Two municipalities cleared to exit Act 47

Governor Tom Corbett announced Wednesday that the state’s DCED rescinded West Hazleton Borough’s Act 47 status.

Governor Tom Corbett announced Wednesday that the state’s Department of Community and Economic Development has rescinded West Hazleton Borough’s Act 47 status. This news follows Tuesday’s announcement that Westfall Township is also deemed ready to exit the Act 47 program.

The Municipalities Financial Recovery Act, Act 47 of 1987 guides state intervention when a municipality is unable to pay its bills or debts.A municipality is considered “recovered” when it is able to balance a budget, provide essential services, and meet debt obligations.West Hazleton Borough received a distressed designation under Act 47 in March 2003, after experiencing a $850,000 budget shortfall  (an amount that represents 60% of the borough’s general budget) the year prior. The borough eliminated its police force as a result of the budget gap.Under the guidance of the state-appointed Act 47 Plan coordinator and DCED, West Hazleton’s recovery plans included hiring a full-time administrator and, in 2009, a property tax reassessment. In 2013, the borough had a $5,423 budget surplus.Westfall Township filed for bankruptcy in April 2009, after a court judgment ruled against the township in a dispute with real estate developers, to the tune of more than $20 million. Shortly after, the township was designated distressed under Act 47. The Act 47 Plan coordinator and DCED brought the township and real estate developers to a settlement that significantly reduced the judgment to a manageable quarterly payment.Westfall was discharged from bankruptcy in 2010 and has since met its settlement obligations.

 No city entering Act 47 has achieved recovered status.

Critics of Act 47 say the program does not give municipalities a clear and manageable exit strategy–of the 27 municipalities that have entered the program, only nine have successfully gotten out. This puts the Act 47 success rate at 33%.Governor Corbett is expected to sign a measure amending Act 47, which would increase the pressure placed on municipalities to resolve financial issues. A new time limit would require municipalities to exit the program within five years. Municipalities that fail to exit would face bankruptcy, dissolution, or a merger.

One other community has exited Act 47 this year, in addition to West Hazleton Borough and Westfall Township. Millbourne Borough, which was in Act 47 since 1993, had distressed designation rescinded in March this year.

Additional reporting by Emily Previti.