Save Scranton Through Bankruptcy

I am raising money to Save Scranton through chapter 9 bankruptcy. My reasoning is simple; the city has no money and has been in ‘fiscal distress’ status for a quarter of a century. The local government’s plan to resolve this has failed continuously leaving an economically depressed city. It has sky high taxes and a declining population (down to 75,000 from a peak of 140,000). The city has recently made "one-shot" efforts to solve the city's problems by selling off public assets. This only delays the inevitable. A recent report by Wells Fargo shows the city of Scranton owes a total of 559 million dollars! This has to be paid back by a city with a population of only 75,000 where at least one-third is in poverty. The truth is the city will never be able to pay it back. Bankruptcy will permit an opening of the books to provide much needed transparency. It will force the city to face economic realities that are inevitable. It will allow for a real and open discussion regarding pensions and government employee contracts. This is a non-partisan initiative to give the city a fresh start.

About Me

I came moved to Scranton Pennsylvania a year ago. I am originally from New York City. I moved because I was told Scranton was an up and coming city that sought innovative solutions to its lack of economic malaise. I was also told they were giving away money to tech related startups. I was working on just such a startup. The first thing I noticed when I arrived in Scranton was that government buildings, churches, and police cars looked brand new while houses looked blighted and businesses were boarded up. The first Scrantonian I spoke to asked me why I would move to a place like Scranton. They proceeded to tell me that no one moves to Scranton, everyone wants to leave the city, and that Scranton was the most corrupt place in America. They went on to explain how everything is based on nepotism and “who you know” in the city. I thought they were exaggerating.

 

So, a colleague and I busied ourselves working on our start up. I came up with the nifty idea that I would help the local government with its tech concerns. My idea was that through current innovations in technologies, governments could run leaner and more efficiently. This would mean less cost for the taxpayer and more wealth all around. When I made it to the City Council, I met a Councilman who told me he was ecstatic to hear about my interest. We began talking about my vision for using technologies to make government more effective and efficient; he was intrigued. I immediately began making templates for a new Scranton government website because the one they currently had looked like it was made in the 90s. While working on the new Scranton government site, the Scranton budget came out. I decided to take a look at the Scranton budget and what I found was eye popping. The Scranton government had no money! The pensions were underfunded by 85% and told the city had a debt of over 500 million dollars.

 

I told the city Councilman my findings and he agreed that the city did not have any money. I told him he should tell the people the truth and probably file for bankruptcy. He said he could not do that because “that isn’t the way things are done around here.” I was perplexed; I asked him to explain. He then proceeded to tell me that the Scranton government is controlled by a political society based on ethnic identification. He said that it has always been this way and that is what controls the government. I was shocked and told him he had a responsibility to come clean about all this. I also told him that it is 2015, things can change. He said that was my reality and not his. I told him I would do something about it. He told me good luck. That is when I created Save Scranton.

 

When I created the organization, people told me that I would never succeed. They said that no one in Scranton or America would listen to me. They said that Scranton would always remain under the thumb of some political machine. I did not agree. I went on to prove all these doubters wrong. I have since been on TV, radio, and numerous online publications. I have generated the interest of financial firms and other financial analysts. They all agree that Scranton has to cut costs in order to have any future. I have faced threats, constant criticism, and actions that thwarted my efforts. My supporters have been threatened and harassed. Some have ceased working with me because of fear of retaliation. In Scranton, speaking against the government can result in your business being fined, your home being condemned, or worse. Since the government is reluctant to do the right thing, I have put forth a ballot initiative to force the local government into bankruptcy. I want the people of Scranton to know they are not alone. In this nation, we look out for each other. If the people of Scranton want to expose their corrupt government through a bankruptcy proceeding, then I believe that people will be there to help them do it!

About Scranton

Scranton has a population of roughly 75,000 people. That is down from its peak population of 140,000. The city is in tatters with vacant buildings, blighted homes, and a town square filled with drug-addled vagrants. 38% of the population of Scranton lives on a fixed income. The average fixed income payment is roughly $15,000 a year. 1 out of 3 Scranton children live in poverty. 20% of Scrantonians live below the poverty line. The downtown “commercial” area of Scranton is filled with non-profits, government buildings, and non-profit colleges. There is a noticeable absence of any real commercial activity. There is hardly any economic interest in the city. Most of the people who work in the downtown area live outside of the city. Why? They do so because Scranton has some of the highest taxes around. The city has a combination of low economic prospects and excessive taxes/fees. If you speak to a local Scrantonian, they despise the place. They say so because of the corrupt local government that rewards the government affiliated at the expense of the local citizen. The highest paid people in Scranton are those who work for the government or with the government. The city basically runs like a kingdom. To make matters worse, the Scranton people feel helpless about the situation. They believe that their lot in life is to just accept the way things are and put up with the local government’s outlandish behavior. What outlandish behavior? The local government has sold every public asset that the city owns. They have lost money on every investment they have made. Nevertheless, Scranton has police officers and firemen making 100k. Here is a list of the things that go on in Scranton:


