Catasauqua Borough Council member Jill Smerdon is speaking out about what she believes to be one-sided coverage and to share additional information she said is not being relayed to residents.

The Press’ challenge, shared with Smerdon, has been not getting information from the new council as requested. Ten Right To Know requests have been filed because of a perceived lack of council transparency. The Press has reached out to council members on a number of occasions with no response.

Smerdon acknowledged the lack of transparency and said she told council leaders she will be speaking out to provide more information to the public.

She specified four data points she believes are critical for residents - Catasauqua bankruptcy, deficit spending by the borough, junk bonds and a $5 million borough expenditure required in the former agreement of sale for the Iron Works project.

Smerdon told The Press she believes the borough is heading toward bankruptcy.

At a recent council meeting, borough Solicitor Thomas Dinkelacker said the borough is not bankrupt. He did say there are financial challenges that must be addressed. Dinkelacker said he is confident the challenges will be met.

Ryan Hottenstein, Catasauqua’s bond adviser, noted a bankruptcy will not occur because the state has Act 47, as well as other assistance to help municipalities unable or unwilling to address their financial challenges.

Smerdon said the borough has been “deficit spending since 2017.”

Hottenstein verified some municipalities will shift funds from borough fund balances to help balance the budget rather than raise taxes. A borough can do this until it exhausts the fund balance and has not raised taxes or engaged budget cuts. As long as the borough has the funds to meet obligations, there is no deficit spending.

Smerdon informed The Press Catasauqua’s bond rating has fallen to junk bond status. She said she blames previous councils for the bond rating decrease.

Standard & Poor bond ratings for Catasauqua recently fell from A- to BB+. BB+ is the highest, safest, rating level of bonds rated as noninvestment grade bonds, or speculative bonds, otherwise known as junk bonds.

Hottenstein noted a recovery from a BB+ rating to an investment-grade bond rating can be achieved after a tax hike and/or budget cuts that demonstrate the council is acting responsibly to address borough financial needs.

There are 10 levels of investment-grade bonds and 12 noninvestment grade bonds S&P uses when rating bond status. Although junk bond is one of several terms used to refer to the noninvestment grade bonds, there is a large difference in the impact of a BB+ rating compared with a D bond rating.

Several factors are involved in S&P’s evaluating a municipality’s bond rating, according to Hottenstein.

Hottenstein explained there are a number of reasons for bond rating decreases. He said the raters look, among other criteria, at the demographics of the community, financial performance, the borough’s fiscal situation and its management personnel.

The departure of the borough’s manager and treasurer, according to Hottenstein, is a red flag for bond status evaluators and investors and was a consideration that factored into the lower bond rating, he said.

Councilman David Bernini also noted the departure of the borough manager and treasurer left the borough with no financial management staff in borough administration, which contributed to the borough’s bond rating decrease.

Bernini, in a response to a request for an explanation, noted Hottenstein, at the Aug. 5 special council meeting, “did indicate one major contributing factor in this most recent bond rating decline to noninvestment grade rating was the resignation of two key management/financial personnel.”

The reasons for former borough Manager Stephen Travers’ abrupt departure from his position are still unclear. The Press submitted a Right to Know request for any written communications between council and Travers that may shed light on the situation. The request is pending.

Travers initially submitted his resignation in June, indicating he would remain with Catasauqua until approximately Sept. 6. He said he was seeking an amicable departure but abruptly left July 25. His official departure, learned through a Right to Know request, was July 27.

Smerdon reported the borough would have to pay $5 million for infrastructure improvements at the Iron Works project after the project exited the due diligence period.

Questions remain, such as when the funds would be due, would there be grant funds available, what is the time table for completion and are there other sources of funding.