Scranton's recovery plan process, under way for seven months, has come to a fork in the road - with a $2.2 million state aid package on the line that could cover two full payrolls and buy the city time to secure financing to keep the city afloat this year.
Mayor Chris Doherty and council President Janet Evans on July 27 finally reached a consensus on revising a recovery plan. Their pact calls for less than half the 78 percent real-estate tax increases over three years that the mayor proposed in May, with the difference to be made up by alternative revenues the council wants instead, such as a commuter tax, increased donations from nonprofits and parking-meter enhancements.
Because much of the alternative revenues, including a sales tax that would first have to be approved by the state Legislature, are speculative, the city's state-appointed recovery coordinator, Pennsylvania Economy League, wants the city to replace any money that does not materialize with something concrete, namely real estate taxes.
The city now has a choice of two routes to take.
- Mrs. Evans last week told PEL that the city is in the recovery-plan driver's seat, and as for the mayor/council consensus plan, PEL could either "take it or leave it."
- Mr. Doherty said the city could both enact the mayor/council consensus and include the PEL caveat that if alternative revenues fail to materialize, the city would have to raise additional taxes.
Efforts to reach Mrs. Evans on Monday were unsuccessful, but the mayor expressed optimism that the latest obstacles would not lead to a dead end.
"The lines of communication are always open," Mr. Doherty said. "The council and administration are committed to getting the other revenues."
A recovery plan is a component of state Act 47, under which Scranton has been designated as financially distressed for 20 years. The city amended its original recovery plan in 2002, but further updates became stalled during the city's lengthy arbitration court battles against the police and fire unions that the unions won in a landmark state Supreme Court ruling in October.
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, Mr. Doherty has said.
After months of stalemate, the mayor and Mrs. Evans agreed July 27 on a plan to increase real estate taxes by 33 percent over the next three years, or less than half of the 78 percent in real estate tax hikes Mr. Doherty proposed in May and that council staunchly opposed. Now, the difference would be made up with the alternative revenues.
Before this consensus was reached, DCED had offered the city a $2.2 million aid package as an incentive to finally reach an accord. The consensus was sent to PEL, which under Act 47 must approve any recovery plan revision or amendment for it to take effect, However, PEL panned the consensus Thursday because its alternative revenues are uncertain. DCED, which oversees PEL, also on Thursday extended its deadlines for the city to receive the $2.2 million in aid. The city now would have until today to reach a new consensus between mayor and council, and until Aug. 21 to adopt a revised plan, DCED spokesman Steve Kratz said. The initial deadlines had been Aug. 1 to reach an agreement and Aug. 15 for legislation.
"At this point, we are kind of in a holding pattern," Mr. Kratz.
DCED, as well as PEL, remains in contact with elected officials in the city "and continues the positive dialogue of putting together a viable recovery plan," he said. "We're just going to continue working toward the process of developing a plan."
Despite PEL's concerns, council last Thursday forged ahead with introducing the tentative revised plan anyway, without PEL's okay. A public hearing and second reading are expected to be held this coming Thursday and a third reading and vote on adoption would be held on Aug. 16, Mrs. Evans had said.
But the $2.2 million "financial aid is contingent on them adopting a long-term viable plan acceptable to PEL," Mr. Kratz said. "Beyond that, DCED is limited in (imposing) sanctions (against the city), which we don't want to do."
PEL Executive Director Gerald Cross said, "The only recourse is to coordinate with the DCED and all parties involved to produce an effective and reasonable recovery plan."
If that does not happen, it appears that the city could again limp from payday from payday and have vendor bills go unpaid. Unpaid bills yesterday stood at $4.9 million, city Business Administrator Ryan McGowan said. They included some $750,000 in back pay that's still owed to employees from the July 6 payday when Mr. Doherty slashed nearly 400 workers' salaries to minimum wages due to the city's cash-crunch crisis.
Blue Cross of Northeastern Pennsylvania also has been extending employee health-care coverage on a two-week basis, as the city has continued to scrape up enough cash to make payments to keep coverage from lapsing, Mr. McGowan said. Blue Cross extended its last deadline for payment to this coming Friday, Mr. McGowan said.
"We're going to try to have to get them another check out" this week, to get coverage extended again, he said.
If the DCED aid package is pulled, it won't be known until next week whether the city would be able to make a full payroll on the next payday of Aug. 17, he said.
Contact the writer: jlockwood@timesshamrock.com