July 30, 2012 at 11:43 AM ET
The financially-strapped city of Scranton, Pa., has settled with unions representing its police, firefighters and public works unions in a deal over the mayor's plan to slash workers' pay to minimum wage.
The Scranton Times reported Monday that under the agreement, Mayor Chris Doherty will pay workers in full by Aug. 17 all the wages they are supposed to get by contract, plus 6 percent interest. In return, the unions have agreed to drop a lawsuit against the mayor that accused him of civil contempt for defying a judge's order and cutting wages for the city's 398 employees to $7.25 a hour.
Scranton is among a number of cities struggling to pay their bills amid rising labor costs. Earlier this month, Stockton, Calif., became the largest city in U.S. history to file for bankruptcy protection from creditors.
Scranton's mayor and the city council have been locked in a dispute over how to raise money in a city that has steadily lost population over the past 50 years and has been hit hard by the real estate slump and the Great Recession that followed. Doherty has argued that the city needs to increase taxes, but council members want to find other ways to raise money. Doherty is a Democrat as are all the members of the city council.
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