You don’t need a finance degree, or a deep understanding of the alphabet soup of credit ratings, to know that it’s not too shabby to receive a designation of “A-.”
And if someone says your outlook for the future has been revised from “negative” to “positive,” well, that also has a nice ring to it.
So, Wilkes-Barre Mayor Tom Leighton legitimately has something to crow about when he points to recent action by the Standard & Poor’s Rating Services, which looked favorably on the city’s financial situation and bumped up its assessment a notch — ultimately allowing the city to save lots of money.
The administration should be well pleased with this result, first announced in November and amplified by Leighton at a recent city council meeting, as it reflects years of hard work and discipline during unfavorable economic conditions nationally and locally.
For city residents, the news conceivably means more of their tax dollars can be spent on services, or saved, rather than paying the interest on previously borrowed sums. For others in Luzerne County, it shows the importance of establishing and maintaining a respectable credit rating — something the county council should make an immediate priority after its vote last week to increase 2014 property taxes by 8 percent.
Luzerne County carries a massive debt from bygone years of nearly $380 million, including principal and interest, which isn’t scheduled to be fully repaid until 2027. In the next year alone, taxpayers are on the hook for $27 million in debt repayment. That’s crushing.
Refinancing the terms of this borrowed money, in hopes of decreasing payments, isn’t an option yet. The 11-person county council and county manager must show strong financial stewardship, and create a cash reserve, before national ratings agencies take a look at the books, much less issue a rating.
Meanwhile, the city of Wilkes-Barre, which is saddled with about $74 million in debt, plans to immediately benefit from its newly revised status. By obtaining a lower rate of 3.77 percent, down from 4.88 percent, on a series of bonds, the city can save about $461,000 over the next 13 years, the mayor said.
Likewise, for short-term borrowing that involves something called a TRAN, or tax revenue anticipation note, the city received a more favorable quote of 1.68 percent for next year, down from this year’s 1.88 percent.
From the perspective of investors, the S&P’s “A” rating for a municipality such as Wilkes-Barre signals it has “a strong capacity to meet financial commitments, but somewhat susceptible to adverse economic conditions and changes in circumstances.”
From Leighton’s perspective, it’s validation of his efforts and key to creating new opportunities. “It saves taxpayers hundreds of thousands of dollars,” he said, “and allows us the flexibility to invest in our city, improve our infrastructure and create jobs for our citizens.”
No one needs to decipher that message for you: It’s good news.