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H0(7Nl Mo-Getr8 Prnyfifn R° 1 COMMONWEALTH OF PENNSYLVANIA HOUSE OF REPRESENTATIVES APPROPRIATIONS COMMITTEE LOCAL GOVERNMENT COMMITTEE ***** i Re: Public Hearing ***** Stenographic report of hearing held at Feast Hall, Old Economy Village 14th & Church Streets, Ambridge, Pennsylvania, Thursday, January 6, 1994 10:00 a.m. iN. DWIGHT EVANS, APPROPRIATIONS CHAIRMAN IN. FRANCIS PISTELLA, LOCAL GOVERNMENT CHAIRMAN MEMBERS PRESENT Hon. Elaine Farmer Hon. Susan Laughlm Hon. Anthony Melio Hon. Joseph Preston Hon. Theresa Brown Hon. John Wozniak HOLBERT ASSOCIATES JANET JACKSON, Court Reporter 2611 Doehne Road Harrisburg, Pennsylvania 17110 H0(7nl Mo-getr8 prnyfifn r°"!si V 2 CHAIRMAN EVANS: Good morning. My name is Dwight Evans. I'm Chairman of the House Appropriations Committee here this morning with the House Local Government Committee. And the Chairman of that particular committee is Francis Pistella, also joining us later. What I'd like to do is introduce some of my colleagues. The young lady to my left - we're in her district and I did have the chance of having dinner with her yesterday evening, Representative Susan Laughlin, who is the representative for this particular district. She's hosting us. MS. LAUGHLIN: Thank you. I enjoyed myself. CHAIRMAN EVANS: To my right is a young lady who is not too far from this area. She told me I must come up and bring my hunting buddies, Representative Teresa Brown. And next is Representative Elaine Farmer and a gentleman who just came in this morning who's a neighbor from Bucks County, Representative Tony Melio. I'm pleased to be back in Beaver County. During the budget meetings of 1993-94, we included a focus on Act 47, the Distressed Municipality Act. We learned how a number of communitles on the list were successful in implem­ entation of the Act. Since that discussion, two success stories, Shenandoah in Schuylkill County and Ambridge, where we are 3 today in Beaver County, Pennsylvania, who have been removed from that list. Today we will hear from representatives from Ambridge who will tell us about the transition from being placed on the distressed list to successfully being taken off the list. We also will hear from representatives from Aliquippa, a community still working hard to recover. We also will hear how the DCA and Commerce have worked with local community leaders to revitalize distressed communities. Responding to distressed communitles requires a combination of resources from the Department of Community Affairs and the Commerce Department. The DCA presents us with administrative and fiscal remedies and Commerce provides us with direction. Working with local government, the state can help communities help themselves. We have two representa­ tives, one from the Governor's Response Team and one who is the Regional Director of DCA. I'd like them to introduce themselves. First, I'd like to ask Representative Laughlin if there's any comments that she'd like to make before we start. MS. LAUGHLIN: Yes; good morning. I just want to say thank you for having the Local Government Committee 4 and the Appropriations Committee coming over to especially Old Economy because this is a place that is dear to our hearts here in Ambridge. And as you can see, we're getting some restoration here. We're going to need a heck of a lot more. And we're looking forward to some help and support from you. And I'm sure you're going to help us out here. And I also want to say that I've worked with Ellen Kight and Barbara Bateman and Bill Gamble over the last two years and even when my husband was in office. And we have some excellent people here. So that's the main reason why with the cooperation and the support of the local govern­ ment in Ambridge that we came out of the distressed community. And I want to thank them personally for that. MS. KIGHT: Good morning; my name is Ellen Kight and I am the Regional Director of the Department of Community Affairs for the Southwestern Regional Office. And we cover nine counties in Southwestern Pennsylvania. And certainly Beaver County is one of those counties. We have been working extensively with the distressed municipalities program since 1987. I want to thank you for asking me to talk with you about Municipal financial distress. My statements this morning are based on the Department of Community Affairs' years of experience dealing with financially troubled munici­ palities, most particularly through our administration of 5 Act 47, the Municipalities Financial Recovery Act or better known as the Distressed Municipalities Act. Incorporated in my comments is information that was previously provided to this committee by Secretary Karen Miller and Deputy Secretary Ray Angeli. I would also like to provide some background on Act 47, information on Recovery Plans with emphasis on those in Western Pennsylvania,,and offer some thoughts on issues to be addressed in the future. Since the summer 