Scranton Residents Plead for Bankruptcy vs. Higher Taxes; Different Than Detroit

City officials in Scranton Pennsylvania have ignored pleas from residents pleading for bankruptcy.

Instead, the city raised property taxes and trash fees nearly 60% and tripled rental registration fees. The city's school district, which faced a $4-million deficit, raised taxes 2.4%. The City Council, which in 2012 passed a 5% amusement tax on live entertainment, is now discussing a 10% drink tax.

As a result, taxpayers who can, flee the city.

The LA Times reports For Scranton residents, bankruptcy is an inviting option

When Detroit filed for bankruptcy, hundreds of residents took to the streets to protest what they saw as a drastic approach to fixing the city's budget problems.

But in this hilly town of 76,000 in northeastern Pennsylvania, residents have a different view of Chapter 9: They want the city to declare bankruptcy. And soon.

"The silent majority would like to see bankruptcy," said Bob "Ozzie" Quinn, president of the Scranton and Lackawanna County Taxpayers Assn. "Basically, it's down to a point where people cannot afford to pay the taxes and are moving out of town."

The City Council, which in 2012 passed a 5% amusement tax on live entertainment, is now discussing a 10% drink tax. The city's parking authority is in receivership, and it recently privatized its parking meters: The company in charge upped rates and extended meter hours to 6 p.m., which bar owner Mert Gavin says has motivated workers to skip happy hour and head home to the suburbs straight after work.

"I am one of the last two bars that's still downtown. Tink's is gone. Whistle's is gone, Banshee's is gone, Molly Brannigan's is gone," said Gavin, who runs Mert's. "Do they expect I'm going to bail the city of Scranton out myself?"

The taxes are especially egregious to some because so many of the city's residents are elderly and living on fixed incomes. The median household income in Scranton is $37,000, and nearly one-fifth of residents live below the poverty line.

The city's financial problems were accelerated by a 2011 Pennsylvania Supreme Court decision that found that the city owed its police and firefighters unions back pay — about $21 million. The settlement money became due in 2013, but the city bickered over how to come up with the funds for so long that Moody's warned in November that Scranton faced the threat of default.

"It's been nonstop. They raised the water fees, the electric, the gas," said Richard Laytos, a Scranton native who moved back to the city to retire in 1997 after 44 years in New Jersey.

Gary Lewis, who once ran a blog, scrantonisbroke, that urged city leaders to consider bankruptcy, took a drastic step when they failed to do so: He moved out of the city where he'd spent his whole life.

"I did the math — realized how much it was costing me to live in the city," said Lewis, who now lives in Indiana, where he says he makes $2,500 more a year because of lower taxes. "That's the story of my generation. There's a lot of kids like me, who grew up, went to college at Scranton, but they turn 22 and move out of the city, and they don't move back because it's not a financially attractive proposition."

bankruptcy won't solve the city's financial woes, said John Judge, president of the local firefighters union. "It's a horrible idea — you take local control out of the hands of policymakers, and put it in some judge's hand," he said.

Neither the city's new mayor nor his predecessor, Chris Doherty, returned calls for comment, but former City Council President Janet Evans said she and Doherty had been determined to avoid bankruptcy.

"We are in a different situation than Detroit," she said. "We were willing and able to do everything within the scope of our authority to continue the recovery of the city of Scranton until it sits once again on sound financial ground."

My Thoughts

Officials in city hall are either complete financial-morons, beholden to the unions, or beholden to their own pension plans that would take a hit if the city declared bankruptcy.

I suspect a combination. 

Different Than Detroit

"We are in a different situation than Detroit," says former City Council President Janet Evans.

Indeed.

Detroit is better off.

In bankruptcy, Detroit has a chance to dump union contracts and onerous pension promises. Detroit may have hit bottom.

The economic-jackasses in Scranton are going to extract every ounce of blood they can from taxpayers, then eventually declare bankruptcy anyway.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com