By MICHAEL COOPER and MARY WILLIAMS WALSH
When the city of Scranton, Pa., found itself down to its last $5,000 in the bank last week, its Democratic mayor took a highly unusual step: he unilaterally cut the pay of city workers — including police officers, firefighters and even himself — to the minimum wage, just $7.25 an hour. Now the city’s unions are fighting for their promised pay in court.
“The teenagers who work at the ice cream stand not far from my house, they make $8.50 an hour — that’s a dollar and a quarter more than I now make,” said John J. Judge IV, a 10-year veteran firefighter who is the president of the Scranton local of the firefighters’ union.
But Scranton finds itself in a position that is unusual even in this era of widespread budget pain: it has nearly run out of cash and, so far, no one is willing to lend it more.
As the city has fallen behind on its bills, it has received warning letters from the company that sells it gasoline for its police cars and fire trucks; the landfill where it dumps its garbage; and even its water company, which threatened to cut off service, according to a lawsuit that Mayor Christopher A. Doherty filed against Scranton’s City Council last month in an attempt to force it to adopt his financial plan, which calls for raising taxes.
Mr. Doherty warned in the suit that the city’s “basic daily operating functions” could be compromised, “placing the city’s residents in immediate peril and undermining their health, safety and public welfare.”
The troubles of Scranton, a city of 76,000, are a combination of long-term structural decline, a mayor and City Council at loggerheads and, since June, an inability to borrow. A majority on the Council turned Scranton into a financial pariah this spring by refusing to honor a guarantee that the city had placed on the revenue bonds issued by its parking authority. The municipal bond market took its refusal as a sign that the city might also default on its own bonds, and cut off credit.
The only bank still willing to help Scranton raise money pulled out of a $16 million short-term financing deal, leading to a cash crunch. The Council later said it would honor the guarantee after all, but the city remains unable to borrow.
Unions representing city workers won a court injunction last week ordering the mayor not to cut their pay. But the city issued the smaller checks anyway last Friday, and the union went back to court on Tuesday, asking a judge to hold the mayor and the city in contempt of court. It also challenged the city for not paying overtime and for cutting disability payments.
“They are running out of laws to violate,” said the lawyer representing the unions, Thomas W. Jennings, who said the workers were caught in the middle of the battle between the mayor and the City Council. “We are literally caught in the cross hairs between the Hatfields and the McCoys.”
Mr. Doherty, who did not return calls seeking comment, told The Times-Tribune of Scranton last week that the city could not afford to make its payroll. “What am I going to pay them with?” he asked.
Gary Lewis, a financial consultant living in Scranton who follows the developments closely, said that last Thursday, July 5, the city had only $5,000 on hand. By Monday, he said, the total was up to $133,000 — but still nowhere near enough to pay its unpaid bills.
Richard A. Ciccarone, a managing director at McDonnell Investment Management, an investment advisory firm, said Scranton’s problems were rare.
“The fact that they have only $100,000 cash, that’s really next to nothing,” said Mr. Ciccarone, who tracks how much cash cities have on hand. He said that last year less than 2 percent of American cities found themselves without enough cash to cover more than 30 days of expenses; the typical city had enough to last 246 days. Scranton, he said, appeared to have only enough for a day.
Mr. Judge, the president of the firefighters’ union, said that his last paycheck was about a third of what he usually gets, and that some colleagues were already worried that they would not be able to pay their bills, or that their credit would be ruined. “When you’re a firefighter or police officer, all your tension has to be focused on the job ahead — it’s an emergency situation, it’s dangerous,” he said. “And now they’ve got all this on their minds.”