A $2.2 million state aid offer to cash-strapped Scranton would be yanked if the mayor and council adopt a financial recovery plan that has not first been approved by the city's state-appointed recovery coordinator, a state official said Friday.
Rescinding the aid offer is not the goal of the state Department of Community and Economic Development, but it would have no choice if the city's final word to its recovery coordinator, the Pennsylvania Economy League, on a mayor/council recovery-plan proposal is 'take it or leave it,' said DCED spokesman Steve Kratz. The state aid offer is contingent on the mayor and council reaching consensus on and adopting a recovery plan that is acceptable to PEL, he said.
"We're hopeful that things will get back on track and the mayor and council will continue to have dialogue with PEL, in order to produce a viable recovery plan," Mr. Kratz said.
An updated realistic recovery plan showing how Scranton would restore fiscal stability and be able to repay loans is required by lenders before they again would provide financing to the city, Mayor Chris Doherty has said.
After months of stalemate, the mayor and council President Janet Evans reached an accord July 27 on a proposal to increase real estate taxes by 33 percent over the next three years, which is less than half of the 78 percent in real estate tax hikes Mr. Doherty proposed in May and that council staunchly opposed.
Instead of larger tax hikes, the new mayor/council proposal contains various alternative revenue sources, such as commuter and sales taxes and significantly increased voluntary contributions from nonprofit organizations.
This "consensus" plan was sent for review to PEL, which under the state Act 47 law would first have to approve it before the city could implement it, officials said.
On Thursday, shortly before the council meeting, PEL issued to the city a sobering letter detailing the city's dire financial plight and expressing concerns that much of the proposed plan's alternative revenues are far from guaranteed. PEL wants the mayor and council to identify backup revenue sources, most likely property tax increases, should alternative revenues not materialize.
Council President Janet Evans - in no uncertain terms - said the city's proposal is final, and PEL can "take it or leave it." She characterized PEL's letter as a rejection of the mayor/council consensus.
Mr. Kratz said, "We're seeking some clarification and fallback scenarios if the revenues that are out of the city's control do not come to fruition. PEL wants to continue the dialogue with the city to not reject the plan but to refine the plan."
The council forged ahead Thursday with introducing an ordinance, on a 3-1 vote, to implement the revised plan even though it lacks PEL's OK. A public hearing and second reading are expected to be held Thursday, and a third reading and vote on adoption would be held Aug. 16, Mrs. Evans said.
However, that appears to be akin to the city putting its revised-plan horse before the PEL cart. Under Act 47, only the city's Act 47 coordinator (PEL) can amend the city's existing recovery plan, Mr. Kratz said. And typically only after PEL gives its blessing to such a revision would the mayor and council then take up a legislative ordinance to implement the new plan, he said.
Asked whether a council ordinance adopted without PEL's approval would have any binding effects, Mr. Kratz declined to comment, saying, "I don't want to cross that bridge until we get there."
Whether another stalemate - this time pitting mayor/council against PEL/DCED - ensues and unravels recent progress remains to be seen.
Mr. Doherty said the city should put the PEL requested backup revenues into the plan and expressed confidence that the alternative revenues would be realized.
"PEL and DCED are saying, 'You have to put the worst-case scenario in case you are not going to get anything' (in alternative revenues), but we are going to get those," the mayor said. "I think we can get through this. We're very close here and it's just a matter of working together. This is not about confrontation. It's about working together."
The city has been designated as financially distressed under Act 47 for the past 20 years. While Act 47 makes PEL a required party to the process, even if the mayor and council accede to PEL requests for real revenue sources, Act 47 has no real teeth to force the Home Rule Charter city to abide by a recovery plan, the mayor noted.
"We're the leaders of the city. They're (PEL) not," Mr. Doherty said.
Contact the writer: jlockwood@timesshamrock.com