After their unsuccessful challenge of a certain tax increase in Scranton, eight residents filed a lawsuit against the city claiming it violated a state tax cap by tens of millions of dollars in recent years.The lawsuit makes the same claim they raised against the
city’s recent petition for a continued, tripled local services tax, or LST — that the city goes way over a cap on total revenues from a group of taxes allowed under Act 511, including: wage, real estate transfer, amusement, business privilege/mercantile and local services taxes.While the judge in the LST case rejected the
residents’ opposition, his ruling last week did not preclude them from pursuing a different legal attack called a “mandamus” action.
The lawsuit, filed Thursday in Lackawanna County Court by residents’ attorney John McGovern of Scranton, is a mandamus action.
It claims that state law puts a cap on the total the city can collect in Act 511 taxes combined, or 1.2 percent of the city’s “total market value” as determined by the Pennsylvania State Tax Equalization Board. If the city goes over the cap, it is supposed to either lower taxes in the Act 511 category to come in under the cap, or put excess collections aside for use next year to result in lowered taxes, the complaint says. It aims to force the city to take either of those two approaches, once the Act 511 tax collection totals hit the cap.
The city did not do either step in 2015-16, exceeded the cap by many millions of dollars, and intends to do so again in 2017, the lawsuit contends.
For example, with a total market value of $2.27 billion in 2015, the most recent available, the city’s cap on Act 511 taxes should have been $27.2 million.
However, in 2015, the city collected $34.5 million, or $7 million over the cap. For 2016, the city budgeted $37.2 million from Act 511 taxes, or $9 million over cap. For 2017, the city budgets $37.8 million, or $10.5 million over the limit, the lawsuit claims.
Such cap violations result in “illegal, excessive and unreasonable (tax) extractions” by the city, the lawsuit contends.
The plaintiffs include Gary St. Fleur, Nicholas Gettel, Casey Durkin, Damian Biancarelli, Rich Johnson, Ethan Green, Angela Gilgallon and Michele McGovern.
“Act 511 exists for a reason,” St. Fleur said in a statement. “If the city of Scranton is at the point where it has to begin illegally collecting tax, you know that the city is admitting that it is functionally insolvent and the clock has run out.”
Efforts to contact city solicitor Jessica Boyles were unsuccessful Friday.
Meanwhile, council adopted a Courtright administration ordinance Thursday for a continued, tripled local services tax of $156 a year, or $3 a week, on anyone who works in the city and earns above $15,600. This enactment of the LST followed the judge’s approval last week of a city petition to continue this tripled tax in 2017, at the same level as in 2015-16.
Contact the writer: jlockwood@timesshamrock.com, @jlockwoodTT on Twitter