Scranton Council Votes 3-2 On Short Term Loan To ‘super Fund’ City’s Distressed Pension System
SCRANTON — A split Scranton City Council approved having the city borrow $23 million in a short-term loan to “super fund” the city’s distressed pension system, instead of directly using that amount of money already set aside from sewer-sale proceeds.
The borrowing move, allowed under state Act 205 pension law, would result in an immediate revaluation of the pension system and translate into lower pension contributions by the city of $2.4 million in 2018 and $2.2 million in 2019, or a total of $4.6 million, officials said.
If the city instead chose to put the $22.9 million in sewer-sale proceeds directly into the pension fund, a revaluation would not take effect — and would not lower the city’s mandatory minimum obligation contributions — until 2020, administration officials told council in a caucus Oct. 29.
Council President Pat Rogan and Councilmen Wayne Evans and Tim Perry voted in favor of having the city borrow a $22.99 million pension obligation note against the sewer-sale proceeds as collateral, while Bill Gaughan and Kyle Donahue voted against the move.
In voting no, Gaughan and Donahue cited procedural concerns of how the ordinance was presented from Mayor Bill Courtright and his administration as needing to be passed by council over two meetings instead of the usual three.
Gaughan said the administration apparently knew about the complex transaction since June or July, but he only learned of it Oct. 29. He also expressed concern about a pending lawsuit against the city challenging the sewer sale.
“I certainly need more time to evaluate this,” Gaughan said. “I don’t think that we should rush this through in two council meetings. I think we should take the full three weeks to make sure everyone has evaluated this deal.”
Some residents also questioned the borrowing move.
Marie Schumacher noted the city’s composite pension board also must approve the borrowing, and that board will not meet until Nov. 21. Council could have advanced the ordinance on second reading on Nov. 5, and then voted on a third-reading adoption on Nov. 19, Schumacher said.
“What’s the rush?” Schumacher asked. “I just have a bad feeling about this.”
Council will not meet on Monday, Nov. 12, because City Hall will be closed that day in observance of Veterans Day. Gaughan and Donahue wanted council to instead meet next Tuesday, Nov. 13 — no matter the outcome of the pension loan — but the other three councilmen disagreed and stuck to not having a council meeting next week.
Schumacher asked if the city needs $2.4 million in MMO savings now to balance the 2018 budget.
Evans, the council finance chairman, replied no. He said the city is taking advantage of Act 205 for MMO savings and there’s no reason not do so. A provision in Act 205 triggers an immediate revaluation of a pension system if money is borrowed to put into the system, Evans said. He’s had several conversations with the administration and Pennsylvania Economy League, the city’s Act 47 recovery coordinator, about the move and “strongly” supports it.
“It’s, in my opinion, sound public policy,” Evans said.
Evans and Perry also defended suspending council rules to enact the ordinance at two meetings instead of three, saying time is of the essence.
“There is a timeline and this is something that I feel needs to get done,” Perry said. “The bones of the structure of this, I’m confident with.”
In other legislation, council voted 5-0 to introduce each of the following:
n An ordinance to transfer a vacant parcel at 2935-2937 Pittson Ave. to the Lackawanna County Land Bank.
n A resolution to execute a $128,723 grant from the Pennsylvania State Clean Diesel program to replace two street sweepers.
In another matter, Gaughan and Donahue will hold an “idea session” Wednesday at 6 p.m. at City Hall to hear input from college and high school students.
Earlier this year, council revived an initiative from mid-2015 of holding informal brainstorming sessions with forward thinkers and stakeholders. For Wednesday’s idea session, council contacted the University of Scranton, Marywood University, Lackawanna College, Scranton High School and Holy Cross High School, encouraging those affiliated with student government bodies and civic organizations to attend.
“Come prepared with your ideas to better the city of Scranton,” council’s invitation said.
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