07/31/2012 10:47 am ET

Scranton City Workers Set To Be Paid More Than Minimum Wage Again

Good news, Scranton firefighters: You will once again be making more than the fry cook at your local McDonald's.

The city of Scranton, Pennsylvania, is set to resume paying its workers their normal salaries, Mayor Chris Doherty said Monday. Doherty made headlines in early July for cutting public-sector pay to the federal minimum wage of $7.25 per hour -- a move that affected the city's police, firefighters, garbage collectors and government employees, including Doherty himself.

According to The Wall Street Journal, Scranton officials are hammering out a deal with the Pennsylvania government to raise local property taxes by 33 percent over the next three years. In exchange, the state will loan Scranton $2 million at no interest and deliver a $250,000 grant. The city is grappled with a budget deficit of more than $15 million.

Meanwhile, city workers will get back pay, plus 6 percent interest, for the weeks they received minimum wage. Workers are supposed to receive their back pay by August 16.

Scranton, one of the most financially troubled cities in the country, has been flirting with the same kind of municipal bankruptcy that's recently swallowed cities like Stockton and San Bernardino. The controversial pay cut for public workers came after it was discovered that the city had just $5,000 in its coffers.

The causes of Scranton's money woes range from an eroding industrial base to a long-running deadlock between city politicians that's prevented the completion of a major tax hike. The most recent blow came in June, when the city council said it wouldn't cover a bond payment due from the Scranton Parking Authority. Shortly after that, the city found itself closed out of the municipal bond market, with no one eager to lend it money that might not be repaid.

Analysts say more municipal bankruptcies are likely on the way, as cities struggle with lifeless housing markets and high pension costs.