Overdue court award owed to Scranton unions still growing

An overdue $20.9 million, and growing, arbitration back-pay award owed to Scranton police and firefighter unions should be paid within a few months, city Business Administrator David Bulzoni said.

The award stems from the landmark 2011 state Supreme Court arbitration ruling awarding them years of back pay. The city has been unable to pay the award or obtain financing for it. In mid-2013, the unions received a judgment of $20.9 million against the city, with interest accruing at $100,000 per month.

With back pay, longevity and interest, the amount owed would be $24.2 million by the end of this year, Mr. Bulzoni said.

Since Mayor Bill Courtright and his administration took over last year, they have been working on plans to pay the award, including making a first installment payment of $5 million. However, that evolved into the idea of paying the award all at once through bonds, Mr. Bulzoni said.

In December, city financial advisory firm IFS Securities presented a plan to the city to obtain nearly the entire judgment amount through bonds, and using about $3 million in workers’ compensation funds as a debt-service reserve on the bonds.

The state Department of Labor and Industry’s Bureau of Workers’ Compensation, which oversees workers’ compensation funds, would have to sign off on using the funds for that purpose. That bureau is still evaluating the city’s proposal, said Sara Goulet, press secretary for the Department of Labor and Industry.

“We have received some favorable feedback from Labor and Industry,” Mr. Bulzoni said. “It continues to move along and I’m hoping we can really accelerate the process. I’d really like to try to get this done within the next 90 days.”

IFS Securities would either place the bonds with investors or underwrite a bond issuance, depending on whether it is insured, Mr. Bulzoni said. A preliminary plan calls for the city to issue $22.4 million in bonds that would be repaid over 20 years. That would include $20.9 million for paying the judgment and $1.5 million for a debt-service reserve. Another $3 million to $3.5 million of workers’ compensation funds would be earmarked as a secondary debt-service reserve.

Such reserves would serve as a guarantee of repayment and hopefully entice bond investors.

“This comes with a more realistic debt structure” for the city, Mr. Bulzoni said. “We think it’s really doable.”

Exact details have not been finalized, he said. For example, some bonds may be issued on a taxable basis, while others may be issued as tax-exempt.

And, other city initiatives that are underway, including selling or leasing parking and sewer systems, may also become factors in bonds financing, he said. For example, a potential sale of Scranton Parking Authority garages would leave “stranded debt” — debt the city still would owe on garages that it no longer owns — that the city may try to refinance.

“We’ve got several ongoing initiatives that may or may not influence the way this (arbitration award) is done,” Mr. Bulzoni said.

Contact the writer: jlockwood@timesshamrock.com, @jlockwoodTT on Twitter