Whether Scranton gets a commuter tax next year will hinge on whether a panel of judges believes the city has tapped out its own residents and now has no recourse but to tax nonresidents working in the city.
Scranton's proposed 2013 budget calls for a 12 percent real estate tax increase on city taxpayers, among other revenue generators. One of the others would be a 1 percent commuter tax that is estimated to raise $2.5 million for the city next year. If there were no commuter tax to bring in that $2.5 million from nonresidents, the city instead would have to raise real estate taxes on city residents by an additional 18 percent in 2013 to make up the difference, Councilman Frank Joyce has said.
But opponents believe that simply keeping a tax hike on city residents lower than it otherwise could be does not justify a commuter tax.
"Here's my problem. I don't have a full understanding of what the city's trying to accomplish, except trying to get money" from commuters, said Newton Twp. Supervisor Ron Koldjeski, a member of an opposition group called Scranton Taxing Our People. "Have they done everything in their own arsenal to help themselves before going outside the city? Did they exhaust all the avenues to right their ship before they go outside their boundaries?" he asked.
Those are the main questions to be addressed by a panel of three Lackawanna County Court judges on Dec. 10, when they will hear the city's petition for a commuter tax next year.
A 1 percent earned income tax on people who work in the city but live elsewhere is one of the key alternatives to property tax hikes under the city's revised Act 47 recovery plan adopted Aug. 23. The city needs approval from the court to impose a commuter tax each year that it may exist. Along with $2.5 million next year, a commuter tax is estimated to generate $4 million in each of 2014 and 2015 and then be discontinued, city officials have said.
The city has traveled the commuter-tax road before, but this time it could be more of an uphill climb.
The city imposed a commuter tax in 1993-94, when a 0.6 percent tax was imposed. That tax was challenged in county court and rejected by a panel of judges who cited witnesses blaming the need for the tax partly on "irresponsibility and mismanagement on the part of the (city's) political establishment."
The judges at that time said they had the right to apply a judicial brake to the city's taxing power if they found a tax unnecessary.
However, the city appealed and won in state Commonwealth Court, and opponents failed to convince the state Supreme Court to hear a further appeal. Though the commuter tax survived, it was unpopular and divisive and discontinued after 1994.
In 1996, former Rep. Frank Serafini legislated a more rigorous, three-pronged test for the city to ever be able to secure court approval for a commuter tax.
These hurdles require the city to show it has "substantially implemented" other parts of a recovery plan, including:
- Raising taxes and fees on city residents
- Taking steps to gain required approval from other groups such as courts, voters or unions
- Showing that additional city tax revenue isn't enough to balance the city's budget
City officials believe they have satisfied such requirements. Mayor Chris Doherty cited various revenue generators in the recovery plan and budget, including increases in the realty transfer, business privilege and mercantile taxes, a new amusement tax, possible imposition of a sales tax in 2014 and 2015, and hoped for significantly increased payments in lieu of taxes, known as PILOTs, from nonprofit entities, to name a few.
"We've raised taxes everywhere," Mr. Doherty said. "This (commuter tax) is not a permanent tax. It's a temporary tax and has to be approved annually" by the court.
A public notice of the city's commuter tax states, "The reasons for the increase to the nonresident earned-income tax rate is to raise sufficient revenue for the city of Scranton to meet its general operating obligations pursuant to its revised recovery plan. It is within the city officials' judgment that the increase in non-resident earned-income tax is necessary."
Earlier this month, STOP launched a website, Stopscranton.com, that seeks donations to fight the tax. The website lists as its participating communities the following: Archbald, Blakely, Carbondale, Carbondale Twp., Clarks Green, Clarks Summit, Clifton Twp., Covington Twp., Dalton, Elmhurst Twp., Fell Twp., Glenburn Twp., Greenfield Twp., Jefferson Twp., Jermyn, La Plume Twp., Mayfield, Moosic, Moscow, Newton Twp., Old Forge, Olyphant, Ransom Twp., Roaring Brook Twp., Scott Twp., South Abington Twp., Spring Brook Twp., Taylor, Throop, Vandling, and West Abington Twp.
The group appears to be gearing up for the long haul, meaning having to fight the tax not only next month when the court takes it up, but also in each of the next two years if the city seeks it for 2014 and 2015, as is expected.
Mr. Koldjeski said, "It could very well be that the court might find the city hasn't done enough due diligence to merit a commuter tax (for 2013), and next year the city will bring it out again" for 2014.
Contact the writer: jlockwood@timesshamrock.com