Review of cases indicates Jeannette won't likely succeed in bankruptcy
By Richard Gazarik
Published: Wednesday, Feb. 13, 2013, 12:01 a.m.
If the City of Jeannette files for municipal bankruptcy, the odds it will succeed are slim, a review of bankruptcy cases since 1980 indicates.
Since then, more than 82 municipalities have filed Chapter 9 bankruptcy, and judges have dismissed all but a handful, according to court records.
The latest was the City of Harrisburg in 2010. A bankruptcy court judge threw out the petition because the state had not followed the proper procedures.
Dr. Robert Strauss, a professor of economics and public policy at Carnegie Mellon University, said all small cities such as Jeannette have the same financial problems and face the same hurdles in filing for Chapter 9.
“When you're not growing, you slowly, inexorably, run out of cash,” he said. “Jeannette has got a problem. They may not be as crazy as Harrisburg. I think Jeannette will have grave difficulty before a judge in bankruptcy court will approve it if they haven't gone through Act 47.
Pennsylvania is one of 19 states that allow municipal bankruptcy. The law was enacted during the Great Depression when cities nationwide were struggling for survival.
“The reality is we don't have a plan. We don't have a policy in this state that will solve the problem,” Strauss said.
Council members said they may consider other actions to save money before deciding whether to file for bankruptcy or seek protection under the Financially Distressed Municipalities Act, commonly known as Act 47.
The city has been under the state's Early Intervention Program for distressed municipalities. More than $133,000 in grants from the Department of Community and Economic Development paid for a consultant to make recommendations for pulling the city out of its financial spiral. The city ignored most of the recommendations but may have to reconsider, Councilman Bill Bedont said this week.
Those recommendations included reducing the police department from 12 officers to eight and dissolving the paid fire department and the sanitation department.
While Act 47 is an option for Jeannette, the process is time-consuming, said Mike Foreman of the Department of Community and Economic Development.
First, the city must file a petition with the state to enter the program. The department would conduct a field investigation of the city's finances, hold a public hearing and then must have approval from the agency's secretary. Once in Act 47, the city could be under state oversight for decades.
Cities under Act 47 include Pittsburgh, Clairton, Braddock, Rankin and Duquesne in Allegheny County. Pittsburgh has been under state direction since 2003. Clairton and Braddock entered the program in 1988, and Rankin joined a year later. Duquesne has been under state control for 22 years, according to Department of Community and Economic Development records.
Jeannette council meets at 6 p.m. Wednesday to “adjust” its 2013 budget to pay hundreds of thousands of dollars of debt.
Council could take several steps to reduce costs:
• Laying off all paid on-call firefighters and relying on volunteers. Wages for on-call firefighters peaked at $60,000 in 2010 after rising from more than $42,000 in 2005. Last year, taxpayers paid $55,000.
• Laying off three part-time police officers.
• Instituting rolling layoffs of city employees.
• Abolishing the sanitation department, which costs taxpayers more than $788,000 annually, and hiring a private contractor to collect garbage.
In the meantime, the city is considering two options to increase revenue.
Council may buy an automated payment machine for the city parking lot. Last year, the city eliminated fees for the lot and parking meters in the business district.
“This is in the preliminary planning stages,” said Mayor Robert Carter.
The machine costs $14,500 and is similar to those used in Pittsburgh, Indiana University of Pennsylvania and West Virginia University in Morgantown. Motorists pay for a specific time period and get a receipt to place on their vehicle's windshield.
Councilman Mark Levander said the city will start fining residents who refuse to use city-sanctioned garbage bags. The fines range from $300 to $1,000.
Richard Gazarik is a staff writer for Trib Total Media. He can be reached at 724-830-6292 or at email@example.com.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Pair jailed in Hempfield drugstore robbery
- Unity Township salesman cleared in scam case sues police, car dealer
- Mt. Pleasant holiday tour to feature homes, more
- Westmoreland water authority signs off on DEP sanctions
- Audit finds Jeannette’s accounting deficient
- Homeowner flees Ligonier Township fire
- Westmoreland prosecutors want prison for Russian in gun case
- Ligonier officials may review legality of 2 council votes
- Unity supervisors adopt budget with no tax hike
- Duo sought in spate of Greensburg graffiti
- Motorist helps troopers arrest man near Route 22