City gets bump up in credit rating
Tax-anticipation loan not so tough a sell for city this time.
Scranton received a good grade from a credit-ratings firm on an upcoming $12.75 million short-term loan, city Business Administrator David Bulzoni said.
Standard & Poor’s rating of a city tax-anticipation note for 2017 as “SP2,” an investment-grade rating, represents an improvement in such ratings for the city and its recovery efforts, he said.
“It’s even more favorable than I expected,” Mr. Bulzoni said. “It’s certainly a step in the right direction.”
Credit ratings impact how much interest a municipality pays when it borrows money.
A higher credit rating reflects financial stability and translates into lower interest rates.
A lower credit rating — or worse, no rating at all — reflects distress or uncertainty, and translates into higher interest rates.
The city lost an investment-grade rating several years ago, during a time of worsening fiscal distress. Debt incurred in a 2012-13 post-default environment did not have any credit rating and came with high interest rates.
In June, Standard & Poor’s rated a city bond issuance as “BB,” a relatively middling or low grade, two notches below the start of investment-grade ratings but better than not having any credit rating.
Short-term TANs repaid within a calendar year typically may garner a higher credit rating than a larger, long-term debt issuance, Mr. Bulzoni said.
Regarding the 2017 TAN to be secured through bonds, the city stressed the “airtight” nature of a TAN and cited an improving recovery to eliminate any perceived credit risk, he said.
The Standard & Poor’s rating for the 2017 TAN said in part, “We base the rating on our opinion of the city’s general creditworthiness.”
“Generally, this (a TAN) is a very safe transaction, with very limited risks for investors,” Mr. Bulzoni said. “Finally, that argument had stuck.” Contact the writer: email@example.com @jlockwoodTT on Twitter