Small municipalities plight 'lost in the shadows'
By Stacy Brown | PA Independent
HARRISBURG — Like their big city brethren, Pennsylvania's smaller municipalities are feeling the pain of an economic downturn that has left them financially distressed and with few solutions.
"Small municipalities get lost in the shadow of the big cities," said Thomas Baldino, political science professor at Wilkes University in Wilkes-Barre. "The smaller cities have a challenge finding political support in the Legislature, because there are many lawmakers from the bigger cities."
Many municipal leaders as well as union and other officials are expected to attend Thursday's joint House and Senate public hearing on the state's Municipalities Financial Recovery Act, or Act 47. Act 47 was enacted in 1987 to help municipalities that are teetering on bankruptcy to restructure debt and obtain government funding to help meet obligations and maintain their infrastructure.
Pennsylvania has 2,562 municipalities, 78 percent with populations less than 5,000, according to the Pennsylvania State Association of Boroughs, a nonprofit representing the interests of boroughs.
“Pennsylvania’s once-thriving town centers and county seats are at risk of insolvency, if we don’t come up with a solution to fix the most common problems,” said state Sen. John Wozniak, D-Cambria, who hosted a hearing in November in Johnstown to discuss the smaller municipalities that are either financially distressed or on the brink of it.
Those problems include a dwindling property tax base, an increase in expenses while tax revenue has nose dived and, because of the Great Recession, slowed state-level assistance, Wozniak said.
“We can’t just consider them local problems," Wozniak said. "Declining cities have an effect on the economy of the entire region, and when you connect the dots, it spreads across the state.”
When bigger cities struggle, it often affects surrounding smaller towns, officials said.
As population have moved from the core community to the suburbs, the tax base has exited, but service needs remain and property values decline, resulting in lower revenue from property taxes, said Fred Reddig, executive director of the Governor’s Center for Local Governments, a resource center for local governments, developers and resident. Raising taxes to generate more revenue only makes the cycle spin faster.
Johnstown, for example, lost 12 percent of its population between 2000 and 2010, and Chester lost more than 7 percent of its population in the past decade, according to the U.S. Census.
Smaller municipalities were particularly crippled by the Great Recession, said East Stroudsburg Borough Manager James Phillips.
"Our pension plans lost money in the stock market, and our obligation to the plan will be up $200,000 over last year," said Phillips, noting that while East Stroudsburg isn't classified as distressed, the borough could be inching toward it.
"We don't have a lot of options. Cost savings is always a point of contention," Phillips said. "I'd like to think there is light at the end of the tunnel, but I don't think the state is doing much to address the problems of the smaller municipalities."
It would be to the state's advantage to help cities before they declare themselves distressed, said Lock Haven Mayor Richard Vilello.
"You cannot run a business, which is what people often claim municipalities should operate like, on a stagnant income," Vilello said.
A more stable tax base and legislation that would curtail large arbitration awards to local unions are among the things needed to help distressed cities, said state Sen. Lisa Boscola, D-Lehigh.
Of the 26 municipalities that the state has declared distressed since 1987, 17 had populations of less than 10,000. The population figures are based on the most recent census data.
Seven of the 26 have populations with less than 5,000. Millbourne borough in Delaware County had the smallest populate with 1,159 residents.
Pittsburgh, with a population of 334,500, is the largest financially distressed municipality.
Reading with 81,200 residents, Scranton with 76,400, Harrisburg with 48,900, and Chester with 37,100, are among the bigger cities that are in distressed status.
"When your number one source of revenue is property tax and 30 percent of the properties or higher are exempt from property taxes, it's only common sense that there is a problem," said Gerry Cross, executive director of the Pennsylvania Economy League, the Act 47 coordinator for several municipalities including Scranton.
