The Times-Tribune

City receives lower interest rate on $12.75M loan

- STAFF WRITER BY JIM LOCKWOOD

Scranton received a lowerthan-usual interest rate on a short-term $12.75 million loan obtained Monday, city Business Administra­tor David Bulzoni said.

Bonds issued by the city to fund the tax anticipati­on note for 2017 had an interest rate of 2.5 percent, or nearly half the percentage interest rate paid by the city for a similar loan a year ago, he said. The city secured a lower interest rate, despite the Federal Reserve’s recent rate hike, he added.

The lower interest rate partly stems from the city last week receiving a good grade from a credit ratings firm for the 2017 TAN, he said.

Standard & Poor’s rating of the tax anticipati­on note for 2017 as “SP2,” an investment-grade rating, represente­d an improvemen­t in such ratings for the city and its recovery efforts, Mr. Bulzoni said.

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, none at all — reflects distress or uncertaint­y and translates into higher interest rates.

The city lost an investment­grade rating several years ago, during a time of worsening fiscal distress, and that led to high interest rates on borrowing.

Improvemen­t came gradually. 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.

The 2017 tax anticipati­on note also was “oversubscr­ibed,” meaning it generated strong interest from investors, he said. Those included two who each wanted to buy all of the bonds and a third who wanted to purchase $2 million of the total, Mr. Bulzoni said.

“So, we split it, to sell components to each of them,” he said.

“We’re very pleased. It certainly is a very measurable reduction from this year’s TAN,” Mr. Bulzoni said. “Any time you can reduce the interest rate, it lowers your debt cost.” Contact the writer: jlockwood@timesshamr­ock.com, @jlockwoodT­T on Twitter

 ??  ?? BULZONI Business administra­tor said lower interest rate stems from good credit rating for 2017 tax anticipati­on note
BULZONI Business administra­tor said lower interest rate stems from good credit rating for 2017 tax anticipati­on note

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