The changes proposed to reform Act 47—the municipal fiscal distress statute—have been approved in the Senate on a unanimous vote. We wrote earlier this month about how the proposal would allow Act 47 municipalities to increase their Local Services Tax while in distress (choosing to do so would mean that the distressed municipality could not also seek increases to its wage tax while in distress). Pittsburgh has always been forbidden from increasing its wage tax while in Act 47 (so long as the oversight board is in existence) so the legislation prohibits the City from utilizing the Local Services Tax option.
Quite possibly the most intriguing portion of the proposed legislation is the “disincorporation of nonviable municipalities” section. Once a recovery coordinator has determined that a municipality cannot deliver essential services, has deteriorated economic conditions or a collapse of its tax base, and no other municipality is willing to explore a merger or consolidation, then the distressed municipality would begin the process for disincorporation, quite a radical concept in a state where every square inch is incorporated as a city, borough, township, or home rule municipality. Presumably, by the legislation’s definition, all local governments except Philadelphia would be eligible, but of course would have to be under Act 47 status.
