So the council for the city of 7,000 residents has agreed to seek
entry to a state financial oversight program dating from 1987 that
facilitates access to credit and permits the levying of certain
taxes. Now, though, some lawmakers say the program is more like a
trap than a benefit: municipalities get into it, and few get out.
Just seven of the 27 local governments to enter state oversight
under the program, known as Act 47, have ever been released from it.
As a result, legislators want to cap how long cities can stay under
state oversight and, in the hardest cases, impose a municipal death
penalty that amounts to disincorporation and a state takeover. The
law was passed in a bid to help Pennsylvania cities battered by the
decline of the American steel industry in the 1970s and '80s.
"We want to hopefully prevent them from going in, but if they do,
there needs to be an exit strategy," said Senator Rob Teplitz, a
Democrat who represents the state capital of Harrisburg, which last
year sold some of its assets and restructured debt. He's one of the
sponsors of a bill that would cap the amount of time a municipality
can stay in the program.
A handful of high-profile failings, such as Detroit's bankruptcy
filing last July, has focused attention on the role states should
play in helping their struggling cities.
About half of U.S. states have some kind of intervention program,
according to James Spiotto, a partner at the law firm Chapman and
Cutler in Chicago.
In Pennsylvania, 20 local governments are operating under state
oversight, and six have been in the program for a quarter century or
more, according to the state Department of Community and Economic
Development, which administers the program.
The bill now moving through the legislature would codify the state's
early-intervention options and improve financial reporting to allow
the state to spot and help troubled municipalities earlier.
State oversight under the amended Act 47 would be capped initially
at five years, and the absolute limit, with extensions, would be
Imposing a hard deadline could force elected officials to make
unpopular decisions such raising taxes, cutting jobs or eliminating
services to balance budgets, said John H. Eichelberger, a Republican
state senator from Hollidaysburg and a prime sponsor of the bill. He
hopes to have legislation ready for Governor Tom Corbett by June.
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Under the "death penalty," municipalities would be disincorporated
and converted into "municipal service districts" run indefinitely by
court-appointed administrators, not local elected officials.
"This would almost never happen," Eichelberger said. "But if
something must happen, this is an option."
Opponents of the bill include Harrisburg City Councilman Brad
Koplinski, who pushed for his city for file for bankruptcy in 2011.
The filing was thrown out later that year after state lawmakers
temporarily banned it. Koplinski said the eight-year deadline is
"onerous" given the magnitude of the problems some cities face.
But weaning these towns from assistance while their local economies
still languish has proven to be too tall an order for most of them.
One of those cities, Aliquippa, the Pittsburgh suburb where former
Chicago Bears tight end and coach Mike Ditka grew up, entered Act 47
the same year the law was implemented.
Since taking office in 2012, Aliquippa Mayor Dwan B. Walker has
focused on getting the city off what he called the "crutch" of Act
47. The city hired a software management company to improve
accounting systems, for example.
This year marked the first budget in ten years that Aliquippa did
not have to take out a tax anticipation loan. The city typically
borrowed between $250,000 and $350,000 a year, Walker said.
But after decades of distress, there's no set date for the city to
exit the program, which Walker called "a stigma."
"It took forty years to drive this bus into the ditch," he said.
(Editing by Hilary Russ and John Pickering)
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