New Castle News

April 12, 2014

John K. Manna: Proposals in Harrisburg fail to reflect reality

John K. Manna
New Castle News

NEW CASTLE — My, how time flies.

The city of New Castle is in already in its eighth year as a distressed municipality under state Act 47.

While city officials and perhaps some residents would like to exit Act 47 status, there is no way the city could survive financially on its own at this time.

Yet, revisions being considered to the Act 47 law would limit the duration of “distressed” status in the worst cases to eight years.

I’m not sure whether New Castle is considered among the worst cases, but if it is, it would have to exit distressed status after this year if the revisions were in effect.

Twenty-seven municipalities have been declared financially distressed since Act 47 took effect. Only six have exited distressed status and 10 have been distressed for at least 20 years.

According to the Associated Press, Amy Sturges of the Pennsylvania Municipal League and State Association of Township Comssioners called the proposed time limit “an arbitrary, one-size-fits-all approach.”

But Gerald Cross of the Pennsylvania Economy League said the time limit “focuses municipal officials on making the necessary structural and financial changes within a limited time frame ...” And if the changes aren’t made, the municipalities would face consequences, he said.

Those consequences could include bankruptcy, disincorporation or receivership.

Again, New Castle would like to get out of distressed status if it could. However, the city is currently in the black, but only because of Act 47.

The city has been allowed to obtain grants and loans and raise the wage tax beyond its normal limit to lift itself out of the red. Plus, some of that additional wage tax is imposed on non-city residents who work in New Castle.

If the city were to leave Act 47 status tomorrow, that additional revenue would go away and the city would fall back into the red. Without that revenue and because of the erosion of the city’s property tax base over the years, New Castle would have a difficult time paying its bills and meeting pension obligations. The inability to meet the pension obligations was a major reason the state declared the city distressed.

Perhaps the city would be able to keep its head above water in the long run if it can build up its tax base. But that won’t happen overnight.

Apparently, some legislators and Cross, who spoke at a Senate committee hearing this week on the proposed revisions, haven’t grasped that reality.

Instead of cosmetic changes, legislators need to look at defects in the current system that affect all municipalities in Pennsylvania, particularly cities. They need to consider the reasons cities get into financial jams and address them. Then, maybe municipalities could be prevented from entering Act 47 in the first place.