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Monday, August 4, 2014

Commentary on Tom Borthwick's Posting, RE: Scranton's Commuter Tax

Below are my thoughts and commentary related to Tom Borthwick's recent blog posting, On Scranton's Commuter Tax.

You can link to Tom's original posting HERE.

For my own ease of posting, I've liberally quoted from Tom's work; his words are in light text, mine are in [dark red bracketed text].

Here goes.
* * * * * * * * * *

[All told, I think Tom completely and glaringly minimized (at best) one key point:  namely that Scranton's fiscal plight is at least partially (and in fact mostly) the result of gross mismanagement by city leaders over a period of time that spans decades.  Yes, he does say the following:

"Scranton hasn’t helped its fiscal nightmare for a good 3 decades."

...but that's it.  Nothing about punitive business and wage taxation.  Nothing about about managing costs.  Nothing about knowingly making promises to city workers that city leaders knew could never be kept.  Nothing about that which all of us who are adults have to do all the time, namely live within our means.  In fact, based on Tom's posting, you would think that every single city in Pennsylvania should be Scranton's equal in the fiscal nightmare department.  The truth though is that most aren't because they were able to manage their fiscal houses in a way that prevented (or at least forestalled) much of what has befallen Scranton.

On to the specific commentary.]

Nobody likes taxes, period.  And nobody likes taxation without representation.  But wait, don’t we elect the people who write up these laws that allow for commuter taxes?  Never you mind that. [Yes, we do elect them; they then write up rules to allow for commuter taxes that they then seek to undermine.  There's a word for what is it?  Hmmmmm, oh now I remember: Politics!  By playing smaller towns/boroughs against cities, hopefully voters pay even less attention to all the special interest padding that is happening in Harrisburg.]
Ah, the hell with it.  I won’t be snarky.  Listen.  It’s the state’s fault.  

[No, it's not entirely the state's fault.  

Did the state REQUIRE manning clauses in city employment contracts?  

Did the state REQUIRE specific benefit packages for uniformed employees?  

Did the state REQUIRE that they city not layoff employees?  

Did the state REQUIRE work rules that, for decades, glaringly favored employees at the expense of efficiency gains that could have helped the city?

