New Act 47 provisions could mean more accountability for distressed cities – and less local control

    Pedestrians and cyclists use the river walk along the Allegheny River in downtown Pittsburgh.  Under changes to the Act 47 law

    Pedestrians and cyclists use the river walk along the Allegheny River in downtown Pittsburgh. Under changes to the Act 47 law

     The changes are meant to help the Commonwealth’s cash-strapped cities get on their feet faster.

    Some say it’s not enough, but the Pennsylvania legislature’s Act 47 overhaul will mean changes for state’s cities that are broke. Act 47 guides the Commonwealth’s recovery process for financially strained municipalities.

    Few communities, however, have found that the Act has worked for them. Of nearly 30 to try it, just seven have achieved recovery, according to the website of the state Department of Community & Economic Development overseeing Act 47.

    The 109-page revised Act 47 contains measures – like deadlines and consequences for failing to meet them – lawmakers think will improve outcomes.

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    Some legislators, however, acknowledge that other laws – such as those governing municipal pensions and the binding arbitration process – need to change to contain costs, avoid widespread fiscal ruin, and maintain stability among the Commonwealth’s communities.

    There are bills pending to address those issues.

    Typically, cities under Act 47 control get state oversight and consultants’ review of local government operations and fiscal practices. 

    Common sense, codified

    As amended, Act 47 spells out that recovery coordinators (appointed by the state) will be subject to annual performance reviews and can be removed if they’re not upholding their contract, or the recovery isn’t going well.

    It also dictates that in Act 47 municipalities, local officials need to start early on the budgeting process and submit their draft financial plan for review by the coordinator, who can recommend changes to better fit the recovery plan, if warranted.

    Michael Gasbarre, who heads the state’s Local Government Commission, says codifying these seeming best – or basic – practices amounts to “put[ting] more teeth in the law as far as the review” of the recovery process.

    “Within 30 days of the budget adoption deadline, if the municipality hasn’t made the changes to conform with [its recovery] plan, the [DCED] secretary is empowered to take action – including withholding state funds,” Gasbarre says.

    State Rep. Chris Ross, the Chester County Republican who sponsored the overhaul bill, says the provisions are meant to motivate officials in distressed local governments and their respective state oversight teams.

    Recover, or else

    The revision includes a requirement that municipalities must recover in five years, the cycle of a recovery plan. That time might be extended under certain circumstances, such as a receivership (an enhanced, more restrictive type of state oversight brought on by imminent service shutdown or other emergency situations).

    But after five years, and exhausting any extension possibilities, the distressed municipality might have the opportunity to merge with another adjacent one.

    Pennsylvania’s never seen that happen, and it’s rare nationally, experts say.

    So absent an unprecedented turn, the municipality would be dissolved if it doesn’t recover within a timeframe that could be as short as five and or long as 13 years (the maximum duration possible under the revamped law).

    Ross says that’s a “last resort” intended more for communities where just a few hundred people live.

    But just one of nearly 30 current or former Act 47 communities have fewer than 1,000 residents. And all but one would have faced dissolution, unless they achieved the improbable by getting a nearby municipality to join forces, based on their duration in the state program.

    Some say other new elements – expanded taxing powers, for example – will better the chances for recovery.

    Potential benefits from the reforms are limited, though.

    Amendments that let Act 47 towns to levy additional or higher taxes, for example, come with caveats.

    The revamped law allows for communities to levy payroll preparation taxes along with raising either local services or earned-income taxes above typical ceilings. 

    But those taxes are capped for residents with incomes below $15,600, and in municipalities already taxing extra to deal with their distressed pension systems via the state’s Municipal Pension Plan Standard & Recovery Act.

    Local elected officials also might avoid taking advantage of permission to exceed typical tax caps if they’re representing a constituency that’s overtaxed or perceives itself as such.

    Local control eroded

    Political will notwithstanding, if a municipality is dissolved, locals obviously lose some control.

    The local government will be disbanded, and replaced by an appointed unincorporated service district advisory committee.

    Instead of overseeing recovery, the coordinator – or a replacement with similar credentials, also spelled out in the revised statute – oversees the districts. The district administrator also guides the process of contracting services previously provided by the local government like public safety, trash pickup and road repairs.

    These services aren’t paid by local property taxes. Instead, residents are charged fees.

    The year after dissolution, they could face  a collective “fee” increase of up to 5 percent over the prior year’s tax levy, according to legislation.

    Pittsburgh prohibition

    The Commonwealth’s second-largest city is excluded – or exempt, depending on whom you ask – from the enhanced revenue raising provisions.

    Lee Derr, chief of staff for state Senate Local Government Commission Majority Chair John Eichelberger, says Pittsburgh has been precluded for a decade by the same law that created the city’s controversial Intergovernmental Cooperation Authority, or ICA.

    “It was just being consistent with what had already been decided,” Derr says.

    Read more about Pittsburgh’s special treatment by House Bill 1773 here.


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