May 12—Most people who work in Scranton would again face a tripled annual local services tax of $156 under legislation city council introduced Tuesday.
The proposed ordinance to maintain the tripled LST for 2021 retroactive to the beginning of the year comes after Lackawanna County Judge Thomas Munley approved in late April Scranton's request to do so. A tripled LST, allowed under a 2014 revision to state Act 47, is part of the city's financial recovery plan but requires annual court approval while the city remains under Act 47 oversight.
Scranton previously received court approvals for an LST of $156, three times the base rate of $52 per year, for each of 2015, 2016, 2017, 2018, 2019 and 2020. About 30,000 workers pay the tripled LST, which is expected to generate about $4.95 million this year. Workers earning less than $15,600 annually are exempt.
Scranton is slated to exit Act 47 in January and shed the financially distressed designation it's carried since 1992. But the city can continue levying the tripled LST after it exits the program for financially distressed municipalities as long as its pensions funds are rated moderately or severely distressed under state Act 205, the distressed pension recovery law.
Scranton's aggregate pension fund, which includes the police, fire and nonuniform pension plans, is moderately distressed, according to a state Department of Auditor General compliance audit released in January. That audit covered the period of 2018 through 2019.
If the city maintains the tripled tax post-Act 47 — which the Pennsylvania Economy League, Scranton's Act 47 financial recovery coordinator, recommends — it would be obligated to use all LST revenue generated above the $52 base rate toward its annual required contribution to its three pension plans, known as the minimum municipal obligation.
Scranton's MMO for 2021 is $12.47 million, about $3.92 million of which will be covered by state aid. It's 2022 MMO remains to be seen.
"The city still needs that enhanced LST post-Act 47," PEL senior research fellow Gerald Cross said when reached Tuesday. "In our projections of the city's financial stability, we assume the continuance of the ($156) LST as long as the city met the requirements of pension distress."
Maintaining the $156 tax under those circumstances after exiting Act 47 would not require court approval, Cross said.
Mayor Paige Gebhardt Cognetti's administration is exploring the potential of continuing the tripled LST post-Act 47 as it considers that and other potential revenue sources in preparation for the 2022 budget, Business Administrator Carl Deeley said.
"I think it's important to say that it's in conjunction with the other revenues, because obviously we're looking at the other revenue sources and the balance of those," he said.
All five council members agreed continuing the $156 LST after Scranton exits Act 47 is necessary to ensure the city's improved financial position is sustainable. Council President Bill Gaughan called the tripled LST "a tool that we have to use."
Because Tuesday is primary election day, council will next meet Monday. Council's virtual caucus session will begin at 5:45 p.m., followed by its virtual meeting at 6:30. Council will return to in-person meetings at City Hall in June.
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