Council Refuses to Fund Debt Payment
Scranton City Council made a bombshell decision on Thursday. They chose not to appropriate nearly $1 million to the city’s parking authority, money that was needed for a debt payment that is due Friday.
Some warn that the vote could have dire circumstances for the cash-strapped city.
Council members admit they don’t know exactly what will happen next.
By Friday, the Scranton Parking Authority will officially be in default on a nearly $1 million debt payment.
One councilman said the vote puts the future of the authority, and maybe the financial stability of the entire city, in jeopardy.
The executive director of the Scranton Parking Authority joined the city’s budget administrator in an eleventh hour plea to city council, to release more than $900,000 needed for a debt payment that is due on June 1.
Speaker after speaker urged council to reject that request.
By a three to one vote that’s exactly what council did.
As of Friday, the parking authority will officially be in default of its obligation, and council members admit that default could have wide-ranging implications.
The mayor’s latest recovery plan calls for steep tax increases in order to secure a $16 million bank loan, which he said the city needs just to pay its bills for the remainder of 2012.
With the parking authority defaulting on a loan that the city is obligated to pay, Councilman Bob McGoff worries no bank will loan Scranton any money and bankruptcy may be the next option.
“Does this vote send the city into bankruptcy? I believe that if it goes into default and we go to court that the unfunded debt that we’re looking at to receive will not be available. And we’re looking at $16.5 million in unfunded debt that’s in the budget, and if we can’t get that, I don’t know how we make up $16 million,” said McGoff.
Council said the parking authority’s insurance company will now be on the hook for paying the debt that is due on Friday. Councilman Jack Loscombe said the insurer could go so far as to appoint a receiver to take over operations of the authority and possibly sell off its assets, meaning the Scranton Parking Authority would basically no longer exist.