Luzerne County government owes about $436 million in outstanding debt through 2027 and can‚??t do anything to refinance without a credit rating, a financial adviser told county council Tuesday.
The figure includes $293 million in principal and $143 million in interest and fees.
The county could reduce payments on ‚??multiple‚?Ě past bond packages by obtaining an investment grade credit rating, said Scott Shearer, of Harrisburg-based Public Financial Management, or PFM, which has provided financial recovery assistance to the county for several years.
The refinancing of two bond packages from 1997 and 1998 alone would save $1.5 million, he said.
The rating also could allow release of some or all of a $6 million reserve fund required by insurers for a 2008 bond.
Shearer advised county officials to take the following steps to obtain a rating:
‚?Ę End the year with a balanced budget or surplus.
‚?Ę Adopt a ‚??realistic and sustainable‚?Ě budget for 2013.
‚?Ę Show progress implementing home rule reforms.
‚?Ę Prepare a multiyear plan proving the county will stay within budget.
‚?Ę Improve financial accounting required by audits.
The county is on the hook for $26.5 million this year for debt repayment. Payments will increase from $27.6 million to $27.9 million annually through 2026, wrapping up with a $22.3 million payment in 2027, Shearer said.
County Manager Robert Lawton said the administration is unraveling the ‚??spider web of transactions‚?Ě using borrowed funds to publicly explain how the money was spent.
For example, the county borrowed a combined $71 million in 2004, 2005, 2008 and 2009 solely to fund deficits and operating expenses, records show.
Lawton told council past county officials twice obtained cash for operating expenses with an unusual financing mechanism involving county owned Moon Lake Park in Plymouth Township.
The park was ‚??leased‚?Ě to the Luzerne County Industrial Development Authority on paper. The authority borrowed funds to give the county money to cover the imaginary lease, and the county repaid the bond with interest to ‚??sublease‚?Ě it back.
‚??That‚??s the legacy that‚??s been handed down to the council and staff and taxpayers,‚?Ě Lawton said.
He said the county has few capital improvements to show for the $27 million bill that must be paid the next 15 years. He used the word ‚??binge‚?Ě to describe much of the past spending of borrowed funds.
Roughly $20 million of the debt must be repaid by the state for improvements at Luzerne County Community College, he noted.
Councilwoman Elaine Maddon Curry said the presentation is a ‚??testament‚?Ě for the county‚??s switch to home rule government.
‚??What a mess,‚?Ě she said.
Council Chairman Jim Bobeck thanked Shearer and the administration for presenting the ‚??terrifying facts‚?Ě in a ‚??calm tone.‚?Ě
The county has about $21.5 million of borrowed funds left for future capital projects, officials said.
Council members also discussed options for county tax collection Tuesday.
Under home rule, council has the power to stop using 69 elected tax collectors or reduce their pay. The tax collectors are paid $3.50 per bill.
Hanover Township tax collector Mildred Luba told council members she will present a petition from more than 3,000 constituents who want to keep tax collectors.
Luba‚??s husband, Len, said the elected tax collectors have an average collection rate of 92.65 percent for county taxes. The collection rate is 90 percent in the three cities where collection is handled by the county, he said.
County Treasurer‚??s Office Manager/Tax Administrator Laura Beers estimated the county could save several hundred thousand dollars handling the service in-house.
Council members said they need more research and discussion before voting on the matter.
The council meeting continued past 11 p.m.