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Tuesday, November 19, 2013

Scranton's revenue problem is not the problem

Well, the initial turd hit the fan blades last week:  the Mayor of Scranton proposed increasing property taxes and the garbage tax (from $178/year to $300/year).  All told, I believe that the Scranton Times figured the total increase to be in the neighborhood of about 400% on the average city taxpayer.

It will not be enough.

Consider Pat.

Pat has a problem managing credit.  Specifically, Pat has managed to get so far into debt that Pat can no longer afford to make all of the credit card payments that come due.  Yet Pat continues to spend, using, of course, credit cards.  So what does Pat do?  Pat gets an evening job at the local Kwik-E-Mart.  The extra income is good, and Pat manages to get current on all of the credit card minimum payments.  But there is a problem:  Because Pat puts all of what is earned into bills (including making minimum credit card payments), Pat has no choice but to continue to use the credit cards for some of the daily expenses of life.  What's more, Pat still likes to buy non-necessities using a credit card.

Anyone think that the solution to Pat's problem is yet another job?

Of course not.  All the extra cash in the world will not solve Pat's problem, because Pat doesn't have an income problem.  Pat simply can't manage to live within a budget.  Pat is in capable of managing expenses.  Pat has an expense problem.

Pat is the City of Scranton.

The credit card bills are the debt the city has incurred over the years.  Include in this the insane award given to police and firefighters that will have to be of course adding to the city's debt.  For the record, the award was the direct result of Scranton's mayor following the advice of the Pennsylvania Economy League (PEL).  While I know it will not happen, it should be PEL that picks up the cost of this ill-decided "award".  Keep in mind though that Scranton was functionally bankrupt even before this award is factored into the mix.

All of the other bills incurred by Pat...utilities, rent, etc...are Scranton's operating expenses.

In the absence of fundamental changes in how the City of Scranton is managed, any additional revenue Scranton manages to pry from its residents will simply be sucked up like light into a black hole.  There will never be enough revenue to solve the city's problems precisely because the system isn't designed to mange simply incurs them.  The city's budget exists in large part to do just two things:

1) Pay employees
2) Make payments on incurred debt

Scranton's viscous cycle is that #2 is helping to pay for #1.  As #1 increases (with no end in sight, particularly under Mayor Courtright, who relied heavily on unionized city employees to get elected), #2 will  increase a well.  Where does it end?  Well what will ultimately happen is that the city will no longer be able to access credit.  It will not be able to do #2, then #1 falls to pieces.


zorcong said...

You nailed it. What the short-thinking, self-centered politicos fail to worry about is the fact that the growing debt service hangs over their municipalities like a vulture waiting to be fed.

Stephen Albert said...

Thank Mark. We have a lot of politicians in NEPA and few actual public servants, and based on recent elections that's not changing any time soon (at least in Scranton). What will change it all is when the the credit spigot gets eventually turned off. In Scranton's case, that will happen when even the union-owned banks stop lending it money.