For the first time in at least 50 years, maybe ever, Pittston has a credit score.
Specifically, it’s a Baa3 stable bond rating from Moody’s Investors Service, and no, it looks nothing like the three-digit number on your Credit Karma dashboard.
While it gives the city another tool in its kit for getting good borrowing rates, it also signals to prospective business developers that Pittston is a safe bet.
In September the city issued $12.4 million in general obligation municipal bonds.
The move consolidates what Mayor Michael Lombardo called a “stained glass window of debt” that comprised “all these little shards of lending” into a single financial instrument. It offers benefits like a single bill and a better interest rate.
With a new bond issue comes a credit score, or bond rating, from Moody’s.
Pittston didn’t receive a particularly excellent rating, but it’s not terrible either. Moody’s says the Baa3 rating reflects a “stable” financial outlook.
In the middle of a pandemic, when businesses and governments struggle to maintain services while tax revenue sinks, “stable” sounds pretty good.
“Clearly, this is not a glowing report at this point,” Lombardo said. “We have a lot of work to do. But what it signifies is a very critical target.”
It’s a major selling point for the city, which remains in a long-running state of revitalization. A stable bond rating tells business owners that roads and other infrastructure, for example emergency services, supporting their shops likely will be maintained properly and that there’s a reliable workforce.
Economic development experts say cities and towns with strong bond ratings should brag about them and often.
“What a lot of people don’t realize is the extent to which the overall financial climate and demographic projections factor into the bond rating agency’s decision-making process,” said Larry Newman, executive director at the Diamond City Partnership, an alliance heading up the downtown revitalization in Wilkes-Barre.
He wasn’t involved in Pittston’s bond issue, but broke down how analysts arrive at their ratings.
“They’re reading newspaper articles, they’re looking at census projections, and they’re essentially reducing all of those complex factors to a specific rating number,” he said.
A bond rating “takes all of these objective and subjective factors and boils them down to a single number.” he said. “That has everything to do with the perceived future of a community.”
Research suggests that businesses do better when municipalities secure financing through bonds, especially when interest rates are near zero, as they are now amid the coronavirus recession, according to a 2017 study by economists from Duke University, the University of Kentucky and the Nova School of Business and Economics in Portugal.
Their research, which studied the effects of Moody’s rating system recalibration a decade ago, also concluded that local governments spend more and private employment increases in towns that issue bonds.
Lackawanna County’s good bond rating was part of former economic development director George Kelly’s pitch when he lured new businesses and developers.
“When you get a good bond rating, it’s kind of like a good bill of health,” he said. “If you can find a municipality with a good footing and a good report card, it’s a good indicator, and a good selling point, too.”
Pittston’s bonds mostly refinance debt from past capital and infrastructure projects. About $2.4 million will cover pension fund obligations. They won’t finance any new capital or infrastructure projects in the city, not directly anyway.
Lombardo estimates that consolidating this way will save the city about $2 million, which can then be pumped into new projects.
Lombardo, who served as a two-term mayor in the late 1990s and early 2000s, then was elected again in 2017, said Pittston never had a bond rating as far as he knows, but he could only speak with certainty for the last 50 years or so.So possibly for the first time, the city is subjected to a higher level of fiscal scrutiny with real consequences if things go sideways.
Lombardo thanked the council and a crack team of City Hall staffers, including city Administrator Joe Moskovitz, former Mayor and current Treasurer Jason Klush, and Redevelopment Authority Executive Director Joseph Chacke for making this symbolic step in the city’s revitalization.
“For a very small municipality, this is a victory for us. I’m very proud,” he said.
Even Moody’s analysts tipped their hats to City Hall, noting that Pittston benefits from the administration’s “formalized policies and practices.”
Lombardo said that the same team is committed to improving their bond rating, though, as Newman points out, sometimes external factors beyond the government’s control can degrade the score.
Pittston relies on earned income taxes and, although the pandemic hasn’t substantially affected collections, the city has a “small tax base with weak wealth indicators and high poverty,” according to Moody’s.
Lombardo does not dismiss the characterization. He isn’t intimidated either.
“We stay on the trajectory we’re on, we will be able to step up to the next level of credit,” he said.
That should be encouraging news to Pittston’s neighbors, because unlike a personal credit score, your neighbor’s bond rating can drag yours down or prop it up.
A 2005 report by the Joint Urban Studies Center, the predecessor for what is now the Institute think tank in Wilkes-Barre, found interdependence when it comes to municipal bond ratings in Luzerne and Lackawanna counties.
The report is 15 years old at this point, but Teri Ooms, the Institutes’s executive director, said the premise holds true, “as there is a recognition that a community is not an island and is part of a larger economic region,” she said. “So what is happening around that community does play a role in the rating.”
Shared infrastructure and amenities, such as the Wilkes-Barre Scranton International Airport and the arena in Wilkes-Barre Twp., stitch towns and counties together. Their citizens cross borders to earn and spend money and get educated.
So now that Pittston’s in the game, it won’t just have its ratings analysts to answer to, any other town in the Scranton/Wilkes-Barre/Hazleton metro that wants to issue bonds will be paying attention, too.
“It helps to drive home the point,” Newman said. “That as a network of cities, it is in everyone’s best interest as a region to try to ensure that no one is left behind.”