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Jeannette plans 'fire sale'

| Monday, Jan. 28, 2013, 12:02 a.m.

The City of Jeannette is in such dire financial straits that council will sell off equipment and other assets to raise money to meet its obligations, officials said.

Jeannette is starting the year with more than $1.4 million in obligations.

Council is expected to consider layoffs of police officers and other employees when it reopens the 2013 budget next month.

Councilman Bill Bedont said an unused fire truck could be one of the first assets to be sold, along with fire equipment and other unspecified items.

The deficient coffers took another blow Friday when a county judge ordered the city to pay businessman Frank Trigona and his attorney more than $235,000 in damages and legal fees for Jeannette's 2005 decision to withhold occupancy and health permits from Trigona's rental properties because he had not paid city taxes. Jeannette does not have insurance to cover the award and will have to find other revenue sources to pay the damages.

City attorney Scott Avolio said Friday that the court decision will have a “drastic impact” on finances.

“We knew it was coming,” he said. “These damages come with interest and attorney's fees. That makes this a major financial problem.”

Meanwhile, the state is pressing officials to explain how the city will pay $350,000 it owes to the police pension fund, along with its $546,000 contribution for 2013.

Failure to pay the pension contributions, known as a Minimum Municipal Obligation, is one of the trip wires that could force the city to seek protection from creditors under Act 47, known as the Municipal Financial Recovery Act.

“That's being worked on right now,” Bedont said.

Mike Foreman, director of Local Government Services for the Department of Community and Economic Development in Pittsburgh, said the state is concerned about the city's failure to meet its pension obligation. The law requires timely payment of the pension contribution, he said.

“We're just trying to get them to comply with the law, to take it seriously,” Foreman added.

Failure to pay the full amount triggers a hefty penalty, city clerk Mike Minyon said.

“It's not simply interest,” he said.

Last month, Bedont transferred more than $309,000 from other city accounts to the general fund to pay employees and “to keep the lights on.”

Foreman said the cash transfers are “other financing sources” and are not considered revenue.

“They're really just Band-Aids,” he said. “The city is going through a vicious cycle of cash shortages. They won't be able to use the money in the future to bail out their general fund.”

Jeannette is borrowing $350,000 to get through the first several months of the year. Repayment is due at the end of 2013.

When Jeannette entered pre-Act 47, the state provided a consultant who issued a list of recommendations to help the city avoid being declared financially distressed. Council ignored all but one recommendation.

Bedont said some of the recommendations — hiring a city manager and a chief financial officer, for example — were too expensive but council may reconsider them when the budget is reopened.

“Maybe this year we take a closer look,” he said.

The city has been unable to reach a contract with the Fraternal Order of Police, and the two sides are headed for arbitration, which could prove costly, Avolio said. The contract requires a complement of 12 officers and a chief. To save money, the city would have to lay off part-time officers and at least four full-time officers, which council has been reluctant to do.

Avolio hopes the city can avoid Act 47 status.

“I don't see the benefit at this time,” he said.

Bedont doesn't know whether Act 47 is inevitable.

“My crystal ball is foggy,” he said.

Richard Gazarik is a staff writer for Trib Total Media. He can be reached at 724-830-6292 or at rgazarik@tribweb.com.

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