Luzerne County officials plan to close Monday on a $20 million loan needed to prevent mass layoffs and service cuts due to state budget impasse funding delays, said county Chief Solicitor C. David Pedri.
Pedri said the lenders and county council Chairwoman Linda McClosky Houck will sign the paperwork Monday.
A closing Monday will provide the county with access to funds to pay a $7.6 million debt repayment due Dec. 15, which was one of the most pressing concerns, Pedri said.
The county council stipulated the interest rate must be less than 4 percent for the next six months, but Pedri said Friday he did not have the final negotiated rate.
Pedri referred comment on the final rate to county Budget/Finance Division Head Brian Swetz, who could not be reached Friday.
The administration projected the interest rate would be around 3.5 percent because of a recent county credit rating downgrade imposed by Standard & Poor’s.
Public Financial Management, the county’s outside financial adviser, had lined up a proposal to borrow the money at an interest rate of 1.3 percent, but that offer was withdrawn due to the rating downgrade.
Several county council members have publicly criticized the drastic downgrade, which reduced the county two notches from BB to BB+. It lowered the county’s financial position from investment grade to speculative, which is labeled as “junk” by some in the investment world.
Standard & Poor’s cited its “worsening view” of county management and the county’s “political gridlock” and criticized both the administration for failing to sufficiently monitor county finances and the council for initially rejecting the $20 million loan to guarantee the Dec. 15 debt repayment would be met.
The county’s rating also has been placed on a credit watch list with “negative implications,” according to Standard & Poor’s.
County Councilman Rick Morelli, who supported both the initial and approved loans, said at last week’s budget work session that he wants more information and justification for the downgrade. It was a “punch in the stomach” because many county council members have been trying to make decisions to get the county back on track financially, he said.
“Something just doesn’t smell right,” he said, describing Standard & Poor’s explanation as “vague.”