Monday, August 10, 2009

Bad Bet. Bad Debt?

Molly Brannigan’s is the latest casualty of Scranton’s faltering economy. Losing an area business is never a bright spot in for any city…but this one could be far more controversial.

Recently, the Scranton Parking Authority reached an agreement with the struggling bar/restaurant that amounted to a rent forgiveness/rent reduction agreement. The authority also assumed over $5,000 in electric bills for the restaurant. The Scranton Times ran an editorial stating that the deal “bets on city’s future.” Apparently, that particular bet was a bad one.

In addition to the $26,445 in revenue lost due to the rent agreement’s forgiveness provision and the $5,536 in electric bill payments covered by the Scranton Parking Authority, the Scranton Times also reports that there is still the issue of a $650,000 loan that the city made to the restaurant in 2006.

A one part of a five party series by the Scranton Times called The Doherty Years: Mayor Focuses on Downtown highlighted Doherty’s proclivity toward steering city council toward awarding loans such as these. Unfortunately, as with the $650,000 loan in question, these bets don’t always pay off.

If there is a bright spot in this, it is that this will hopefully cause both the Doherty Administration and Scranton’s City Council to consider changing their emphasis from give-away gimmicks to serious tax policy. Other areas in Lackawanna County are experiencing growth. One major difference between the growth areas and Scranton is that Scranton boasts the highest wage tax rate and a business privilege/mercantile tax to boot. These conditions are hostile to both businesses and residents of the Electric City. If Scranton focused on changing its tax structure to make it business and family friendly, perhaps it wouldn’t have make “bets” with thousands in loans to job creators to get them to make Scranton their home.

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