Exclusive: As cities struggle, Scranton in Pennsylvania to triple a local tax

Reuters News
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Posted: Nov 11, 2014 7:32 PM

By Hilary Russ

NEW YORK (Reuters) - The former steel and coal town of Scranton, Pennsylvania, will triple a local tax next year as it and some other U.S. cities struggle to recover from the financial crisis, the city's business administrator told Reuters on Tuesday.

Scranton's local services tax, a flat tax on all who work in the city, will triple to about $3 a week from $1 a week, said administrator David Bulzoni.

A judge must still approve the tax hike, which could go into effect the second quarter of 2015, but it is not clear how much money it would generate. Bulzoni did not disclose details of the budget, which he expects to release on Wednesday.

Known as the Electric City and the setting for the television series "The Office," Scranton is one of many U.S. cities that failed to reinvent itself after steel and related industries starting crumbling about 50 years ago.

The Pew Charitable Trusts reported on Tuesday that of 30 major U.S. cities, 18 had revenue declines from 2011 to 2012, largely due to still-depressed property tax collections and cuts in state and federal aid.

Financially distressed cities are facing tax hikes and layoffs to pay for pension obligations and other costs as revenues stagnate.

Higher taxes could come even as voters in this month's mid-term elections sent a message that they were fed up and looking for ways to stem the increases.

"The citizens are really taxed to the gills in terms of paying their fair share," Jeffrey Snyder, a vice president with Cammack Retirement Group in New York. "It would be very difficult to make up the unfunded (pension) liabilities with taxation."

Under former Mayor Christopher Doherty, Scranton grabbed international headlines in 2012 when it cut police and firefighter pay to minimum wage for two weeks because it could not make payroll.

Last year, Doherty closed a $20 million budget gap with steep tax and service fee hikes after battling the city council.

The city of 76,000 residents has a new mayor and some new council members but still has a pension system on the verge of collapse. Mayor William Courtright did not return calls for comment.

The funded level of its pension for firefighters sank to 16.7 percent as of Jan. 1, 2013, according to an August report by the state's auditor general, despite the city being under state oversight for 22 years.

The law that provides state oversight was revamped last month to include a deadline for the Pennsylvania local governments that have languished in the program for decades.

Scranton now has until 2020 to improve its finances or else face severe punishment.

Millage rates are also undergoing a complete re-evaluation, Bulzoni said, so property taxes could rise, too.

(Reporting by Hilary Russ; Editing by Lisa Shumaker)