At least one of Scranton's revenue sources, an amusement tax that Council President Janet Evans said is lagging actually is collected on a quarterly basis, and the first quarter of the year isn't over, said Business Administrator Ryan McGowan.
At Thursday's council meeting, Mrs. Evans said certain revenue sources in the city's 2013 budget and revised Act 47 recovery plan so far have not produced any money, including payments in lieu of taxes from nonprofits, an amusement tax and parking-meter enhancements. She blamed Mayor Chris Doherty and his administration for not aggressively pursuing alternative revenues, and threatened that council would not approve more debt if the administration does not step up efforts to bring in alternative revenues.
Efforts to reach Mr. Doherty on Friday were unsuccessful. But Mr. McGowan said the administration is working daily to achieve its goals in the budget and recovery plan. As for an amusement tax, Mr. McGowan said it's not lagging because the ordinance that council passed enacting it dictates that it is to be collected quarterly.
"The legislation they (council) put together says we can only bill on a quarterly basis. We have the billing ready. We have to follow the legislation," Mr. McGowan said.
Mrs. Evans said, "Then perhaps he (Mr. McGowan) could provide us today with a copy of bill statements that will be sent and the parties that all bills will be sent to."
The prospect of revenue shortfalls is reminiscent of the city's financial crisis of last year, when the city could not get financing during a mayor/council war over the recovery plan, city coffers dwindled and the mayor slashed salaries to the minimum wage. The current debate also highlights the city's significant financial challenges, which this year involve having to borrow $22.5 million to pay a landmark state Supreme Court arbitration award of $17 million to police and fire unions and fund a $5.5 million increase in pension obligations. Mr. McGowan said the city is working on securing that financing.
"It's important for us to work together and not pit one body against the other. Obviously, that hasn't worked for us (in the past)," Mr. McGowan said. "To play the blame game at this point is counterproductive."
Mrs. Evans replied, "What I am attempting to do is work together so these revenues are realized. It was my understanding that the city was having trouble with financial institutions due to revenue insufficiency of $3 million to $4 million. Obviously, I'm not alone" in having concerns about city revenues lagging.
The city also has been looking at the possible sale of an asset and/or a sale-leaseback of an asset, the sale of delinquent garbage fees and perhaps seeking court approval for unfunded debt, Mrs. Evans said.
The city's cash flow this year is better than it was at this point last year, Mr. McGowan said. Last year, a pile of unpaid bills were carried over from 2011, but there was no such carryover this year due to a pair of unfunded-debt borrowings the city obtained last year.
Last year's diversion of real-estate taxes into a lockbox to pay back a tax-anticipation note also helped cause a severe cash crunch. The lockbox condition was imposed by wary banks after the city was late in paying back a TAN in 2011. The banks also wanted the city to update its Act 47 recovery plan before they would consider providing more financing to the city. That led to the long, bitter feud between mayor and council over how the recovery plan should be revised. The mayor initially favored tax hikes while council wanted less tax hikes and more alternative, though speculative, revenues. In the end, the recovery plan had both.
One such alternative revenue, PILOTs, is budgeted at $1.3 million to be collected this year. But to satisfy PEL concerns, city officials have said a contingency fund would be used to cover any PILOT shortfalls. Mrs. Evans said it appears that the mayor has not made any PILOT requests to nonprofit organizations, and she hopes that the potential availability of a contingency fund is not the reason.
Another alternative revenue, a commuter tax for 2013, also fell through when it was rejected by a panel of Lackawanna County Court judges in December. The city is expected at some point this year to seek court approval for a commuter tax for 2014.
Other alternative revenues coming up empty so far this year include a parking-meter enhancement program and an market-based revenue opportunity program of selling ads on city property. Regarding speculative alternative revenues, the recovery plan states the city is to replace any nonexistent revenue through either budget cuts, tax hikes or some combination of both.
Gerald Cross, executive director of Pennsylvania Economy League, the city's Act 47 coordinator said, "Any revenue shortfalls in the 2013 budget are anticipated by the recovery plan, and the recovery plan anticipates city action to reduce expenditures or increase revenue to make up differences not achieved. As coordinator, we will be preparing suggestions to the city to satisfy requirements of the recovery plan as far as expense reductions or revenue increases."
While the city can adjust its budget, it cannot change property taxes that have already been struck and billed for this year. Other taxes, however, such as the city's wage tax, could be changed, although a raise there seems unlikely because it is already the highest in the county, at 2.4 percent for the city and 1 percent for the school district, for a total wage tax on city residents of 3.4 percent.
Mrs. Evans flatly rejected any notion of raising the wage tax saying, "That idea is completely off the table. It's out of the question."
She said of PEL and the recovery plan, "Their expectation is that when we fall short it will be made up with tax increases. That's where we part ways. Tax increases are not my solution. The attitude has to be we're going to shake the bushes, we're going to leave no stone unturned, we're going to get every dollar we can into this city" from alternative revenues.
Contact the writer: jlockwood@timesshamrock.com
Editor's note: This story has been corrected from its original version due to an error. The city has a 2.4 percent earned income tax and the school district has a 1 percent wage tax, for a total wage tax of 3.4 percent.