Scranton, Pa., nearly broke and seemingly shut off from the capital markets, is seeking a $16 million loan from its pension board to meet current-year obligations for payroll and debt service.
But the Scranton Composite Pension Board on Wednesday set aside Mayor Chris Doherty’s request.
According to Doherty’s investment proposal to board president John O’Shea, the bonds would have a fixed rate of 8% over 10 years.
“This rate of return will greatly assist future funding in order to maintain the corpus of the fund,” Doherty said.
The $16 million equals more than one-third of the plan’s total assets, the Times-Tribune of Scranton reported.
It also represents unfunded debt assumed in the City Council-approved budget. Scranton has had trouble obtaining a loan for that amount since the council withheld $1 million from the Scranton Parking Authority for a bond payment until after that payment was late. According to Doherty, M&T Bank of Buffalo, N.Y., backed away.
Scranton’s cash balance dipped to as low as $5,000 two weeks ago and Doherty on July 6 began paying employees the federal minimum wage of $7.25 per hour. City employees received full pay in the last cycle, but unions are in court seeking back pay.
A Tuesday deadline for approving a state loan-and-grant package is looming. The Pennsylvania Department of Community and Economic Development has offered Scranton a $2 million interest-free loan and a $250,000 grant if the mayor and council can agree on a revised financial recovery plan by Aug. 1. But mayor and council have been repeatedly at odds.
The council has rejected a Doherty plan that calls for a 78% increase in residential property taxes over three years.
Lackawanna County Court Judge Michael Barrasse has ordered Doherty and council members to appear Monday at a hearing on a contempt of court charge against Doherty for paying the minimum wage in defiance of a court order.
According to the Times-Tribune, pension board members were upset that no city administration officials appeared at Wednesday’s meeting.