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State ups commitment for struggling municipalities

By   /   January 7, 2013  /   No Comments

TOUGH TIMES: According to the Coalition for Sustainable Communities, 41 percent of Pennsylvania residents live in a financially distressed municipality.

By Melissa Daniels | PA Independent

HARRISBURG — Pennsylvania is giving more money to local governments facing financial difficulties, hoping they will see the writing on the wall and reform their budgetary ways.

Pennsylvania created the “Early Intervention Program” in 2004 to provide short- and long-term financial planning to municipalities that were struggling. This year, the program’s funding from the state more than doubled, from $685,000 to more than $1.7 million.

The money provides matching grants of up to $100,000 to municipalities that hire consultants to help diagnose and repair their fiscal health.

Edward Jordan, a press aide for the Department of Community and Economic Development, said the state recognizes the struggles municipalities across Pennsylvania are facing.

The hope is to address the problems so municipalities avoid Act 47, the state’s official classification for financially distressed municipalities.

“Through strengthening the Early Intervention program, including increasing staffing levels for the program, the department will be able to proactively help municipalities before they get to a point where they would have to enter the Act 47 program,” Jordan wrote in an email to PA Independent.

Since its inception, 60 boroughs, townships, cities and counties have taken advantage of the program — a fraction of the state’s more than 2,500 municipalities.

But the state’s commitment to upping the program’s funding may be symptomatic of a larger problem— municipalities are struggling to stay fiscally sound.

That reality is prompting some to take action.

In December, Senate Democrats announced legislative proposals to help grow local tax bases, mend urban blight and streamline costs.

The latest local government seeking assistance through Early Intervention is the borough of Middletown, which found itself facing a continuing deficit. Following concern from constituents, Mayor Robert Reid took to the opinion section of The Harrisburg Patriot-News in September to explain what the step means for taxpayers in his community.

REID: Early Intervention Program will let borough of Middletown seek new alternatives to balancing its budget.

The borough previously had been transferring money from the electric department to help pay the general fund’s expenses, Reid wrote. Instead of raising rates, the council decided to seek the state’s help in finding alternatives.

“It would be easy to raise taxes or raise electric rates to generate the additional money the borough needs,” Reid said. “But that would not be good for residents’ pocketbooks and certainly would not make property values go up.”

Rick Schuettler, deputy executive director of the Pennsylvania Municipal League, said that the intervention program has helped struggling municipalities right-size their budget and workforce.

But it can only stop the bleeding after the wound is opened.

“Even with the Early Intervention Program, with the Act 47 program, we’re still going to see municipalities become distressed,” Schuettler said.

“The best plan in the world,” Schuettler said, won’t change the reality of stagnant property and income taxes.

The Coalition for Sustainable Communities, a group of chambers of commerce, government and other associations, estimates 41 percent of Pennsylvanians live in distressed municipalities.

Schuettler said the goal of the Coalition for Sustainable Communities, of which the Municipal League is a member, is to seek reform to laws on prevailing wage, collective bargaining and pension costs, some of the major cost drivers in local budgets.

“I think the (intervention) program itself could be much more efficient if in fact there were more options and opportunities for local governments,” Schuettler said.

In addition to getting advice on immediate concerns, municipalities in EIP receive a three-to-five year financial plan, crafted with help from a state-approved consulting firm or individual. The consultant also may recommend staffing changes, tax rate recommendations or ideas for shared service agreements with other governments. The recommendations, however, are nonbinding.

Gerald Cross, executive director of the central division of the Pennsylvania Economy League, said the recommendations are only worthwhile if they’re implemented.

“It’s a matter of the municipality taking the report seriously,” Cross said.

Cross said raising taxes isn’t always the answer to solving a local government’s financial woes. Rather, it’s looking at how the money is spent at a larger level.

“More money at the problem won’t solve the problem,” he said. “A new look at how we provide services, regionally and across municipal lines is important.”

Contact Melissa Daniels at [email protected]


Melissa formerly served as staff reporter for Watchdog.org.