Pennsylvania: We'll Cut Scranton Deadline Slack

A Pennsylvania official Tuesday said the state could relax its Aug. 15 deadline for Scranton to enact a revised recovery plan if it sees the mayor and City Council making progress.

"Obviously with the cash-flow issues the city is having, we're hoping they can adopt a plan by Aug. 15, but we're willing to revisit that under the right circumstances," said Steve Kratz, a spokesman for the state's Department of Community and Economic Development, which oversees distressed communities.

Over the weekend, Mayor Chris Doherty and City Council members agreed on a compromise recovery plan in which Doherty proposed a 33% residential property-tax increase over three years instead of the 78% hike he originally sought.

The plan, which the full council must approve after a public hearing, also calls for a return of the commuter tax, the imposition of sales and amusement taxes, and departmental budget cuts.

The Pennsylvania Economy League, Scranton's plan coordinator under the Act 47 program for distressed communities, is reviewing the plan.

According to Kratz, the Lackawanna County Court of Common Pleas must approve a commuter tax.

DCED Secretary C. Alan Walker, looking to break a stalemate between Doherty and four of five council members over how to right Scranton's financial ship, has offered the city a $2 million interest-free loan and a $250,000 grant if it can enact a recovery plan by mid-August.

"In accordance with Act 47, the PEL must revise and approve the plan," Kratz added.

Doherty said Scranton, whose cash reserves dwindled to $5,000 at one point last month, must approve a recovery plan to regain the good graces of the capital markets. The city has been unable to borrow $16 million it says it needs to balance its budget.

Meanwhile, Scranton and its municipal employees, who worked for two weeks for the federal minimum wage, struck a different compromise that if approved, would give the employees back pay plus 6% interest.

Doherty and the labor unions over the weekend worked out an agreement that avoided a court session on Monday. The unions had sought a contempt-of-court citation against Doherty for paying all workers, including himself, $7.25 per hour.

The city, according to the agreement, must settle on all back pay by Aug. 31.

Doherty said Scranton, whose reserves dipped to as low as $5,000 one month ago, will be able to meet its August payroll.

Gary Lewis, a private-sector financial consultant and downtown resident, opposed the plan in a letter to Walker.

"The plan fails to adequately address the drivers of the city's projected budget deficit of nearly $25 million," said Lewis, who cited a $10 million structural deficit exclusive of debt service and salary increases due to collective-bargaining agreements; $8.2 million of debt service, not including costs related to additional borrowing; $1.4 million in new costs connected with the state Supreme Court arbitration award; and more than $6 million in unpaid bills rolled over from the previous year.

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