A three-judge panel in Lackawanna County rejected Scranton, Pa.'s request to impose a 1% commuter tax.
Judges Terrence Nealon, Robert Mazzoni and Harold Thomson, the latter visiting from Pike County, ruled in the Court of Common Pleas Wednesday that the city failed to satisfy statutory criteria established under the state-sponsored distressed communities program, known commonly as Act 47.
Mayor Chris Doherty said the city would make up for the $2.5 million by borrowing or selling an asset. "There is no crisis in the city right now," he said. "All the bills are paid."
Scranton, which has belonged to the Act 47 program since 1992, has had a cash crisis much of the year. In June it allowed the Scranton Parking Authority to default on a $1 million bond payment before freeing up the money two weeks later. Shut out of the capital markets for part of the summer, it briefly paid municipal employees the federal minimum wage in early July.
Scranton in August amended its recovery plan, but the judges found the city's execution flawed. "Since the city has not satisfied the recovery plan imperatives relating to 77.5% of the revenue based mandates contained in the recovery plan, it has not 'substantially implemented the provisions' of the recovery plan," Nealon wrote on behalf of the judges.
The triumvirate reconvened Friday after the City Council the night before passed a $109 million budget that called for an additional residential property tax increase: to 22% from the original 12%, to cover unfunded debt.
Doherty and other city officials said the additional 10% tax increase was necessary to obey a court order in October to repay unfunded debt with a dedicated tax millage.
But the judges were not swayed. After receiving exhibits from the city. "the city's petition became ripe for disposition," Nealon wrote.
Several communities outside 76,000-population Scranton opposed the commuter tax.
"We have to realize that this is only a temporary victory. The city still has the ability to appeal the decision in the commonwealth court or they could file a commuter tax for 2014. Our communities have to stay together, and we have to start fundraising to be prepared to fight if either of those options occur," said Mayfield, Pa., Mayor Alexander Chelik, whose borough sits 15 miles northeast of Scranton.