Troubled Scranton, Pa., closed on a deal with Amalgamated Bank to borrow $6.25 million in tax anticipation notes, which city leaders say will enable them to make payroll Friday and cover some past-due bills.
The capital markets had frozen out Scranton since June after officials waffled on making a city-backed bond payment. In July, with the city’s coffers nearly bare, Mayor Chris Doherty paid workers the minimum wage for two weeks.
According to a statement from union-owned Amalgamated, loan proceeds will provide Scranton with cash flow while it awaits collection of income-tax proceeds during the fourth quarter.
John Judge, president of Scranton Fire Fighters Local 60, helped broker the deal.
“We helped them engage the city when no other lenders wanted to step in,” Judge said.
City Council President Janet Evans said the loan will “provide critical assistance that will allow Scranton to have time to finalize the details of our recovery plan and get our long-term fiscal house in order.”
Scranton two weeks ago finalized its revised recovery plan under the state-sponsored Act 47 program for distressed communities. But Pennsylvania’s Department of Community and Economic Development, which oversees the program, said the city must adjust some baseline projections to satisfy its plan coordinator, the Pennsylvania Economy League.
The DCED recently provided a $2.3 million loan and grant program after Doherty and the City Council approved the recovery plan. Spokesman Steve Kratz said $1 million from that package will go toward repayment of the Amalgamated Tans, with the balance repayable in 10 years.
Scranton still has roughly $19 million of unfunded debt. M&T Bank of Buffalo, N.Y., backed away after the council allowed the Scranton Parking Authority to default on a $1 million bond payment due June 1 by withholding the funds. The council finally authorized the payment in mid-June.
Gary Lewis, a private-sector financial consultant and Scranton resident, called the $6.3 million “suspiciously identical” to a debt service balance. Borrowing money to make a debt payment, he said, would require a material-event disclosure to the Municipal Securities Rulemaking Board and bondholders.
Messages were left with Doherty seeking a response.