Mounting pressure on the City of Scranton to file bankruptcy, supporters of Save Scranton, a group headed by founder Gary St. Fleur, and other concerned residents filed a response today against the city to stop tax increases, contending that it has been illegally overtaxing its citizens by millions of dollars every year.
The response was filed in reply to the city’s announcement that it would triple local service taxes, and in light of Scranton’s $500 million debt, as reported in a memo issued by the Municipal Research Department of Wells Fargo.
Representing plaintiffs, Attorney John McGovern explains that the Scranton government has been collecting Act 511 taxes beyond the legal limit for years. Considered the one of the City’s Primary Revenue sources, these taxes include Amusement Tax, Business Gross Receipts Tax, Business Privilege Tax, Earned Income Tax, Mechanical Devices Tax, Mercantile Tax, Local Service Tax, Occupational Privilege Tax, Occupation Tax, Per capita Tax and Real Estate Transfer Tax. The most recent budget shows a $10 million overage.
The city’s coffers are consistently strapped for revenue, forcing the city to aggressively sell government property to private individuals or firms. Among the items that have been sold or leased are the Scranton Sewer Authority ($195 million), a public parking garage ($28 million), and a sparsely-occupied shopping mall ($32 million).
Taxpayers have strenuously voiced their concern that the burden of the city’s fiscal instability is being placed on their own shoulders. The recent sale of the Scranton Sewer Authority has also sparked controversy because of revelations that the final sale figure would be lower than expected.
If the lawsuit prevails, the City of Scranton will be forced to reduce Act 511 taxes to the legal limit, which would make the distressed city insolvent.
“The City of Scranton is not in a position to meet its debt obligations and is in desperate need of a fresh start,” Mr.Fleur said.
St. Fleur plans to put additional pressure on the city by placing a measure on the 2017 November to give voters a chance to directly force the city to declare bankruptcy.
The legal limit for local taxes is established in Act 511, which reads:
“The aggregate amount of all taxes imposed by any political subdivision under this section and in effect during any fiscal year shall not exceed an amount equal to the product obtained by multiplying the latest total market valuation of real estate in such political subdivision, as determined by the board for the assessment and revision of taxes or any similar board established by the assessment laws which determines market values of real estate within the political subdivision, by twelve mills.”
According to McGovern’s Analysis the city’s limit for Act 511 Taxes is $27,789,175.