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Time runs short as Jeannette seeks to restructure debt

By Richard Gazarik and Kristie Linden
Friday, Aug. 16, 2013, 12:01 a.m.
 

Jeannette is running out of time to obtain a loan to restructure its debts and could face another budget deficit by year's end, solicitor Scott Avolio said.

Jeannette has been trying to avoid protection through Act 47, which allows financially ailing cities to be managed by a state-appointed overseer.

City officials want to restructure debt through a general obligation bond after learning they will not be able to refinance a bond issue to raise money.

A general obligation bond is a common venue for local government to borrow money. The bonds are backed by a municipality's power to dedicate tax revenue or increase taxes to pay bondholders. Jeannette has reached the limit it can raise taxes under the Third Class City Code. Any future increases would require court approval.

The city faces other financial pressure in the form of a court-ordered judgment to pay Jeannette businessman Frank Trigona and his attorney, Robert Lightcap, $271,000 in damages and fees after losing a lawsuit. A county judge ordered the city to pay the award even if it requires raising taxes.

The city hasn't paid, and Lightcap may seek to hold the city in contempt of court, Avolio said.

“If we don't pay, the way to enforce it is to seek an order of contempt,” he said.

Avolio said if Lightcap seeks a contempt citation, Jeannette would have no recourse but to seek protection through municipal bankruptcy or Act 47. By filing for bankruptcy, an automatic stay is imposed, preventing creditors from seeking payment for debts.

Avolio said if Jeannette is forced to pay Trigona, it may not have money at year's end to meet the payroll or pay bills and likely would default again on mandatory contributions to the police pension fund.

Councilman Bill Bedont, who oversees the budget, said council planned to pay the remaining $164,000 pension payment for 2012 this month but will withhold the payment until the Trigona issue is settled.

The city is waiting for several “legal matters” to be resolved before paying Trigona, Bedont said, because a final figure hasn't been determined. But the city will be able to make the payment, he said.

“We still have the financial means to meet the (Trigona) obligation,” Bedont said. “I still fully expect to get (the bond restructured). I'm not hearing anything negative (regarding the bond).”

Richard Gazarik is a staff writer for Trib Total Media. He can be reached at 724-830-6292 or at rgazarik@tribweb.com.

 

 
 


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