Five banks expressed interest Monday in submitting bids to loan Scranton a $14 million tax anticipation note in 2013.
In a year when the city's relationship with some banks has been strained and financial difficulties are continuing, having five banks attend the pre-bid meeting was viewed with cautious optimism by city Business Administrator Ryan McGowan and one of the city's financial advisers, Michael Judge of CaseCon Capital.
"We'll see what happens," Mr. McGowan said. "I'm very happy with the individuals that came, and we'll see what can be done here when the bids come in."
Mr. Judge added, "Five (banks) there is certainly a positive sign. It's better than none."
The bid opening for the 2013 TAN is set for Oct. 26.
In advance of this bid opening, the city held a pre-bid conference Monday at City Hall that was attended by Amalgamated Bank, Fidelity Deposit & Discount Bank, Landmark Community Bank, Penn Security Bank and Peoples Neighborhood Bank.
Attendance at this pre-bid conference was mandatory for prospective bidders. However, their attendance does not necessarily mean they will end up submitting bids for the TAN. It's not unusual for prospective bidders to attend pre-bid conferences only to later decide against submitting a bid, Mr. McGowan said.
At least one of the banks, Fidelity, is leaning toward submitting a bid, said Fidelity Senior Executive Vice President Timothy O'Brien. Fidelity led a consortium of banks that provided the city with a $9.5 million TAN last year, as well as an $11.5 million TAN earlier this year.
"We may be looking at doing something like that (a consortium) again, because we all want to help the city," Mr. O'Brien said.
Efforts to reach representatives of the four other banks were unsuccessful.
TANs are routine short-term loans that municipalities borrow to cover cash-flow gaps until tax revenues come in. The bid proposal for a 2013 TAN is a routine procedure, officials said.
In recent years, the city typically borrowed separate $5 million and $9.5 million TANs per year. However, because of concerns over whether the city could pay back TANs on time, lenders this year insisted the city acquire one TAN.
The city then secured in January from a Fidelity consortium an $11.5 million TAN that had several strings attached. The consortium wanted the TAN paid back by July, instead of by the end of the year as before, by having all real estate taxes go into a repayment "lockbox." The group also wanted the city to update its Act 47 recovery plan before considering giving any future loans. A bitter dispute ensued between the mayor and council over revising the recovery plan.
With real estate taxes diverted into a TAN lockbox, the city in February and March began experiencing a cash crunch because of a lag in earned-income tax collections under a state-mandated switch to a single collection agency.
The city administration then tried to secure a $2.75 million TAN from Landmark Community Bank, but city council balked at Landmark's demand that - in exchange for a TAN - the city must back an unsecured $2.95 million loan that Landmark gave to the Scranton Parking Authority last year. By April, Landmark pulled out of negotiations over that TAN, and it died. The cash crunch deepened into summer, when city coffers dropped as low as $5,000 and the mayor unilaterally slashed city workers' pay to minimum wages.
The crisis began to ease in late August when the mayor and council finally came to an agreement on a revised recovery plan, and a second TAN, of $6.25 million, was secured from an out-of-state union bank, Amalgamated Bank of New York City and Washington, D.C., in a loan arranged by the city's firefighters union.
Mr. McGowan and Mr. Judge said they hope the new recovery plan will give the city a better bargaining hand over a 2013 TAN.
"We're hopeful that the terms can be a little better now that we've put a plan in place for the next few years." Mr. McGowan said. "With this year's initial TAN (from the Fidelity consortium) there was a learning process for everyone as far as what the city can realistically provide on a payback, and I think everyone has a better idea of what we can do and can't do."
Contact the writer: jlockwood@timesshamrock.com