HARRISBURG — The state will soon set a timer for cities on its “distressed” list, giving them five years to quit the program along with any special taxes they may collect.
The news is creating some hesitation in the cities, many of which struggle with collapsing tax bases and have slogged along on the list for years — in some cases decades.
“It might be like telling us to eat our veggies,” said Michael Ceci, borough manager for Farrell in Mercer County, which was the first city in the rescue program — almost 27 years ago — and remains on the list.
Twenty other cities or boroughs are on the list, as well. The most recent addition was Shamokin in Northumberland County.
Though facing a timeline to quit the program, cities on the list would be allowed to triple commuter taxes levied on workers from travel from out of town, from $52 a year to $156. The increase will come with stepped up oversight, as well.
The changes are part of a bill now on Gov. Tom Corbett’s desk. The bill sailed through the Senate, 43-5, but cleared the House, 134-64, despite bipartisan opposition.
Cities in the distressed program may levy taxes — like the commuter tax — that others are not allowed to collect. The result is a financial incentive to stay in the program, critics say.
In the rescue program’s history, just seven boroughs designated as distressed were later deemed recovered enough to shed the label — and their special taxing powers.
Some lawmakers wonder if the recent changes and new timetable give cities enough help — and time — to turn around their fiscal ships. State Rep. Mark Longietti, D-Mercer County, said the recast program doesn’t provide the tools that communities will need to reinvent themselves.
For example, some lawmakers hoped the new distressed cities plan would expand upon a popular redevelopment program used in Allentown and a handful of other mid-sized cities, said state Rep. Chris Sainato, D-Lawrence County.
Those cities have created local authorities to issue bonds for redevelopment projects, then repaid the notes by taxing businesses that move to the development zone.
Sainato said it’s the kind of measure needed in small cities where financial struggles are aggravated by large land-consuming nonprofits including government, school districts, hospitals and colleges.
Lawmakers voiced other objections. Conservatives including Republican Reps. Brad Roae of Crawford County, and Kurt Masser of Northumberland County were uneasy with the tax increases.
But proponents say that criticism misses the point.
State Sen. John Gordner, R-Columbia County, pointed to a new strategy in the plan to help communities before they become badly distressed. The law on Corbett’s desk also gives distressed cities priority for economic development assistance from the state.
Updates to the program include many approaches wielded by the state to guide Harrisburg away from the financial brink, Gordner said.
In 2012, the capital was America’s most indebted city. Corbett declared a “financial emergency,” and retired Air Force General William Lynch was appointed to guide a recovery effort. He served for less than two years before the state determined that Harrisburg had an adequate recovery plan.
Masser said he’s unconvinced the five-year schedule allows enough time for cities to actually recover. Cities in the program, after five years, must adopt a three-year exit strategy under the new guidelines.
That worries people like Ceci, who is fighting to keep Farrell afloat while facing a dramatic population loss. The city is home to fewer than 5,000 people — less than half the 11,000 residents who lived there 40 years ago.
Ceci said Farrell has taken steps to address its financial problems.
It replaced its police with a regional force shared among neighboring communities. Its streets department shed five full-time employees — from eight to three. The fire department, which used to have a dozen employees, will soon have just one, when the chief retires and is replaced by an assistant.
If the state boots Farrell from the rescue program, it would cost the city about $250,000 a year in lost taxes. That’s a sizable chunk of its $3 million operating budget.
And it would not change the fact that Farrell is plagued by 300 vacant properties — one in 10 parcels — said Ceci.
“You don’t have to a brain surgeon to see that our problem is that our tax base isn’t increasing but our costs are,” he said. “The problem is the loss of our middle class.”