Mon Valley cities, other Act 47 communities desperate for change
By Richard Gazarik and Adam Smeltz
Published: Saturday, Sept. 21, 2013, 10:03 p.m.
A sign leading into Clairton welcomes newcomers to “The City of Prayer.”
“We could use a few,” says steelworker Rich Lattanzi, mayor of the Monongahela Valley community, where a quarter of the 6,800 residents live in poverty and 5 percent are homeless.
The former boom town needs prayers partly because it lost huge numbers of jobs and tax revenue in the post-steel decline — it once had 20,000 residents — but still carries the government trappings of a larger city.
Residents' tax dollars support a stand-alone zoning office for Clairton's 3 square miles. Residents pay for a parks department, a finance office and a public works department, even as the city labors for its 25th year as a state-designated “distressed municipality.”
From Clairton and Duquesne to Aliquippa and New Castle, expensive, bloated and geographically fragmented relics of local government threaten financial recovery in Pennsylvania's shrinking third-class cities, warn independent observers and scholars.
“You had houses, factories, stores and streets built for 30,000 people, but now you have 5,000 people there. You have to find ways to keep the infrastructure from imploding, from not falling down,” said David Thornburgh, executive director of the Fels Institute of Government at the University of Pennsylvania. “The reality is that many communities will just kind of continue to muddle along.”
While Pittsburgh, a second-class city, grabbed a national spotlight for its downturn and rebirth after the 1980s steel industry collapse, smaller post-industrial towns struggled mainly off the radar. Eleven of 27 communities placed under the state's Financially Distressed Municipalities Act since 1987 are third-class cities, many of them former industrial hubs such as Altoona and Reading.
Lawmakers say that legislation, known as Act 47 and meant to stabilize city finances through restructured debt and other measures, has become another burden for local leaders. Five third-class cities have been stuck under the designation for more than 20 years.
“When the act was written, no one realized how long a community would be in it,” said state Sen. John Eichelberger, R-Altoona, who co-chairs a legislative task force rewriting the act. “Municipalities need to work their way out. They need to have an exit strategy.”
Brewing a crisis
Communities across Pennsylvania — from boroughs and cities to suburban townships — saw their landscapes shift when industry began moving out in the 1980s.
But the 53 classified as third-class cities have another layer of complications.
Built at the height of boom times, many elected municipal officials oversaw dramatic expansions of public services. Manufacturers clustered in small-city centers, becoming the hearts of one-trick local economies without the economic diversity of larger towns.
Small businesses set up shop along busy main streets where just about any worker could find a job and walk to work with lunch box in hand — lives timed to their shifts.
Third-class cities began spending more than their tax revenues, as the Pennsylvania Economy League warned in 1958. Cities coped with deficits by borrowing more and more money.
Five years later, the league sounded the alarm again, warning that cities in southwestern Pennsylvania were spending more than double their tax revenue for police, fire protection and public pensions. Fringe benefits for police alone increased 74 percent in 1963.
Today, most city pension funds have liabilities that exceed their assets, according to the Public Employees Retirement Commission, and many former industrial cities never scaled back public services as populations declined.
“You make promises to people based on what a thriving community of thousands can generate, and then you find yourself with a fraction of that,” Thornburgh said. “You find yourself in a spiral that's very hard to get out of.”
To escape that spiral, Clairton and its school district sought mergers with neighboring municipalities and school districts, said Lattanzi, the city's mayor.
“Nobody wants us,” Lattanzi said. “We wrote letters and received replies saying: ‘Thanks for writing, but no, thanks.' ”
Michael Panza, superintendent of the West Jefferson Hills School District, said he was unaware of Clairton's request, but said merging school districts is not easy.
“School districts are political subdivisions,” he said. “Even if they wanted to merge, it will take action of the Legislature to do that.”
Helping the helper
To leave Act 47, Lattanzi said, cities must develop recovery plans that involve debt restructuring and often mean tax hikes on residents struggling with their tax burdens. Some have scuttled recovery plans because they didn't want to increase taxes.
Last year, New Castle rejected a plan because it would have required city council to pass tax hikes amounting to 17 percent in 2014 and the following year.
Farrell in Mercer County, the first city to enter Act 47 in 1987, increased wage and property taxes in 2012, Mayor Oliver McKeithan said. The city's paid firefighters double as street department workers and the fire chief as director of public safety.
“Act 47 is a death sentence,” said state Sen. James Brewster, D-McKeesport, a former mayor whose district includes a half-dozen third-class cities. He supports a series of amendments under Eichelberger's task force.
Those changes include a standard five-year limit for placement under Act 47 and a requirement to implement fiscal recommendations from the state. Distressed municipalities unable to emerge from the program would be dissolved and incorporated into neighboring communities.
Others would be offered financial incentives to make consolidation politically and financially palatable.
In Clairton, where about 1,000 abandoned houses have long since replaced bustling streetscapes, city Manager Howard Bednar doesn't expect the proposed changes will help such desperate communities much.
“The financial incentives would have to be astronomical,” he said. “You won't see any municipal mergers. The Mon Valley is old. A lot of problems they have are because infrastructure is collapsing. The revenue isn't there to fix it.
“Businesses come into town, and all they see is dilapidated buildings.”
Rebuilding a legacy
Not everyone has lost faith in the distressed cities and boroughs.
Stephanie Smalls of Braddock opened Unique Boutique in May in a narrow storefront on Fifth Avenue. After working 25 years at Del Monte Foods on Pittsburgh's North Shore, Smalls was laid off and decided to go into business.
“I'm not paying myself, but I'm paying the bills,” she said. “I don't look at myself as a gambler. I look at myself as someone who has faith.”
Natalie Koedel was furloughed as a middle school English teacher in McKeesport. She and her husband, Kevin, sell hotdogs on a corner of Fifth Avenue for two hours every day.
“The potential is here.” she said. “The leaders have the best interests of the city at heart. They believe in the city as much as I do.”
McKeesport, in Allegheny County, has been trying to avoid Act 47, along with the cities of Jeannette and Latrobe in Westmoreland County, both of which are receiving state help to avoid the designation.
For as much as the communities want to escape a downward spiral, the track record for attempted turnarounds isn't good, Thornburgh said. He said towns supported by the natural-gas boom, college towns and those close to transportation hubs might fare better.
“There haven't been very many Lazarus communities that come back from the dead,” Thornburgh said. “This question has been around for 50 years now. It would be terrific if we were able to gather the political will, break through the bubble and make it so the next generation doesn't have to cycle through the same issues.”
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