Lawmakers are working out the details of a plan to overhaul Act 47, shorthand for the much-maligned Pennsylvania program that attempts to rehabilitate municipalities with money problems.
Cities lingering in the state program would be given deadlines to exit. And Pennsylvania would expand early intervention efforts for municipalities sailing toward fiscal cliffs. Smaller communities would have new ways to disband if residents agree they’re just not viable.
“This bill will give our distressed municipalities a clearer path toward prosperity,” said Sen. John Blake, D-Lackawanna, just before the measure passed a Senate vote last week. House lawmakers must approve the bill to send it to the governor’s desk.
“This legislation, while not correcting all of the ills that affect our cities, is a step forward,” Blake said.
The measure also would give Act 47 cities various ways to raise taxes, something that has caused heartburn as the bill shuttled back and forth between the House and Senate.
Under a version passed by the Senate last week, all cities in Act 47 except for Pittsburgh would have the ability to triple their local services tax, in lieu of raising the earned income tax. Supporters argue that Pittsburgh has unique ways to raise taxes.
But Sen. Jay Costa, D-Allegheny, the Senate minority leader, said the bill specifically bars Pittsburgh because of prominent House members representing Pittsburgh suburbs. A higher local services tax would be levied on residents as well as nonresidents working in the city in question.
“I’m disappointed that the city of Pittsburgh is not given the ability that every other municipality in this commonwealth has been given,” said Costa.
The bill’s sponsor, Rep. Chris Ross, R-Chester, said he’s optimistic the House will approve the Senate’s changes. The local services tax is intended to trade out an earned income tax increase, and he said Pittsburgh “has already given up the earned income tax.”
“The Senate over the summer talked it through, and we now are more clear,” said Ross.
The bill is expected to save the state money as it ushers cities out of the distress program; 20 municipalities are in financial distress under Act 47. According to a note prepared by Senate legislative staff, each city’s designation cost the state an average of $173,000 annually over three years.
Before voting on Act 47 changes last week, senators acknowledged the remaining challenges facing cities.
“While financial mismanagement does exist, it’s not the only reason why so many of our cities are in distress,” said Sen. Rob Teplitz, D-Dauphin.
He suggested new revenue sources for cities with a concentration of tax-exempt properties, and called for financial incentives for smaller municipalities that share services or merge completely with their neighboring communities.
“We need to get to a comprehensive approach to solve what we see across the state,” Teplitz said.