Scranton's state-designated recovery coordinator, Pennsylvania Economy League, has told city officials they need to raise property taxes next year higher than the 12 percent that the city budget for 2013 proposes. Exactly how much higher was not stated.
In a letter received Thursday, PEL Executive Director Gerald Cross notes that the city has not dedicated a tax millage toward paying for the city's second unfunded debt package approved by a court this year, of $9.75 million. In that case, Judge Peter O'Brien, a senior visiting judge from Monroe County, on Oct. 31 ordered that a tax millage be dedicated to paying back this unfunded debt.
It was the same arrangement the city sought and received in January, when a different judge, Senior Monroe County Judge Jerome Cheslock, approved the city's first unfunded debt, of $9.85 million, and ordered that this amount be paid back with a dedicated tax millage over 10 years.
The first unfunded debt package translated into the 12 percent tax hike in the proposed budget for next year, city officials have said.
Despite Judge O'Brien's similar order of Oct. 31, the mayor and council have not dedicated additional millage toward paying the second unfunded debt. Instead, they have included in the proposed budget a line item of $1.7 million to pay the debt service of the second unfunded debt.
That approach doesn't wash with PEL, as Mr. Cross stated he "recommends that the city includes a sufficient dedicated real estate millage increase in its 2013 proposed budget to meet the new 2013 debt service obligation."
Mr. Cross did not specify a figure for an additional tax millage increase. But it would not be unreasonable to assume that if the first unfunded debt of $9.85 million translated into a 12 percent tax hike, then a second unfunded debt of nearly the same amount would translate into a nearly similar additional tax hike, city Business Administrator Ryan McGowan said.
"I would say that as far as the percentage (of an additional tax hike that PEL seeks), it would be roughly around that (initial 12) percent," Mr. McGowan said.
However, that doesn't mean the city would necessarily do as PEL says, because the budget does contain a $1.7 million line item to pay the second unfunded debt, Mr. McGowan said.
"The assurances of making sure the payback on debt service has been made," Mr. McGowan said. "The necessary adjustments have been made (in the budget). We have to make good on our debt."
Asked after Thursday's council meeting whether the city's refusal to dedicate a millage for the second unfunded debt violates the judge's order, council finance chair Frank Joyce said no, because under the council's alternative method that it is pursuing, the debt service would already be paid before 2013.
Council members declined to comment on Mr. Cross's letter because they said they had not yet seen it.
Mr. Cross's letter also cites areas where the city has missed deadlines on certain actions stemming from the city's revised Act 47 recovery plan, and areas where the city has essentially achieved plan compliance.
n The city missed a Dec. 1 deadline to provide to PEL commitment letters for a total of $1.3 million in payment-in-lieu-of-taxes (PILOT) donations from the city's larger nonprofits to come next year or make up the difference in equivalent revenues and/or cuts. PEL extended its PILOT deadline to Monday. Mr. McGowan noted that the mayor and council have placed $1 million in a contingency fund to cover any PILOT shortfalls next year. "The mayor is still speaking to nonprofits on a daily basis and will continue to do that. That (PILOT commitments) can change over the next month or two," Mr. McGowan said.
n If a court had not approved a commuter tax by Dec. 1, the city was supposed to have told PEL how it would make up that non-existent $2.5 million in equivalent revenue and/or cuts. PEL now wants to know by Monday how a commuter tax would be replaced. A commuter-tax hearing is scheduled for Tuesday in Lackawanna County Court. Mr. McGowan said, "Obviously, we haven't been in court yet."
n The city missed a Dec. 1 deadline to have a firm commitment from a lender for an estimated $22.1 million leaseback plan, and PEL now wants a commitment by Monday of how those funds would be replaced. This leaseback borrowing is now the $25 million that the city will seek next year to fund the landmark state Supreme Court arbitration award of $17 million in favor of the city's police and fire unions, and a $5 million increase in the city's mandatory minimum pension payments next year, Mr. McGowan said. The city has had some discussions with lenders on this but no commitments, and doesn't expect any until after the new year, he said.
n The city achieved several goals of the recovery plan for next year, including making departmental cuts, obtaining a $1 million deferment in landfill fees, increasing the realty, business privilege and mercantile taxes, and making substantial progress on implementing an amusement tax, parking enhancements and a market-based revenue opportunity (MBRO) program of selling ad space on city property.
Mr. McGowan said he would be responding to PEL with an update on the status of all of the items.
Contact the writer: jlockwood@timesshamrock.com