a.m. today.

To allow unfunded debt loans, a judge must determine that tax revenue came up short and overspending and shortfalls could not be foreseen, according to the Local Government Unit Debt Act. The county must also prove that failing to pay the debt would be dangerous to “public health, safety or education.”

Property owners Walter Griffith and Ed Chesnovitch represented taxpayers pro se, or without legal representation, during Monday’s hearing. The men challenged and cross examined the county’s witnesses.

County Budget/Finance Chief Tom Pribula said the county will be out of cash by mid-November.

He said the deficit stemmed from the discovery that $10.5 million in expenditures was not in the 2008 budget, including pension fund subsidies and commitments to Luzerne County Community College and 911. Unrealistic property tax revenue, land sale and debt restructuring projections added to the problem, he said.

County Human Resources Director Doug Richards said he spoke with union leaders, and they said workers couldn’t be expected to show up for work without pay.

The county employs 1,500 union and 450 non-union workers, he said.

Even if non-union employees agreed to work without compensation, the skeleton crew couldn’t cover mandated services, department heads testified.

Their testimony painted a picture of disaster, including potential lost lives and lawsuits from citizens involved in the criminal justice system who feel their civil rights were violated.

Lokuta kept asking if the county has a back-up plan in case permission for the borrowing request is denied.

County Solicitor Vito DeLuca, who represented the county along with Jim Blaum, said county officials had called an Oct. 3 meeting with department heads to come up with a plan, but the focus changed because it became clear that the county could not “slash enough” to cover payroll, heat and utilities.

Instead, the meeting focused on preparing testimony for Monday’s hearing, several department heads said.

Griffith said the county has been borrowing money to cover deficits for years, and granting permission for another loan “rewards them for bad behavior.” He said the county uses the same argument every year, that public health and safety will be jeopardized. He called it a “scare tactic.”

Chesnovitch said he “heard the same story last year” when county officials threatened a shutdown after former Wilkes-Barre resident Tim Grier challenged county bond borrowing, but the county still survived.

“I beg the court not to grant this request,” he said.

Though last year’s threatened shutdown occurred before his county employment, Pribula said the county avoided mass layoffs by borrowing from other county agencies. Those agencies don’t have the same financial resources this year, he said. Even if they did, the county would have to figure out how to repay the agencies at the start of 2009, repeating another cycle of debt, he said.

The county still owes about $10 million in debt repayments, and defaulting would ruin the county’s credit, he said.

Griffith said property owners have to suffer bad credit ratings when they can’t pay their bills, and he thinks the county should be forced to deal with the same ramification.

Pribula said the $15.9 million would cost the county about $1.85 million per year, for 10 years, factoring in about $4 million in interest over the life of the loan.

By law, the county has the ability to borrow up to $460 million, and county debt would climb to $316 million with the new loan, he said.

The following other department heads testified Monday: Prison Warden Gene Fischi; First Assistant District Attorney Jeff Tokach; Sheriff Michael Savokinas; Probation Services Director Larry Saba; interim 911 Coordinator Edward Casaldi; Chief Public Defender Basil Russin; county Engineer Joe Gibbons; and Emergency Management Agency Coordinator Stephen Bekanich.

Commissioner Chairwoman Maryanne Petrilla, who sat through the hearings, said she is “not happy” about seeking permission to borrow $16 million, saying it is “the last thing I want to do.”

Petrilla said she and other county officials have been attending staff meetings for seven months, delivering the message that money is tight and that department heads should try to keep spending under-budget.

Preparations for the 2009 budget are under way, and the spending plan will include a “major cutback” in staff, she said.

“We have to make major cuts. It’s a reality. We can’t keep borrowing money year after year,” she said.

Petrilla said she believes some departments are overstaffed and will have to receive reductions, though she declined to specify them at this time.

She also took issue with Griffith’s contention that the county is using “scare tactics” to convince the court to allow the borrowing.

“The last thing I would do is scare people, particularly the hard-working employees,” Petrilla said. “The reality is, we need $16 million to get through the end of the year.”

Petrilla and Commissioner Stephen A. Urban voted to seek court approval to borrow the money, blaming the 2008 budget passed by Commissioner Greg Skrepenak and former Commissioner Rose Tucker. Skrepenak voted against the borrowing and said Petrilla could have reopened the budget when she became a commissioner in January.

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