Scranton Levies Commuter Tax, Considers Selling Sewer System to Cover Pension Debt

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The Pennsylvania city of Scranton is scrambling to avoid bankruptcy brought on by its mounting pension costs, and in the process is turning to some less-than-conventional sources of revenue.

The city has already levied a commuter tax on non-residents who drive into Scranton for work. Now, the city is considering selling its sewer authority. From Bloomberg:

The former manufacturing community will tax commuters starting next month and may sell its sewer system to buttress its retirement funds. The city has 23 cents for every dollar in retiree obligations, down from 47 cents in 2009, according to state data. Without a fix, Scranton may go bankrupt in less than five years, said Pennsylvania Auditor General Eugene DePasquale.

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Scranton’s pension costs are rising. The city’s contribution next year will reach $15.8 million, from $3.4 million in 2008, data from the city and the auditor general show. Pension expenses will take up 16 percent of the budget in 2018, from 9 percent in 2006, according to a July presentation by Hackensack, New Jersey-based financial consultant HJA Strategies LLC.

The seat of Lackawanna County, Scranton passed a 0.75 percent income tax on nonresident commuters effective Oct. 1. The measure would generate at least $5 million annually, based on county data on tax collections, and the funds would go toward pensions, [city business administrator David] Bulzoni said.

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Another option is to sell the sewer authority, which has started a review of the proposal, Bulzoni said. In addition, municipal officials this month met with union representatives to discuss contract features that are depleting pension assets, Bulzoni said. He declined to elaborate because he said some solutions will involve bargaining.

The city’s pension funds were collectively 23 percent funded in 2013.

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