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

Scranton Mayor_660_AP.jpg

Scranton Mayor Christopher Doherty at city hall in Scranton, Pennsylvania July 13, 2012.(Reuters)

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.

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.

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