SCRANTON, Pa. – A lawsuit against the city of Scranton over taxation could have ramifications throughout Pennsylvania, said the head of a group that initiated the suit.
“State law clearly states there is a cap to taxation through the Act 511 law,” Gary St. Fleur said in an interview at the Lackawanna County Court of Common Pleas in downtown Scranton on Tuesday. “If we do not win, that would allow any city to raise taxes in any amount it wants.”
County Judge James Gibbons on Tuesday heard preliminary arguments by the city in opposition to the taxpayer group’s petition for a mandamus action to halt Scranton from tripling its local services tax to $156 from $52 for every person working within the city limits that earns at least $15,600.
The lawsuit named Mayor William Courtright and city business administrator David Bulzoni as defendants.
Kevin Conaboy of Abrahamsen, Conaboy and Abrahamsen PC, which is representing the city, defended the move under state law, saying Scranton may do so under home-rule provisions. He also said home-rule law supersedes a cap in the state local tax enabling act, known commonly as Act 511.
City officials also call the tax increase essential for Scranton’s recovery under the state-sponsored Act 47 workout for distressed communities, to which Scranton has been subject since 1992.
John McGovern, representing the taxpayers, called for invoking the Act 511 cap. The city, he said, should hit the cap around July or August. According to the lawsuit, Scranton two years ago collected about $34 million, well beyond the $27.3 million ceiling on all Act 511 taxes combined.
Speaking to reporters after the meeting, McGovern said a ruling favorable to the taxpayer group could prompt calls for tax rebates.
“Hopefully we can get this resolved quickly,” said McGovern. “If the judge rules in our favor, we can move forward to really the heart and meat of the thing. If the judge rules against us, then we’ll have to decide what to do.”
A ruling for the city might trigger an appeal.
“If we lose, depending on how we lose and why we lose, then the question is whether it’s appealable or not,” he said.
The effectiveness of Act 47 has been under question in Pennsylvania, with some critics saying that municipalities stay in the program for too long.
“Act 47 is effective but continues to present a problem as cities are able to request an extension after the five-year time period has expired,” said Villanova School of Business professor David Fiorenza, referring to a 2014 change to the state enabling law.
“A five-year time frame is sufficient for a municipality to assess their financial situation and implement any changes. However, if the economy enters a recession during this time period, it will impede their financial progress.”
St. Fleur, an independent candidate for mayor, has initiated a ballot measure to force 76,000-population county seat Scranton into bankruptcy.
“The current situation is messy,” he said in Gibbons’ second-floor courtroom.
St. Fleur cited a Wells Fargo report from October 2016 that said a 2014 audit of Scranton revealed $375 million in liabilities and $184 million in unfunded nonpension post-retirement benefits to government employees.
Last June 2016, S&P Global Ratings assigned Scranton its first rating in five years – junk-level BB with a stable outlook.