No, those were all decisions made by CITY leaders who, over decades decided to write checks for things that they KNEW were not affordable.  Was it a secret that the city's tax base was shrinking?  Of course it wasn't, but yet the city continued to be run as if the population was over 100,000 residents.] Simple as that.  Why, you ask?  A ton of reasons.
  • State policy encourages business flight from the City.  Shall we level another mountain in Jessup and build another business/industrial park?  Taxes are lower there, businesses are incentivized to leave, the City is required to raise taxes in order to cover the gap.  Scranton has the infrastructure to support business and industrial development, but there isn’t any guidance or policy from the state that pushes development into the city.  [Agreed, somewhat.  Where we probably disagree is in the impact of the overall fiscal management of the city, which has clearly played a role in business flight from Scranton.  Over decades, Scranton continued to rely on things like the gross receipts tax (where a business owner is taxed even if they lose money), which is quite frankly the worst possible taxation idea, ever.  Couple business un-friendly taxes with a punishing wage tax and is it any wonder those businesses want to move to Jessup?  Now I do agree that the state should not be encouraging environmental degradation, especially when there are brownfields available in Scranton, but alas we then run into the whole "Scranton's taxes discourage business" argument again, and city leaders bear responsibility for taxation levels.]
  • Townships and boroughs can rely on the state police for their services.  They have volunteer fire departments, rather than paid, professional ones.  That’s a lot of savings cities don’t get.  [Absolutely agreed.  The state should not allow smaller governments to shun their responsibility to provide basic public safety services.]
  • The State can take action to combine all of the seemingly endless government pension systems across the Commonwealth, which would help solvency not just in Scranton, but everywhere.  [Absolutely agreed.  I'll go one step further:  the state could be taking action to combine many things in the name of efficiency.  For example, there is no reason why West Pittston, Exeter, Wyoming, West Wyoming, etc. all have to pay for separate police forces, recycling programs, etc.]
  • Since State law allows for non-profits to avoid taxes, the State should be reimbursing Cities the lost revenue.  Currently, taxpayers simply absorb it through increases to cover the gap.  [Where would the revenue for this reimbursement come from?   That's a trick question because it all comes down to simply playing a shell game with tax dollars.  As Governor Tom Corbett knows well (via his punitive educational policies), simply shifting a tax burden from one level of government to another is bad policy and bad for taxpayers.]
Some think that blaming Harrisburg is a cop-out and I understand this.  [It is and it allows for a convenient way of avoiding the offense of local elected officials and unionized employees who will, eventually, have to bear the burden of Scranton's fiscal nightmare (whether they like it or not).] Scranton hasn’t helped its fiscal nightmare for a good 3 decades.  [I'd would like to see a posting that would expand on this point further. Scranton passed its own budgets for decades knowing full well that they were not worth the paper they were written on.] But being hamstrung by a State that cares little for cities certainly hasn’t helped. [The Pennsylvania legislature cares mostly about protecting and promoting the political fortunes of legislators, period.]
In fact, the state is actively attempting to hurt the city with the full support of our very own State Senator, John Blake.  Over 40 municipalities statewide have had this commuter tax for years.  As soon as Scranton needs it to get its house in order, nope.  Nada.  The hell with all y’all.  I’ll be writing in Cthulu come November, because why vote for a lesser evil?  [I agree with Tom in that Senator Blake rarely has helped Scranton, but let's also not forget that he was also the hand-picked successor of a convicted felon, (jailed) (former) Senator Bob Mellow.  Are those two points related?  Probably not, but I do think that Senator Blake has worked hard to shake off the perception of a Bob Mellow's my job to remind one and all of where he came from, as facts are facts.  Anyway, my own opinion is that Senator Mellow Blake is playing politics with the issue, knowing that stonewalling this kind of tax will be wildly popular with non-Scranton voters (because Scranton voters will vote for just about anyone who is a Democrat, like Senator Mellow Blake, anyway).  By the way,I actually don't think the state should be encouraging commuter taxes, but to poison one option without offering an alternative is simply disgraceful acting on the part of Senator Mellow Blake.]
Regardless, it’s more than that.  The County can’t function without the City.  Workers here do indeed use our roads.  If there is an accident, our cops.  Our fire department.  Our infrastructure supports the major hospitals of the region.  The universities.  [Yes, these groups do use Scranton infrastructure, but all of us use the infrastructure of many different municipal governments.  Should I be greasing the borough of Taylor because I drive through it on the way to work Monday-Friday?]
The temporary tax, at .75%, isn’t much to help a beleaguered city.  [I've looked at the math, and it's clear that it is IMPOSSIBLE for that tax in and of itself to do what it is designed to do, namely create fully funded pension plans.  By that measure it will be far more permanent than temporary.]  People in this county should want to see the city succeed.  This isn’t a competition where one borough steals business from another with KOZs and lower taxes.    We are all in this together.  Or at least we should be.  [Agreed, however, commuters shouldn't be liable for the governmental ineptitude of city leaders.  Case in point:  the 22% funding level for uniformed public safety employees pension plan didn't just happen overnight.  It took years and multiple city administrations (both mayors and councils) to get it to this level.  These were mayors and council members that no commuter ever got a chance to elect or vote out of office, yet these same commuters are now having to help pay for those mistakes.]
Instead, I keep hearing about boycotting city businesses.  That really won’t be helpful, because, aside from harming the innocent, that will simply mean the city is out that much more money in things like business and mercantile taxes.  [Boycotting city business is quite frankly stupid, as it will only make matters worse.]
To the credit of the new administration, they’ve been trying to get the house in order.  [I'm sorry, I just laughed myself into a stupor.  How is demanding that commuters pay a new tax before insisting on benefit changes from uniformed city employees an example of "getting the house in order"?  Now I genuinely feel bad for the police (and to a far lessor extent  the firemen) in Scranton, as they were given promises that city leaders KNEW COULD NOT BE KEPT, but this is a classic tale for city employees of "be careful what you ask for".  Over years these employees yielded considerable clout in city governance, and yet no one was actually thinking about the long-term financial impact of successive contracts awarded to these same employees.]  This is one step in that direction.  The state hasn’t acted to aid us, so we’re taking what avenues we have available.  [The state sold Scranton a "bill of goods" when it comes to failed recovery plans.  Shame on them, but the greater shame is on Scranton's elected leaders who have knowingly allowed the city to become functionally bankrupt in the first place.] We are trying.  [Scranton can try all it wants, but at the end of the day it works out to this:  Scranton has been on a decades long spending spree, and now the bill is due.]  And it would be wonderful if people supported us.
[Scranton is bankrupt, as liabilities far exceed assets and there is insufficient revenue to meet on-going expenses.  All that's left is for the formal filing.  Mark my words:  none of these measures will actually help over the long term.  Scranton's situation is not much different than an individual who gets into severe credit card debt, goes on a program to help reduce that debt, but then continues charging up a storm.  As I have said repeatedly over the years, Scranton doesn't have a revenue has an expense problem...and the situation will not improve until that expense problem is addressed.]


Tom Borthwick said...

Don't worry, Steve, I'll probably take the time to post more about what Scranton hasn't done and can do.

As for the administration's efforts, they actually exist. I had some of the work I've done on the Parking Authority in mind. It would've been way too much to post, but I'm sure it'll be coming out soon.

The state absolutely is a major part of what's going on here and I was inspired to write the post because of Blake's decision to hamstring us, even though I didn't focus on him. So I got out what I needed to get out. We (Scranton Residents) are left wandering in the dark, basically. It sucks.

Stephen Albert said...

Tom...fair enough. Thanks, as always, for reading (and, as always, for raising my blood pressure).

As for Senator Blake, well, it does kind of suck to be called out for playing both sides of an issue, but that's precisely what he is doing. Fair enough to oppose the commuter tax (all be it in his case for what I think are purely political reasons), but the man has proposed nothing as an alternative. Hell, if he came out in favor of Scranton declaring bankruptcy that would at least be something.


- Steve (former Scranton resident)

PS - Life is good in a small borough & it's kind of interesting being having the 'outside looking in' perspective.