Scranton, Pa., Closes $20M Budget Gap

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Under the glare of bond rating agencies and banks, Scranton, Pa., Mayor Chris Doherty submitted a $130.2 million budget that would close a $20 million gap largely by raising property taxes nearly 50%, plus steep hikes in parking rates and fines, and garbage collection fees.

Doherty, about to leave office after 12 years as mayor, submitted the fiscal 2014 spending plan late Friday, a week after Moody's Investors Service said Scranton, which it does not rate, could default. Moody's said that without a balanced budget, Janney Montgomery Scott and Amalgamated Bank might withdraw planned debt financings.

"The 2014 budget continues to call for an aggressive approach to current revenues," said Doherty, who will yield mayor's office to city tax collector and fellow Democrat Bill Courtright on Jan. 1. He didn't seek another term. Doherty's budget proposal includes $16 million for a tax anticipation note issuance.

According to Doherty, increased current refuse fees should bring the city an additional $2.2 million, while further revenue enhancements such as increasing the rental registration fee will bring in an extra $300,000.

Scranton, the 76,000-population seat of Lackawanna County, needs roughly $28 million to satisfy an arbitration court award for back pay to police officers and firefighter unions, and fund required increased payments to the pension system. A state court ruled in 2011 that the city could not use its distressed status under the Act 47 workout program to lower pension payments.

The five-member City Council, whose relationship with Doherty has often been contentious, must approve the budget. The council intends to debate the budget at its Dec. 5 meeting.

Scranton has struggled to access banks for funding over the past 18 months. In summer 2012, the city paid municipal workers the federal minimum wage for two weeks. The capital markets at the time had shut off Scranton after the City Council forced a parking authority default by temporarily withholding a $1 million bond payment.

According to Moody's, Scranton has $195 million of long-term debt outstanding, including direct obligations, city-guaranteed debts of component units and $15 million of state loans. Of the $195 million, $16 million bears interest at a variable rate, while the remainder is fixed rate. Scranton also typically issues $14.5 million of tax and revenue anticipation notes annually.

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