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City Officials Make Case For Act 47 Designation

August 2, 2018
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City Officials Make Case For Act 47 Designation

WILKES-BARRE — A report based on a state investigation of Wilkes-Barre’s finances recommends that the city should be deemed financially distressed, although some city residents disagree.

Jim Rose, a local government policy specialist with the Governor’s Center for Local Government Services — an arm of the state Department of Community and Economic Development — testified about the investigation’s findings at a public hearing Wednesday at City Hall.

“Based on the … investigation, it is the center’s recommendation that the City of Wilkes-Barre be determined to be a financially distressed municipality under Act 47,” Rose said.

Read the report

The hearing was required under the Municipalities Financial Recovery Act after Mayor Tony George sent a written request for the status to DCED Secretary Dennis Davin on June 29.

Distressed status would give the city revenue-collection advantages other cities don’t have, such as the ability to increase the local services tax and have tighter controls over spending in union contract negotiations.

Evidence

of distress

Rose testified that the investigation substantiated George’s claims that the city meets two of 11 criteria set forth in Act 47, any one of which would qualify the city for consideration — deficits of 1 percent or more in each of the last three years and expenditures exceeding revenues in those years. In fact, audits show the city’s general fund deficits ranged between 1 percent and 8 percent (between $302,597 and $3.2 million) in five of the last six years.

The report also points to other factors that Rose said support a distressed determination:

• A stagnant tax base.

• A decreasing fund balance, making it difficult to maintain a strong credit rating, avoid short-term borrowing, and provide security in emergencies.

• A continued decline of pension assets.

• Population decline; comparatively low median household incomes, education levels and home values; high poverty levels and unemployment and crime rates.

• A projected $16 million cumulative deficit by 2021.

More challenges

Rose noted the city has participated in DCED’s Early Intervention Program under the guidance of Philadelphia-based financial consultant Public Financial Management, which presented a financial plan in June 2017.

 

“It was apparent the city did not have the staff or funds to begin implementation of the improvements recommended by PFM” but the city worked with PFM to address the recommendations, Rose said. Rose noted that the city has been making reduced payments to its pension funds, but a 25 percent reduction will not be allowed after this year.

Rose — and later George and Wampole — testified that council earlier this year declined to approve the sale of the city-owned parking garage for $2 million as specified in the 2018 budget, “creating concerns of a revenue shortfall and the possibility that the city would have insufficient cash flow at the end of the year.”

Rose also testified that George noted in his request for distressed status that in 2019, a state grant toward some police salaries will expire; salaries are expected to increase 3 percent; there will be $500,000 in capital improvement needs; and council likely won’t approve any tax or fee increases. He also noted a sharp increase in the city’s minimum required pension contribution in 2020.

Others testify

George testified that some of his administration’s efforts to stabilize city finances were successful, but others have been thwarted by council and labor unions. He also noted the city lost $228,000 in tax revenue between 2015 and 2018 because of the sales of taxable property to nontaxable entities.

“After much thought and discussion, I made the difficult decision to file for Act 47 consideration in the best interest of the city,” George said.

Wampole testified that the administration implemented many recommendations of its financial advisor and made cuts where possible. He noted the city workforce decreased from 275 employees in 2013 to 258 this year. “Clearly, we are trying to do more with less,” Wampole said.

He predicted Act 47 status would result in “short-term pain for long-term gain. But it is something that needs to be done now to avoid the more serious financial situations other municipalities have found themselves in.”

Resident Linda Smith said she welcomes distressed status if it will help the city “survive and thrive.” She made several recommendations for a recovery plan, such as negotiating an end to a $1,500 annual payment fire and police employees receive because the city took away responsibility for parking meter enforcement from police officers.

Tom Dombroski said the city should have considered selling the Wilkes-Barre Municipal Golf Club and renegotiating payments in lieu of taxes with King’s College and Wilkes University.

Jason Carr suggested renegotiating union contracts to base pensions on base salaries without overtime and other add-ons. Phil Holena also blasted pension provisions, drawing applause from attendees.

Sam Troy criticized the administration for a lack of transparency leading up to the Act 47 request and asked instead for a commission of citizens and officials to work on solutions.

Bob Kadluboski questioned the qualifications of some administrators to lead the city.

C. Kim Bracey, executive director of the Governor’s Center for Local Government Services, presided over the hearing. She said additional written testimony can be emailed to Rose at jamerose@pa.gov or mailed to DCED Financial Recovery Program, 400 North Street, 4th floor, Harrisburg, PA 18120.

Contact the writer:

smocarsky@citizensvoice.com

570-821-2110, @MocarskyCV

 

Online Extra

Read the report recommending that Wilkes-Barre be deemed financially distressed based on a state investigation into city finances.

What’s next

State Department of Community and Economic Development Secretary Dennis Davin must approve or deny Wilkes-Barre Mayor Tony George’s request for distressed status within 30 days.

If Davin approves the request based on transcribed testimony from the hearing and other written testimony, a financial recovery coordinator will be appointed and will have four months to come up with a recovery plan for the city.

If, after receiving public input, city council approves the plan, it can move forward; if not, city officials must come up with their own plan that’s acceptable to Davin or risk losing state funding.

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