· 1/3 of the Scranton population lives in poverty (here)

· Most of the lucrative jobs in the city have some affiliation to the government (here)

· The Scranton government is tittering toward bankruptcy with over a 300 million dollars in debt (here)

· There are hardly any jobs in the area that pay a living wage(here)

· The Scranton government routinely attacks residents, so much so that they are now in court for such abuses(here)

· The city is falling apart with blighted houses and boarded up business everywhere.(here , here)

· Did I forget to mention that it is the unhappiest city in America?(here)

· The local mall is a ghost town (here)

· The local government spends upwards of 80% of the budget on government employee compensation.(here)

· And they are planning to sell public assets in order to pocket to proceeds.(here)

· The local government will use intimidation tactics to silence anyone who opposes the status quo.(here)

· The current debt rating for Scranton is below Junk Status(here)

· The fire fighters pension is only 17 percent funded, the non-uniformed fund is 23 percent funded and the police fund is at 29 percent. (here)

· 50% of retired police officers and 56% of the firemen in Scranton are currently on disability and receiving disability payments. The highest rate in the entire state of Pennsylvania!(here)

· Being on disability in Scranton does not disbar these people from getting jobs elsewhere. One source is quoted saying “There are actually some people in Scranton, some retired police officers who are now working as prison guards. “ (here)

· But the police cars, fire engines, headquarters and government buildings are absolutely luxurious! In fact, government buildings account for the most tax-exempt property in the city(here )

· Corruption runs deep in the area.(here)

· Residents plead with the government to stop the tax increases and file for bankruptcy but the City refuses. (here)

· It is not possible to tax your way out of this crisis by raising taxes but the City of Scranton tries anyway(here)

·In the neighbouring town, police cars, fire trucks, and the headquarters were purchased through private dollars and offered as “gifts”(here)

· Eleven officers in Scranton earned six figure Salaries when most Scrantonians live in poverty and the city government is bankrupt!(here)

· One in three children live in poverty in Scranton, Pennsylvania!(here )

· Scranton has a lead problem worse than Flint's(here)

· Police officers and Firemen make 100k when the median salary is 40k(here)

· Scranton sold its sewer authority to a private company and intends to pocket the money(here)

· Scranton “leased” its parking meters and public garage to dubious firms who intend to raise fees(here)

· Scranton has a high mercantile tax just to do business in Scranton(here)

· Scranton has a Heroin problem (here)

· Scranton gave away its public garage for a dollar (here)

· Scranton refuses to go bankrupt despite having no money(here)

· Scranton is in desperate need of federal investigation(here)

· Scranton government is going to tax rain(here)

· Scranton residents live in fear of Scranton government(here)



How Will The Bankruptcy Be Obtained?

I created a one-of-a-kind ballot initiative that will effectively put bankruptcy on the ballot for the people of Scranton to vote on it. This will allow the people of Scranton to respond to their economic woes through direct democratic means. The city has towering taxes and fees. It has an underfunded pension that is destined to collapse. It exists within a circle of prosperity because neighboring locales do not nearly have as much taxes and fees.


What Will Your Contribution Be Used For?

This is quite the undertaking and I plan to use the funds for campaigning expenses including marketing material, events, legal, etc… Here is a list:

Campaign literature: $1000

Event space: $3000

Field directors: $2000

Advertising: $3000

Consultant and legal fees: $2000

Signature collection: $4000



  I want to create a dialogue about the city’s mounting cost and excessive taxes in order to demonstrate why pension reform and lowering taxes is the only course of action. This is also the only way to save the pensions. This is destined to be a controversial legal battle.
I want this to become a national dialogue since Scranton is not the only city facing a collapsing pension. In fact, some studies say that there is a 4.5 trillion dollar nation wide pension crisis waited to explode.

A Complete Detailing of the Ballot Initiative

Using Article 10, Section 1003 of the Scranton Home Rule Charter, I seek a public initiative that would mandate that the government files for Chapter 9 Bankruptcy. An initiative is a piece of legislation that originates with citizens and brought to a vote, whereas a referendum is a piece of legislation that originates with a legislature and subsequently brought to a public vote.

Once filed with the city clerk, the petitioners are allotted a time period to collect signatures (15% of the voters of the last mayoral election). After the signatures are collected, the city council must then vote on the initiative. If it passes, it will become law. If it does not, it will be put forth to public ballot and the citizens of Scranton will have the opportunity to vote for it. This might be the first known instance of a ballot initiative being used for municipal bankruptcy protection.





