Jeannette faces another hurdle in trying to generate cash
The City of Jeannette has run into a roadblock trying to refinance a bond issue to generate cash and may have to undertake another bond deal to pay some pressing liabilities and avoid falling under state oversight, said the city's lawyer.
Scott Avolio said Jeannette may have to look at alternatives to refinancing the 1998 bond.
“I can't say it hit a snag,” he said. “We're looking at alternatives of issuing another bond. We're a little bit behind schedule.”
The city issued $2.9 million in bonds and is seeking to refinance them so it can raise enough revenue through savings to pay a $235,000 judgment to a Jeannette businessman who won a lawsuit against the city and about $200,000 remaining on its 2012 contribution to the police pension fund, he said.
If a municipality or school district borrows money through the bond market when interest rates are high, it usually refinances when interest rates decline, allowing it to save money on interest payments. Raising cash, Avolio said, is critical to meeting the city's liabilities.
“At this point ... it's one of the necessary components to deal with unfunded liabilities,” he said. “Without it, we will remain under some kind of cloud.”
The bond issue matures in 2024. The city would like to extend the maturity date by three years but Avolio said that may not be possible.
Jeannette could borrow by issuing a general-obligation bond to take advantage of low-interest rates. A general-obligation bond is secured by a municipality's taxing power.
“If this restructuring doesn't go through, there's a limited number of options that the city is looking at and one of those options is Act 47,” Avolio said.
Council will discuss its options during a meeting Wednesday at 6 p.m. in city hall.
Act 47 is the Pennsylvania Distressed Municipalities Act. Financially ailing cities are placed under state oversight, which could last for years until the city is able to return to sound financial footing. Jeannette is being advised by a state consultant.
Jeannette faces a mandatory 2013 pension payment of about $547,000 and will have to repay a $350,000 loan it took out earlier this year to cover city expenses until real estate tax revenue started coming in.
The city has been scraping to raise additional revenue to meet its bills.
It briefly considered, then rejected, a plan to try to sell the city's municipal authority to Westmoreland County when members of the city authority balked at being disbanded.
It is planning to sell some assets and is more aggressive in going after deadbeat taxpayers and residents with garbage bills.
Richard Gazarik is a staff writer for Trib Total Media. He can be reached at 724-830-6292 or at email@example.com.