Could Pittsburgh Shed Act 47 Status?

Close to five years ago the City of Pittsburgh asked the state to remove it from Act 47 distressed status. At that point the City had been in Act 47 for just under four years. If the request was denied, the City asked that a new recovery plan be written telling what should be done in order to emerge. That plan was written in 2009 and focused heavily on the City’s legacy cost issues.

With articles today reporting that the Act 47 coordinators wrote to the DCED secretary that Pittsburgh should have its distressed status removed (here and here) Pittsburgh would be the seventh municipality to leave the Act 47 fraternity. The most recent was the Allegheny County municipality of Homestead, which came out in 2007 after spending fourteen years under state watch. The three preceding Homestead were all Allegheny County towns: North Braddock (out in 2003 after close to eight years), East Pittsburgh (out in 1999 after seven years), and Wilkinsburg (out in 1998 after ten years).

The statute leaves the determination to the DCED secretary. A public hearing has to be held, and the law points out several factors shall be considered including the monthly coordinator reports, that accrued deficits have been eliminated, that obligations issued to finance the municipality’s deficit have been retired, and that the municipality has operated under a positive operating fund balance for at least one year. The 2009 amended recovery plan noted that it would give "…the City a clear strategy to address the remaining obstacles to full fiscal recovery [and] completing these steps will allow Pittsburgh to leave Act 47 oversight".

Another City Enters Act 47 Status

The City of Altoona, population just over 46,000, has been declared financially distressed by the state under the terms of Act 47 of 1987. It will be the 27th municipality placed in Act 47 status since the law was enacted; Altoona will join 20 others currently in. The City’s 2012 budget included a real estate tax increase.

Six municipalities have been released from financial distress, the most recent being Homestead in 2007. That municipality had been in Act 47 for fourteen years. The fastest entrance-to-exit time is for Ambridge, which spent three years in the program.

No doubt the hopes in Altoona are for a short stay. One councilman said that Altoona can be out in three to six years if "tough decisions" can be made. Two municipalities in neighboring Cambria County-Johnstown and Franklin-have been in for more than twenty years.

At a joint hearing of several committees of the General Assembly in October of 2011, the Executive Director of the Governor’s Center for Local Government Services testified "there is no limit to the amount of time a municipality can be in the Act 47 program, and the Commonwealth’s authority to address the factors of distress in a given municipality are the same in year ten of the program as in year one." A proposal in that testimony was to have a Fiscal Recovery Board appointed for a municipality that had been in Act 47 for five years

What Will Become of the Oversight Board?

Next year marks the end of the current life span of the Intergovernmental Cooperation Authority (ICA) for Cities of the Second Class, commonly known as the Oversight Board.  Created by Act 11 of 2004, which was signed into law on February 12 of that year, the statute’s language declares the Board “shall exist for a term of at least seven years”.  An act of the Legislature is required to extend the life of the Board beyond 2011.  


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Distressing Times

"…it is our recommendation that the City of Harrisburg be declared financially distressed"-Governor’s Center for Local Government Services, Consultative Evaluation for the City of Harrisburg, October 20, 2010

If the Department of Community and Economic Development follows through on the recommendation of its Center for Local Government Services, Harrisburg will become the 20th active participant in Act 47 distressed status. Since Homestead (in Allegheny County) came out of Act 47 in March of 2007, three new entrants (including Harrisburg) have gone in.

Act 47 lays out eleven criteria of which a municipality must meet one in order to be declared distressed. Harrisburg asserted that it had met three of the ten, but the evaluation found that only one-that the City had defaulted in payment of principal or interest on bonds or notes due to an authority-to satisfy the petition.

The evaluation found that of five comparable PA cities (one of which, Chester, is also in distressed status) Harrisburg has "a low and diminishing ability for the residents to produce the necessary resources to support services at current levels".

Money on Demand

History is repeating itself in the City of Harrisburg, and at an alarming rate: we wrote recently that the Commonwealth had agreed to expedite payments so that the capital city would not miss a bond payment. Just last week the City got additional help from the Harrisburg School District, the Harrisburg Authority, and the Parking Authority in order to meet payroll this week.

"It ameliorates the immediate crisis" was what the Mayor’s press secretary said. Note that he said immediate, which implies there are still long term problems. The City still is trying to secure a line of credit to pay its bills through the end of 2010. This follows on the heels of the Mayor’s official application to DCED to place the City in Act 47 distressed status. If approved Harrisburg will be the state’s 20th municipality in Act 47, and the first new entrant into distressed status in almost a year (Reading went into Act 47 status in November of 2009).

If placed in Act 47, Harrisburg would be given priority for aid and could even get emergency financial aid from the state, much like the quick cash that has been extended in the recent weeks.