City Council is hoping Wednesday's education on Act 47 will lead to financial stability after this year's budget projected a $1.6 million operational deficit that will exhaust the unreserved fund balance.
About 55 spectators - including union officials - attended the presentation by Michael Foreman of the Department of Community and Economic Development's southwest region office.
Entry by the city into the program would allow for tax "revenue enhancements," grants and loans, limits on salaries and benefits, and guidance from the state through a distress coordinator and a recovery plan, Foreman said.
Article Video
Act 47 meeting
"This is not a state takeover," he added. Rather, it's a cooperative effort among the city, the coordinator and DCED.
It's also not meant to be permanent, he said, although all of the 11 third-class cities that have entered the program in its 25-year history have remained in it.
The next step is for council "to beat this around," in deciding whether to file a petition for distress, said City Manager Joe Weakland afterwards.
"Nothing has been decided," said Mayor Bill Schirf. "We're going to do this step-by-step."
There would be plenty of public input during the seven to eight months it would take from the time the department would receive a petition to enter the program and approval of a recovery plan by council, Foreman said.
Virtually all municipalities take advantage of higher property and earned income taxes - on which the city currently is maxed out at 30 mills and 0.5 percent, respectively, for general purposes.
Act 47 removes those caps, but the increases must be approved annually by county court, based on a demonstration of need, Foreman said.
The department would seek eventually to "wean" municipalities off the enhanced rates, "as part of our exit strategy," he said.
It could do so after regrowing the tax base through economic development designed to "grow their attractiveness," he said.
Weakland isn't confident about the economic development potential of the program.
Cities haven't emerged from the program because systemic changes since their "heyday" have made their economies less "bountiful," Foreman conceded.
Unfortunately for municipalities in distress, a recent state Supreme Court ruling in a Scranton case has undermined the effectiveness of the mandatory limits those municipalities can put on police and firefighter salaries and benefits, because a arbitrator's decision overrules the plan, Foreman said.
However, the General Assembly has a 50-50 chance of revising the law to undo that decision, which runs counter to the original intent of the act, said state Sen. John Eichelberger, who attended the meeting.
Asked whether distress tends to worsen relations between management and union labor, Foreman conceded "it's challenging."
"Everybody needs to work together and make sacrifices for long-term improvement," he said. "Share the burden."
"We'll wholeheartedly work with the city," said new police union President Chris Rosenberry after the meeting. No one joins the force to "retire to Tahiti on our pension," he said. "We choose the profession to make the community better," he said.
The firefighters are putting "our trust and confidence" in council but are "troubled by the idea entering Act 47, which has become a black hole of dependence for many other communities," wrote new union President Bryson Peterman recently. They've already had their fill of concessions, according to Peterman: "We have been laid off, taken pay freezes, altered how we pay for health insurance and are down five positions since 2007, and about to lose a sixth through attrition," he wrote.
Altoona qualifies for distress on at least three of the 11 criteria which independently of one another make municipalities eligible for the program: it's running operational deficits, it has had to curtail services and it is maxed out on taxes, Weakland said.
Not only City Council, but the city's chief executive or 10 percent of the voters in the last election or 10 percent of the city's pension beneficiaries or 10 percent of city employees or the city's auditor have standing to petition the department for entry into the program, Foreman said.
Mirror Staff Writer William Kibler is at 949-7038.
