Moody’s warns of bankruptcy in Scranton as city faces $20 million budget gap « Watchdog.org
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Moody’s warns of bankruptcy in Scranton as city faces $20 million budget gap « Watchdog.org

Moody’s warns of bankruptcy in Scranton as city faces $20 million budget gap « Watchdog.org

By Eric Boehm

November 11, 2013

By Eric Boehm | PA Independent

Scranton could be headed towards another fiscal crisis like the one that resulted in city workers having their pay cut to minimum wage in 2012, according to a major credit ratings agency.

GOING BUST: Scranton could default or face bankruptcy before the end of the year, if the city doesn't close a $20 million budget gap, Moody's warned Friday.

GOING BUST: Scranton could default or face bankruptcy before the end of the year, if the city doesn’t close a $20 million budget gap, Moody’s warned Friday.

In a weekly publication, Moody’s warned investors that Scranton could be facing the threat of default or bankruptcy thanks to a $20 million budget gap for the fiscal year that begins Jan. 1. The city is supposed to approve a new budget by Nov. 15, which would have to close that deficit to balance the budget.

Without a balanced budget, the ratings agency warned that two financial institutions could withdraw from scheduled debt financing for the beleaguered northeastern Pennsylvania city.

The resulting liquidity squeeze would leave the city with few options to meet its financial obligations, raising the threat of default or bankruptcy,” warned Moody’s analysts.

A similar crisis hit the city in July 2012, which lead to Mayor Chris Doherty cutting all city workers’ pay to minimum wage for several weeks, a move that made national headlines.

“A second liquidity crisis could have more severe effects, including additional defaults,” Moody’s warned.

Doherty is the current mayor of Scranton, but didn’t seek re-election this year and will step down from the post at the end of the year.  City tax collector Bill Cortwright, a Democrat, was elected mayor Tuesday with 55 percent of the vote, beating Republican nominee Jim Mulligan.

Neither Doherty nor Cortwright returned calls Friday.

Continue reading at Moody’s warns of bankruptcy in Scranton as city faces $20 million budget gap « Watchdog.org.

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