Scranton has a problem. A very big problem. As part of the Supreme Court ruling in favor of the city’s unions, the administration needs to figure out how to pay off our current and former employees. The total award was somewhere in the $30M neighborhood, but the unions graciously cut the amount in half (in exchange for an average 4% raise per year for the next three years). The city budgeted $17M for the award in 2013.
Then the fuzzy math kicked in: the award rose to $21M by July of 2013. Nearly thirty days after the deadline to pay, the city was still guessing at the cost, and accruing interest at 6%, or roughly $100,000 per month.
Our fearless Mayor assured the city that the award would be paid once the amount was finalized by an actuary (why this was not done during the 2013 budget process is another story). The money, to be obtained via a sale-leaseback, would sure be available to us.
Well, friends, here we are. It is now September 2 and a bond offering, if it is even possible, has disappeared from the news. A redline – a preliminary document filed prior to closing – has not been made public and City Hall had grown suspiciously quiet.
I think the reason for the radio silence is the cost. See, we also need to finance a $5.1M pension obligation. That means the total amount to be borrowed is about $26.5M.
BUT WAIT THERE’S MORE (I am so sorry for the Cities property owners): we usually have to offer a 3-4% discount and, of course, Boyd Hughes and his ilk need their pound of flesh (which usually totals about a million bucks; nice work if you can get it). That means total principal will be about $28M.
Want to know the minimum Cost of that? At 8%, it’s about $2.5M per year, plus some amount for principal reduction. $3.5 is safe bet.
Keep in mind, this is in addition to our $15-20M deficit in 2014.
Would you make that loan? I wouldn’t. Not without a 150% tax hike.
Remember: point to the doll’s wallet when they ask where the city touched you.
Consolidated IZA 