Pennsylvania has offered Scranton a $2 million interest-free loan and a $250,000 grant if Mayor Chris Doherty and the City Council can agree on a revised recovery plan by Aug. 1 and enact it by Aug. 15.

Scranton, which generated national headlines when it started paying employees the federal minimum $7.25 per-hour wage in defiance of a court order and is in danger of missing its payroll next week, cannot obtain a $16 million bridge loan from any bank because of its finances.

In a letter to Doherty and City Council President Janet Evans on Thursday, Department of Community and Economic Development Secretary C. Alan Walker also offered a mediator, with officials from the DCED and the Pennsylvania Economy League, the city's recovery plan coordinator under the state's Act 47 distressed-communities program, to sit in.

"The adoption of an amended recovery plan that will provide the city financial stability into the future is critical in this effort," Walker said. Scranton, enrolled in the Act 47 program since 1992, must update its plan because the previous one became outdated.

Four of the five City Council members have continually opposed Doherty's proposals, including the mayor's latest plan revision that hinged on a 78% property tax increase over three years. The plan also called for selling a stormwater conveyance system to the Scranton Sewer Authority; this proved problematic the authority already owns the lines and has since 1968.

City Council members on Thursday night seemed willing to talk, with Evans urging for public mediation sessions.

Pat Rogan said Doherty must overhaul his plan. "The bottom line is that the mayor's 78% tax increase is not going to pass the City Council. He has to work with us on alternative ideas [and] cuts have to be made in other areas."

The council budget assumed the city would be able to borrow $16 million, but the capital markets effectively froze out the city after the Scranton Parking Authority was late with a city-guaranteed $1 million bond payment. The City Council, in a dispute with the authority, withheld the funds until after the June 1 deadline, leaving the city and the authority in default.

Robert McGoff, Doherty's lone supporter on the council, said too much damage has occurred already. "We may have taken it too far and I'm not sure that the banking community, even with the recovery plan, is going to be amenable to borrowing," he said.

Police, firefighter and public-works unions a week ago sought to hold Doherty in contempt after he continued to pay the minimum wage in defiance of a Lackawanna County injunction. The mayor replied by saying the city simply didn't have enough money to comply. The unions have also sued in the U.S. District Court for the Middle District of Pennsylvania for back overtime pay and over the denial of health benefits without a proper hearing.

Firefighters union president John Judge found the DCED's latest proposal encouraging, but remained skeptical. "I hope this is not an attempt by DCED to just hit the ball back over into council's court," he said.

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