SCRANTON, Pa.—Scranton's mayor is slashing the pay of almost 400 workers to the federal minimum wage as the northeastern Pennsylvania city faces a standoff over its financial situation.

Mayor Chris Doherty says the only way for Scranton to survive its "cash-flow crisis" is to cut pay to $7.25 per hour for 398 city workers. Forty more paid with federal funds are also affected.

Doherty said Wednesday the cuts would be reflected in the July 6 paychecks.

Doherty and city council are at odds over how to pull Scranton out of its financial problems. A judge on Thursday set an August court date on Doherty's suit trying to force council to act on his recovery plan.

The city is trying to get $16 million in financing to pay bills and refinance debt but can't get it without a recovery plan.