At first glance, state receivership might not sound all that bad.
In essence, it’s a process that assigns a state official to make a municipality’s financial decisions that local politicians have been either unable or unwilling to make.
On the other hand, when one holds it up against the potential of home rule, the true aspect of receivership is plainly seen. Home rule enhances a municipality’s ability to make its own decisions; state receivership takes it away.
Should New Castle City Council fail to approve by Aug. 22 the Act 47 exit plan presented to it, receivership is a very real possibility. Just ask the folks in Harrisburg.
The state capital was declared a financially distressed city in December 2010, and an Act 47 recovery plan coordinator appointed in January 2011. Eventually, a recovery plan was created and given to Harrisburg City Council to approve. Instead, the council rejected the proposal.
Harrisburg’s mayor was allowed to create an alternate plan, but council rejected that approach as well.
Shortly thereafter, Gov. Tom Corbett signed into law Senate Bill 1151, which amended Act 47 to address an instance of a financially distressed third class city (and New Castle is one of these) rejecting a financial recovery plan. The law declared such a circumstance to be a fiscal emergency and provided for the appointment of a receiver to resolve it.
Now, it is the receiver who determines the path to financial recovery for the city to which he has been assigned. The receiver must come up with a recovery plan, which must be submitted to Commonwealth Court. The court has 30 days after the the receipt of the receiver’s plan to schedule a hearing on it, and 60 days to act on its confirmation.
If the plan is approved, the receiver cannot levy taxes or modify debt. However, the receiver can petition the court to force local officials to comply with the recovery plan even before it receives court approval.
Confirmation of the plan will have the effect, among other things, of:
•Imposing on the elected and appointed officials of the distressed municipality or an authority a mandatory duty to undertake the acts set forth in the recovery plan
•Suspending the authority of the elected and appointed officials of the distressed municipality or an authority to exercise power on behalf of the distressed municipality or authority … to the extent that the power would interfere with the powers granted to the receiver or the goals of the recovery plan.
Additionally, under Act 47, the receiver’s recovery plan may include:
•The sale of the assets of the distressed municipality or authority;
•The approval, modification, rejection, renegotiation or termination of contracts or agreements of the distressed municipality or authorities
•The execution of new contracts or agreements.
And as receivership is limited, unless an extension is approved, to two years, all of this happens very quickly.
The choice, then, is to retain — and even enhance — the ability of local government and residents to lift their community out of the quagmire of financial distress through the approval of the Act 47 recovery plan and the potential adoption of home rule, or throwing in the towel and letting the state make our decisions for us.
We would very much like to see city leaders avoid the latter.