Media Response

Bloomberg Video




Wnep16 Covering Bankruptcy Ballot Initiative




Wnep16 Covering Save Scranton’s Mercantile Tax Boycott





Testimony From Experts

“The city’s 2014 audit incorporates the new pension accounting standards in terms of showing a measure of the “unfunded liability” on the balance sheet. As a result, there was a negative adjustment to the 2013 balance sheet of $149 million. This audit shows total government activity assets were $146 million, while liabilities totaled $375 million. The pension adjustment was based on an 8% investment rate of return. On these assumptions, the police plan is 33% funded, the firefighters plan is 18% funded and the non-uniform is 29% funded. The city also has an estimated unfunded liability for non-pension post-retirement benefits of $184 million (not yet fully reflected)…we would argue, re-negotiated benefit… over the long term may help older cities like Scranton grow out of their pension and fiscal woes.” – Natalie Cohen, Wells Fargo Senior Analyst



“Tackling these problems requires structural reforms including 1) tax reform that does not penalize workers or businesses for locating in the city, 2) pension reform that includes allowing workers to move to a defined contribution plan and 3) removing any barrier to entrepreneurship that might prevent new businesses from locating in Scranton. In addition we recommend several state-level reforms to laws that have made it harder to Scranton to control its finances namely collective bargaining reform that removes benefits from negotiation; and eliminating “budget-helping” band-aids that mask the true cost of pensions. Such band-aids include state aid for municipal pension and allowing localities to temporarily reduce payments during tough economic times. Each of these has only helped to sustain fiscal illusion – giving the city an incomplete picture of the true cost of pensions.”
– Eileen Norcross, George Mason University Mercatus Center

“Of the 346 cities ranked, the Scranton MSA is 248th for quality of business and 176th for quality of life…relatively unattractive to both younger workers and retirees…Benefits have been enhanced without regard for the locality’s ability to pay.” - Eileen Norcross


Scranton, PA Ranks Number #1 in least happy American Region in Study from University of British Columbia(here)

“The silent majority would like to see bankruptcy. Basically, it’s down to a point where people cannot afford to pay the taxes and are moving out of town.”
- Bob ‘Ozzie’ Quinn, President of the Scranton and Lackawanna County Taxpayers Association

“I did the math - realized how much it was costing me to live in the city. That’s the story of my generation. There’s a lot of kids like me, who grew up, went to college at Scranton, but they turn 22 and move out of the city, and they don’t move back because it’s not a financially attractive proposition.” –Gary Lewis, Distress Debt Expert (now lives in Indiana, where he says he makes $2,500 more a year because of lower taxes)

Scranton has the highest rate of police officers and firefighters receiving disability pensions in the state. Fifty percent of police and 58 percent of firefighters receive a disability pension. That's an astronomically high number compared to other municipalities, most of which have maybe 3-10 percent… Right. In some other municipalities, if you're out on a disability pension and then go get another job, they can reevaluate you and potentially require you to come back to work. But Scranton does not have that provision within their disability or their pension plan. There are actually some people in Scranton, some retired police officers who are now working as prison guards… It's been projected that the police fund will become insolvent within five years and the firefighter and non-uniform pension would be insolvent within 2.5 years if something isn't changed right now. And the situation is going to get worse. – Terrie Morgan-Besecker, Investigative Journalist for Scranton Times-Tribune

Graphs













Reports

Wells Fargo

Mercatus Research Search

Articles

The New American : Scranton, Pennsylvania, Fighting Bankruptcy Foolishly

Newsworks : How Scranton's pension system took a nosedive and what other cities can learn from it

Bloomberg : Scranton Stalked by Bankruptcy Mulls Selling Sewers: Muni Credit

Foxnews : Moody’s warns of bankruptcy in Scranton as city faces $20 million budget gap

Economist : The sadness of Scranton

Town Hall : Scranton Pennsylvania on the Road to Bankruptcy

Nepa Scene : Scranton documentary ‘Half Empty’ explores ‘Life in America’s Unhappiest City’

Governing : Bankrupt Cities? What About Distressed Cities?

Bloomberg : Scranton: When Your City Needs to Go Bankrupt

LA Times : For Scranton residents, bankruptcy is an inviting option

Mcalvany Intelligence Advisor : How to Bankrupt a City: Lessons from Scranton, Pennsylvania

CNBC : Here's why Mike Pence gave Scranton a shout-out at the VP debate

Save Scranton : Residents of Scranton Seek Chapter 9 Bankruptcy

Links

Savescranton.com
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 Pics and Video Of Scranton