1987, the Department of Community Affairs has been administering Act 47, the Municipalities Financial Recovery Act. The Department has received 21 petitions from municipalities for a distressed declaration. And we've declared 15 of them actually to be distressed . The cities were Aliquippa, Farrell, Clairton, Duquesne, Scanton, and Johnstown; and the boroughs were Wilkinsburg, Shenandoah, Braddock, Franklin, Rankin, Ambridge, East Pittsburgh, Millbourne, and Homestead. It's important to note that of the 15 that were declared distressed, 12 are in Western Pennsylvania and nine have been in Southwestern Pennsylvania. So there's a heavy concentration in the west­ ern part of the state. Both Shenandoah and Ambridge were released from the ProgranT on Apr lT~l6", 1993, so DCA now has actively 13 distressed municipalities. We've provided $1,450,018 in 6 grants and $8,119,559 in no-interest loans to these 15 com­ munities. The Department has given thousands of hours of technical assistance and has developed comprehensive recovery plans for all of the communities, as required by law. Communites involved under the Act generally ex­ perience some degree of both economic decline and tax base erosion and also financial/administrative mismanagement. The more their distress is rooted in economic/tax base decline, the more difficult the job of recovery is. To initiate an Act 47 recovery, the community files a request for help with DCA. The staff is sent out to validate whether the Act's technical criteria have been met; i.e., budget deficits, failure to withhold taxes, missed pay­ rolls, bankruptcy filings; and if so, whether the community meets the basic policy criteria of the Act set up by the General Assembly: Can they provide for health, safety, and wel­ fare of the citizens; can they pay principal and interest of debt; pay employees, vendors, suppliers; provide for proper budgeting, accounting, and taxing practices? And this has been a problem with almost all of our municipalities A staff investigation is done, a staff recom­ mendation is made, a report issued and presented at a public hearing held to gather further information on the financial 7 condition of the community. A hearing officer's report is issued and Secretary Karen Miller studies the evidence and makes a de­ termination. If distress is declared, emergency no-interest loans have been provided to insure continuation of basic ser­ vices. DCA hires a coordinator to prepare a comprehensive recovery plan for the municipality at the state's expense. The plans are all unique but they must present concrete rec­ ommendations. The officials, employees, and management of the community are consulted throughout plan development. And that's very important. The community comments on the plan. It may be changed by the coordinator. And then the elected officials vote whether to adopt the plan. Assuming they adopt the plan, the coordinator then begins implementation immedlately with municipal and DCA assistance. At this stage we provide further loans and grants, comprehensive technical assistance, project help, and other state economic development resources. The plan covers a period of three years and it is updated as needed. And as the plan covers a period of three years, it's updated as needed and as approved by munic­ ipal officials. At the end of the three years, DCA does a re-evaluation and generally the plan is further revised and approved by municipal officials for a set period of time. 8 Five of the nine recovery plans that we've had in Southwestern Pennsylvania have been updated and/or extended for a period beyond the three years. Certain general strategies for municipal finan­ cial recovery have emerged: first, get the community out of immediate financial difficulty by loaning some money to keep services going; Second, begin instituting good management and financial practices. Start the business of getting municipal costs under control as soon as possible; Third, get new revenue sources on line - insti­ tute new taxes and fees, if necessary, improve collections, sell assets, whatever is in the plan; Fourth, begin economic development, tax base revitalization planning, start working on getting grants and programs in place, and begin creating the public-private partnerships needed for long range tax based solvency - and we'll talk more about that as it relates to Ambridge; Fifth, work on building public-private partner­ ships, on developing shared municipal services whenever pos­ sible in areas such as police, public works, code enforcement, and even economic development using COGs, contracts, and reg­ ional police agencies. What has worked? Why are an increasing number of communities willing to pursue Act 47? Certain things seem 9 clear. No interest loans are the best deal in town, especially for municipalities whose banks have stopped pro­ viding them with credit - and that certainly was the case in Aliquippa.
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