SCRANTON, Pa. – The Scranton City Council reversed itself Thursday night and approved a transfer of $1 million to the city’s parking authority to make an overdue bond payment.
The northeast Pennsylvania city is a guarantor of the bonds, issued in 2007.
But after the release of money from a contingency fund to the Scranton Parking Authority’s bond trustee, Bank of New York Mellon, the city is down to about $150,000 in cash. Local officials say they need a $16 million bond issue to make it through the year and hope the payment will attract otherwise skittish banks.
Unpaid bills include $2 million demanded by Blue Cross of Northeastern Pennsylvania for health insurance for employees and retirees, and more than $200,000 by a vendor that fuels city vehicles, including fire trucks. Mayor Chris Doherty, who did not attend the council meeting, has also warned about payless workdays for municipal employees.
And still with no revised financial recovery plan in place, Scranton could have trouble obtaining a loan. While Mayor Peter Doherty and the council generally agree that a revised plan is the linchpin of obtaining the necessary financings, they have been at loggerheads over what plan to approve.
The council last week defeated Doherty’s latest plan, which called for a 78% property tax increase over three years and the addition of amusement and commuter taxes, the latter requiring state intervention. Scranton has been in the state-sponsored Act 47 program for distressed communities for 20 years.
“I see many problems with the revised recovery plan offered by the mayor,” said Gary Lewis, a consultant for Deloitte who works in distressed debt and lives downtown. Lewis called the amusement tax “another fake revenue item designed to balance a budget on paper but not in practice.”
Last month the council voted 4-1 against the Parking Authority bond payment, accusing its officials of mismanagement and secrecy. But council President Janet Evans led the change, saying bondholders could use the courts to force additional taxes to pay the balance.
The city has roughly $156 million in debt outstanding, while the Parking Authority’s debt is $100 million.
According to council solicitor Boyd Hughes, the payment only settles one of five counts of default that BNY Mellon and bond insurer Radian Asset Assurance Inc. cited in a letter last week to the council, in which they were prepared to initiate a takeover of the authority by July 7. Other counts include failure to submit an independent audit.
Council members on Thursday continued to lambaste the authority, but feared an extra tax increase through receivership, which Bank of New York and Radian could obtain through the courts. “This way, there’s less of a threat to taxpayers. This gives us a little more control,” Jack Loscombe said after the meeting.
Robert McGoff and Frank Joyce also voted yes.
Dissenter Pat Rogan wanted to allocate the money instead to the Blue Cross debt. “They’re snakes, and I don’t want to give them an inch,” he said of the Parking Authority.
Evans urged the administration to explore issuing $5 million of tax anticipation notes. The city issued $11.5 million in Tans in January.
Additionally, 77,000-population Scranton is on the hook for an extra $20 million after the state Supreme Court ruled last year that the city could not use its distressed status to limit the size of arbitration awards.
Council members have also refused a request for the Department of Community and Economic Development, the state agency that oversees distressed communities, to mediate the impasse.
