Today marks another significant milestone in the City of Scranton’s financial recovery.
Credit rating agency S&P Global announced that for the first time in 12 years, the City of Scranton’s credit rating has been raised to investment grade. The City’s rating went from ‘BB+’ to ‘BBB-/Positive.’ The City has not had an investment grade rating since September 30, 2011. For a period of almost five years, from October 2011 to June 2016, the City had no credit rating.
Highlighted in its report, S&P noted continued improvement in its liquidity position and balanced financial operations without reliance on federal stimulus money, general fund surpluses in the last three audited years due to conservative budgeting and cost reductions, and the City’s reduction of its annual Tax and Revenue Anticipation Notes from $10 million in 2022 to $4.9 million in 2023.
S&P also cited the City’s continued improvement of the City’s reduction in debt principal and the elimination of outstanding variable-rate debt, along with the City’s efforts to reduce its long-term pension and healthcare costs.
Economically, S&P noted that while the City’s manufacturing sector needs improvement, the local services sector has remained steady. S&P noted the City’s above-average concentration of employment in hospitals, nursing homes, and social services as well as the momentum of new residents into the City seeking affordability and opportunity to build businesses here.
Going forward, S&P noted that the sizeable, fixed city costs, including legacy costs, need to continue to be addressed. S&P also noted that they will be monitoring the City’s ability to contain costs due to inflation and a tight labor market. If the City continues to demonstrate structural balance over the next two years, improve its liquidity position, and continue to contain costs, S&P stated they may raise the rating.
The City exited Act 47 Distressed Status in January of 2022 after following a road to recovery that involved monetization of assets, refunding and defeasing variable and high-interest debt, successful resolution of litigation, and increased efficiency and control over revenues and expenditures. Building upon these efforts, we have implemented strategic reforms and policies to prevent the City from repeating fiscal mistakes, which have proven successful.
“S&P’s rating supports what we’ve known all along: that the City of Scranton is worth investing in,” said Mayor Paige G. Cognetti. “In addition to the positive financial implications of this rating upgrade, it is gratifying to have our ratings agency recognize our hard work and Scranton’s positive momentum. While we still have work to do to maintain this rating and continue our recovery, Scranton taxpayers can rest assured that the City is heading in the right fiscal direction.”
Last modified: June 8, 2023