State clears Shamokin for Act 47 program

Pennsylvania’s Act 47 program for distressed municipalities has taken another case, agreeing to help the city of Shamokin fix its fiscal woes – and it could be the first to go through the process after it’s overhauled by state lawmakers.

The coal region community of 7,300 people tried to fix its finances through the state Department of Community & Economic Development’s Early Intervention Program. Local officials sought state intervention through Act 47 after they couldn’t get a loan to cover their budget deficit and about $800,000 in unpaid bills.

Shamokin will be the 28th municipality to attempt to stabilize its finances and recovery through Pennsylvania’s Act 47 program. The law hasn’t changed since taking effect in 1987. Currently, the program’s success rate is 25 percent. And most of the 21 communities still engaged in the process have been at it for more than a decade.

State Rep. Chris Ross, R-Chester, says he believes that will improve through reforms – which include time limits, additional taxing options and disincorporation guidelines – in his House Bill 1773.

Dissolving local government

One provision in the proposed revision would dissolve distressed local governments that don’t stabilize fast enough, and put their community in the hands of appointed officials who don’t live there.

Lawmakers say they believe that will happen rarely, partly because other amendments to Act 47 will speed and improve the process for getting dysfunctional local governments to the point that they can pay their bills while efficiently and effectively providing basic services.

But under the time limits proposed by the bill, all but one municipality now engaged in Act 47 would have faced the possibility of disincorporation.

Ross said he envisions that happening mainly in municipalities that “have shrunk down to a shadow of their former selves, down to a few hundred people and are no longer able to staff the local government with willing citizens who were prepared to serve or capable of serving.”

None of the communities now engaged in the Act 47 process fits that profile.

The smallest is Greenville, which has 667 residents, according to the U.S. Census.

Ross’s bill also would restrict attempted recovery time to between five and 13 years.Given that range, at least nine Act 47 communities would have faced disincorporation  – all with populations of more than 2,000 that rank as high as seventh (Scranton, pop. 75,806) statewide, according to an analysis of DCED and US Census Bureau data.

Rankin’s 2,111-person population is smallest of that group, but larger than more than half of Pennsylvania’s 2,500 municipalities.

The deadlines are meant to help local elected officials “focus their attention,” Ross said.

Of eight recovered Act 47 municipalities, six exited within a decade.

If recovery and merger attempts fail, the distressed municipality’s Act 47 coordinator would recommend disincorporation or municipal bankruptcy.

The bill provides for the coordinator to seek a court order in lieu of the preferred options of an ordinance or voter referendum supporting the choice.

“It would be open only to those municipalities that had tried and been unsuccessful in merging with their mergers,” Ross said.

Municipalities have never merged in Pennsylvania, and it’s rare nationally, experts say.

The bill does not add incentives for municipalities to merge or consolidate services aside from codifying a state matching grant to fund studies for municipalities considering merging or consolidating services, along with the rest of DCED’s Early Intervention Program.

Otherwise, the program “could disappear tomorrow,” Ross said.

Once disincorporation happens, a three-person advisory committee would work with the administrator to find contractors to provide services needed by the unincorporated service district (the former municipality)’s remaining population, Ross said.

None of those committee members must live in the territory. Owning property or a business is enough, according to the bill.

 “We have to worry about … everyone who has a financial interest,” Ross said when asked why residency isn’t a requirement to serve on the committee.

The county would take over planning, zoning and land use functions in the area.

The bill also allows Act 47 municipalities to levy local services and payroll preparation taxes, which under certain circumstances – mainly, pension distress – can be initiated without court approval and continue after state oversight ends.

What’s next?

The bill cleared the House of Representatives June 3, and is heading for a state Senate vote.

Shamokin would be subject to the new provisions if lawmakers enact them before the city submits its recovery plan, which is due to the state within the next four months.

First, though, DCED must appoint a coordinator to oversee Shamokin’s recovery. That is expected to happen within a month. The coordinator then has another three months to come up with a recovery plan in collaboration with local officials.

Other municipalities already engaged in the process won’t be subject to the new rules unless they amend their recovery plan.

Some experts say modernizing the law is long overdue, but that more reforms are needed to other regulations for cost drivers like pensions and arbitration proceedings.