Sweeping changes to Act 47 proposed in Harrisburg

State legislators are looking to change the program to help towns in financial distress

From the sparkling blue community pool to grassy lots where vacant buildings have been recently torn down, Clairton Mayor Rich Lattanzi can show you some of the ways his city has benefited from being under Act 47 — a state designation of financial distress.

His community has slowly clawed its way back to a path to financial sustainability, and has come a long way since 1985, when it had to lay off its entire police department, or since 1988 when it entered Act 47, running an operating deficit of $681,000.

“We’ve done everything we could” in terms of cutting expenditures and raising revenues, Mr. Lattanzi said, speaking on a recent weekday, driving through his Mon Valley community of about 6,800 residents.

It was here in Clairton in 1987 that then-Gov. Bob Casey signed what became known as Act 47 — the law governing “financial distressed” municipalities in Pennsylvania. The law was largely prompted by the massive steel mill closures and subsequent job losses and loss of tax revenue that rocked Western Pennsylvania communities in the 1980s.

“We understand the special problems that you have,” Mr. Casey said upon signing the bill, and promised the crowd Harrisburg would not write off the Mon Valley.

A bill before the Legislature now would make fairly sweeping changes to the act — chief among them setting a more firm time limit for communities to exit their “distressed” designation. A municipality would have to exit Act 47 within five years; a three-year extension would be available.

But more than 25 years after the original law’s passage, many Mon Valley communities have not exited the program, which was intended to aid communities in regaining their fiscal footing. Act 47 municipalities must adhere to a recovery plan crafted by the city and their state-appointed overseers at the Department of Community and Economic Development; they can install new taxes on commuters, have greater ability to control labor costs in collective bargaining negotiations, and some are eligible for grants and no-interest loans.

“I didn't envision communities staying in Act 47 for 20 years. … It was thought to be a program you would get in and out of,” said David Sweet, a former Washington County representative who was the bill’s sponsor.

Clairton and Braddock have been under Act 47 since 1988, Rankin since 1989 and Duquesne since 1991. Aliquippa, which is not in the Mon Valley but is a former steel powerhouse, has been under Act 47 virtually since the program was created in 1987. Several officials in Act 47 communities say they believe the proposed time limit is reasonable, however.

“[Time limits are] something I would strongly favor. I think it’s long overdue,” said Braddock Mayor John Fetterman. “There’s nothing wrong with a community that needs Act 47 to right their ship. But it shouldn't be a perpetual state.”

“I’m OK with the timeline,” said Duquesne City Manager Frank Piccolino.

Mr. Lattanzi said he believes Clairton can exit the program by 2016 due to budget cutbacks and layoff of municipal workers, income from the sale of the city’s sewage lines to an outside authority, and additional tax income from workers constructing a new coke battery at U.S. Steel’s Clairton coke works.

Since Mr. Lattanzi took office in 2010, the city has reduced the number of workers from 10 people to four in public works, gone from seven to two secretaries, and combined the position of finance director and city manager. Since the 1980s, the city has returned to having a full-time police department, though it no longer has a paid fire department now and has an all-volunteer force.

While Mr. Lattanzi said his community has benefited from the grant opportunities of Act 47, with some additional funds for demolitions and assistance in repairing a liner in the community pool. But, “I don’t think people should make it a way of life,” he said.

Rep. Chris Ross, R-Chester, the author of House Bill 1773, which would change Act 47, said it’s important for cities to eventually exit that designation, which was always intended to be temporary.

Indefinitely languishing under the distressed label can also discourage new residents or businesses from locating there, he said.

“I think all of us benefit from a deadline,” Mr. Ross said. “I know I do.”

However, in one of the few Mon Valley communities to have successfully exited Act 47, Homestead Mayor Betty Esper says she sees a time limit in itself as unhelpful.

Homestead entered into Act 47 in 1993 and had the designation lifted by the state in 2007; Ms. Esper and many others credit that largely to the Waterfront shopping and entertainment complex that now sits on the former site of the Homestead Works of U.S. Steel Corp. and the development that has since spilled over into Homestead’s downtown.

“Well, we got into [Act 47] because, of course, the steel industry left us,” she said. “We were able to get out because of the Waterfront starting to give us a tax base.”

Ian McMeans, the borough manager of Homestead, estimates about 20 percent of the community’s general fund revenue comes from real estate taxes from The Waterfront, which also sits in the adjacent communities of West Homestead and Munhall.

Ms. Esper is not alone in her view that underlying structural changes in the economy must occur to change the fortunes of some communities.

The state’s Local Government Commission Act 47 task force report issued last year noted that is one of the law’s weaknesses.

“A considerable mismatch exists between the causes of distress and the types of solutions contained in the act. While the primary causes of persistent cash flow imbalances are changes in the economies of the municipalities, recommendations concerning managerial inefficiencies predominate in the recovery plans.”

“In places like the Mon Valley, where there was such a loss of employment, there is a limit to what the government can do to repair their fiscal health,” said An Lewis, executive director of the Steel Valley Council of Governments, which includes Homestead and Clairton. Ms. Lewis notes one of the primary challenges in a community such as Clairton — blighted, vacant and tax-delinquent properties — are difficult to solve with limited resources.

“Putting a short window on Act 47 assumes that municipalities have the ability to quickly reverse their financial profile,” she said.

Michael Foreman, Clairton’s state Act 47 overseer, cautions that growing a community’s tax base through development is the slowest part of any recovery — and can take years of work.

Mr. Lattanzi is not confident state lawmakers always understand the reality of communities such as Clairton.

“I think they need to visit [Act 47 communities] and take a look at these towns and see the way some people are living,” he said.

Sen. Jim Brewster, D-McKeesport — whose district includes several Act 47 communities — said while he is supportive of some of the changes proposed in the bill, the state could do lots more to assist communities with early interventions before they reach fully distressed status, and in assisting with brownfield redevelopments. Mr. Brewster, a former McKeesport city council member and mayor, said he is also concerned about the disincorporation provision contained in the legislation, which he sees as allowing a community to die.

Michael Gasbarre, executive director of the Pennsylvania Local Government Commission, said that provision wouldn’t be forced on any community and would have to be initiated by voters or a local governing body.

Mr. Lattanzi is not naive about the continuing development challenges his city faces — there is no bank or grocery store in the city — even if it is able to officially exit distressed status. Mr. Lattanzi’s hope is to attract a big box store or other retailers.

“If it wasn’t for the sewer authority, and U.S. Steel making a small comeback, I don’t know where we would be either,” he said.

Kate Giammarise: 1-717-787-4254 or kgiammarise@post-gazette.com or on Twitter @KateGiammarise.

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