Scranton in Sewer-Sale Slip-Up

Scranton, Pa., has three lawsuits against it over paying employees the federal minimum wage, can’t get a bridge loan for payroll and past-due bills, and has little money to its name.

The city now has another problem: it must resubmit its financial recovery plan, which hinged largely on a sale of its stormwater conveyance system to the Scranton Sewer Authority, because the authority already owns it — and has since 1968.

Scranton and neighboring borough Dunmore ceded the sewer and stormwater lines to the authority in 1968, when it was founded, two years before plant construction. Furthermore, the two municipalities sued the authority in 2007 over maintenance costs. The authority settled the dispute, paying Scranton $6.9 million and Dunmore a lesser amount.

“Not only has it been owned by us, the city admitted as such in filing their claim seeking reimbursement,” Jeffrey Belardi, the SSA’s attorney, said in an interview.

“There was a differing view on the discussion of the stormwater maintenance system, on what we thought was sold and what wasn’t sold,” city business administrator Ryan McGowan told the Times-Tribune newspaper. Messages were left with McGowan seeking further comment.

Scranton has been in Pennsylvania’s Act 47 program for distressed municipalities since 1992. It must submit a revised recovery plan to the state Department of Community and Economic Development.

The city, recently down to its last $5,000, had roughly $130,000 as of Monday after some tax collections, according to Gary Lewis, a private-sector financial consultant and downtown resident. Minimum-wage payroll, totaling about $330,000, is due next week.

Lewis, who insists that bankruptcy is the city’s only viable option, said Scranton’s budget deficit, as a percent of its total budget — $16 million to $86 million, or 19% — exceeds the 17% in San Bernardino, which on Tuesday became the third California city in a month to announce plans to file Chapter 9.

The capital markets have effectively shut off Scranton. Mayor Chris Doherty has said the city needs a $16 million bridge loan to meet payroll and placate antsy vendors. M&T Bank backed off after the City Council forced the Scranton Parking Authority to miss a June 1 deadline for a $1 million bond payment, though it eventually released the funds.

Meanwhile, police, firefighter and public-works unions sought to hold Doherty in contempt after the mayor continued to pay city employees the federal $7.25 per hour minimum wage in defiance of a Lackawanna County injunction.

Additionally, the unions, which Philadelphia law firm Jennings Sigmond PC is representing, sued in the U.S. District Court for the Middle District of Pennsylvania for back overtime pay and denial of health benefits without a proper hearing.

The latter, attorneys said in court filings, violates the Pennsylvania Heart and Lung Act.

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