Wilkes-Barre: ‘No one wanted to go Act 47’

By Dave Gardner

The financial voyage Wilkes-Barre is now embarked upon may not be completely smooth sailing, but many regional analysts believe it will keep the city’s ship is afloat — unlike conditions in Scranton.

Wilkes-Barre, with a population of approximately 42,000 residents throughout 7.2 square miles, is the county seat of Luzerne County. Gerald Cross, Pennsylvania Economy League executive director, says that Wilkes-Barre suffers from the same fiscal trends as Scranton, like “dwindling revenue, the flight of higher-earning residents to the suburbs and an increase in the numbers of low-income residents.”

Yet Wilkes-Barre has been politically cleansed by scandal. The recent Cash for Kids judicial mess, a scandal in the County Commissioner’s office, and indictments throughout other facets of government have brought new faces to power.

Despite the political house-cleaning, the city is not yet a center of financial prosperity. Median income for a Wilkes-Barre family is about $44,000, compared to a national average that exceeds $64,000.

External recovery plan

Mayor Tom Leighton, who has held the office for a decade, explains that the city has steered through financial disaster by employing a recovery plan with origins outside city, along with a grant from then-Gov. Ed Rendell. Upon taking office, Leighton declared “war” on the city’s chronic financial difficulties, heavily cutting city employment and raising taxes and fees.

“We made some very difficult decisions to reduce the weight of government,” says Leighton. “You can’t do this if you’re worried about re-election, but I’m still here.”

Central to Leighton’s fiscal plan was a realization that, if city employees were awarded a 3 percent raise every year, their salaries would soon exceed anything comparable in the local labor market. And never mind raises — Wilkes-Barre’s existing payroll required large-scale cuts.

“On day one of this administration we had no dollars in the city treasury,” says Leighton. “I took a risk that could have backfired.”

Today, Wilkes-Barre operates five employee pensions with an aggregate value that exceeds $74 million and, according to a 2013 audit, they operate with funding percentages from 48.84 percent to 90.93 percent. “The unions, city leadership and the people are all in this together,” says Leighton. “No one wanted to go Act 47.”

Leighton says most Wilkes-Barre residents responded positively to the idea of revision when the compensation packages of union employees were publicly disclosed. There was some opposition union members and their families, but it was minor when measured against overall public support.

“The true facts about Scranton’s dire financial situation don’t seem to have gotten out,” says Leighton. “With this information vacuum, both sides have dug in. The fact is taxes must be raised if revenues are not growing, but expenses can’t go up. Without cost containment, there’s trouble.”

Robert Durkin, president of the Greater Scranton Chamber of Commerce, says Wilkes-Barre benefits from the fact that Luzerne County players have been able to work together on a regional basis. He believes that Scranton, overall, is more parochial. Fiscal improvement will require increased cooperation between Lackawanna County’s power centers.

“The outside world sees us as Scranton Wilkes-Barre — not two individual areas,” says Durkin. “We can learn from that.”

Durkin adds that the recent appointment of Wico van Genderen as the president and chief executive officer of the Greater Wilkes-Barre Chamber of Business and Industry has brought in international and cosmopolitan experience. Durkin calls van Genderen a “very unique leader,” blessed with a truly international viewpoint and a variety of modern business skills. “A new face like Wico’s adds spice to the conversation,” says Durkin.

Resistance to change

William Parente, Ph.D., professor of political science at The University of Scranton offers a direct analysis of Scranton’s situation, when viewed against Wilkes-Barre . He blames a great deal of Scranton’s plight upon a regional resistance to change, citing the uproar against the “modest” commuter tax as evidence.

Dr. Parente also advocates a moratorium on mayoral pictures in Scranton’s daily papers and he believes union concessions are crucial. One dose of reality due Scrantonians and everyone in Lackawanna County is a recognition that upper-level wage earners have fled to the suburbs, leaving only the a hollowed-out lower middle class to pay city taxes.

“We also need an experienced MBA for mayor,” says Dr. Parente. “One who can run a city with a balanced budget.”

Teri Ooms, executive director of The Institute for Public Policy & Economic Development, takes issue with the way Scranton’s fiscal situation seems to have come as a surprise to many residents. Ooms notes that multiple warnings were issued about municipal pension investments after the 2008 financial crash, but many leaders chose not to address the situation.

“Pension reform, in particular, involves tough and awkward political decisions,” says Ooms. She says Scranton is five years past the proper time to revise its pensions. Now it must quickly act. She also looks to Harrisburg for guidance and resources in the reform process, as well as union concessions to save the pension systems from bankruptcy.

“Times have changed since these systems were set up,” says Ooms. “They must evolve with the changes that have taken place in the world.”

As Scranton’s fiscal situation worsens, John Cognetti, owner/broker with Hinerfeld Commercial Real Estate, offers advice to the people of the city. He asks each person to listen, respect others, build consensus, communicate and try to understand the true reasons behind the city’s troubles. “All change is cyclical and there now are many young people in Scranton who have a vested interest in the city,” says Cognetti. “We’ll have to watch and see where the influence of these young people leads us.”