Scranton, Pa., officials have asked the Lackawanna County Court of Common Pleas to let it borrow an additional $9.75 million, citing the need for the distressed city to plug further unexpected gaps by the end of the year.
Judge Peter O’Brien, visiting from Monroe County, expects to rule by the middle of next week.
On Tuesday, the city received proceeds from an $11.3 million bond issue to cover payroll and overdue bills. The City Council had authorized the unfunded debt in January. That borrowing, through a private placement issued by Janney Montgomery Scott, consists of $9.85 million in Series 2012A new money general obligation bonds and $1.47 million in Series 2012B refinancing.
Scranton, Pennsylvania’s seventh-largest city with a 77,000 population, has struggled for access to the capital markets for the past four months, since the City Council allowed the Scranton Parking Authority to default on a $1 million bond payment due June 1. It released the funds in mid-June, but cash-flow problems prompted Mayor Chris Doherty to pay city workers the federal minimum wage for two weeks in July.
A message seeking comment was left with Doherty.
Speaking in court on Wednesday, city business administrator Ryan McGowan said new developments prompted the latest round of unfunded debt. They included more than $5 million in lost savings from not having refinanced older debt earlier, and $1.5 million the city borrowed from the workers’ compensation trust fund to deal with the cash-flow crisis.
“I think it’s hilarious that they were ‘surprised’ by these 2012 costs,” said Gary Lewis, a Scranton resident and private-sector financial consultant. “I saw them coming in April, when I stood at the council’s meeting and told them they would be out of money by October.”
Lewis also said the city was understating the total borrowing from the workers’ compensation trust by about $10 million. He has made an open-records request for data.
Scranton, which is working under the state-sponsored Act 47 workout program with recovery plan coordinator Pennsylvania Economy League, in August adopted a doubling of the commuter tax to 2%. The city needs Lackawanna court approval, but has yet to petition for a hearing. Several outlying communities oppose the tax increase.