Scranton to maintain tripled local services tax this year

Jan. 24—SCRANTON — The city will continue to levy a tripled local services tax of $156 in 2023.

With Councilwoman Jessica Rothchild absent, city council introduced an ordinance Tuesday to maintain the $156 LST, three times the base rate of $52 per year.

People who work in the city pay the tax, which city officials budgeted to generate $5 million in revenue this year. Workers earning less than $15,600 annually are exempt.

Scranton is able to maintain the tripled tax as long as the city's pension funds are rated moderately or severely distressed. The city's municipal pension is currently categorized as moderately distressed, according to the ordinance.

The city must use all LST revenue generated above the $52 base rate to defray its annual required contribution to its three pension plans, known as the minimum municipal obligation.

"It's helping us to meet our obligation," council President Bill King said.

Scranton's required 2023 contribution to the pension funds is $15.2 million, up from $14.8 million last year. It's estimated the city will receive $3.9 million in state aid, leaving a balance of $11.3 million to be paid from the general fund. The LST revenue will help cover that cost.

"As the years go by, hopefully it will help the city put the pensions into a better fiscal scenario with these additional dollars," Business Administrator Larry West said in an interview.

The market value of Scranton's composite pension fund, which consists of the police, fire and nonuniform pension plans, was $115.4 million as of Dec. 31. That's $19.8 million less than the fund's $135.2 million market value at the beginning of 2022, but still substantially above where it's been in the past.

The fund's value sank below $41 million in 2013 and faced the prospect of insolvency. But Scranton's 2018 super funding of the pension system with $22.9 million in sewer sale proceeds, strong investment returns, concessions from the police and fire unions and actions by the pension board and city to curtail benefits later contributed to a major turnaround.

Officials largely attributed the composite fund's 2022 losses to struggling investment markets, but stressed that the plan remains financially stable.

On another matter, council recently received information from Scranton Tax Collector Cathy Nealon Wechsler showing 21,855 accounts, or 85.51% of accounts, paid their 2022 city and Scranton School District property taxes in full.

"One thing we're working on is, we're trying to clean up the tax rolls," Wechsler said. "There's a number of uncollectible accounts on there, which brings down that percentage."

There were 263 accounts that paid at least one installment, but didn't pay in full. That leaves 14.2% of accounts, 3,630 total, that made no payment.

The Lackawanna County Tax Claim Bureau will pursue the delinquent property taxes.

Contact the writer: jhorvath@timesshamrock.com; 570-348-9141; @jhorvathTT on Twitter.