READING – Department of Community and Economic Development Secretary George Cornelius has determined that the City of Reading is “financially distressed” under the guidelines of Act 47, the Municipalities Financial Recovery Act.
Cornelius now has 30 days to appoint an Act 47 coordinator, whose job it will be to develop a financial recovery plan for the city; once appointed, the coordinator will have 90 days to develop and propose a plan.
“Act 47 status is neither a state takeover, nor a determination of bankruptcy,” Cornelius said. “No interruption in the delivery of essential services is anticipated. Moreover, ultimate responsibility for city policies and priorities, and the day-to-day management of city affairs, remains with elected city officials.”
Cornelius announced his decision at a Pennsylvania Economy League public policy forum here, following meetings with the mayor and city council Wednesday evening. A public hearing on Reading’s Act 47 application was held Oct. 14
Act 47 triggers procedures, guidelines and powers that help financially distressed municipalities provide vital services, meet debt and other financial obligations, and supply improved accounting, budgeting and taxing practices. Pennsylvania’s oversight emphasizes long-term fiscal management improvements, service delivery efficiencies, intergovernmental cooperation, and economic and community development priorities.
Cornelius cautioned that many Pennsylvania cities face daunting financial challenges from factors both within and outside their control.
“In the long-term, workable systemic changes to the way Pennsylvania organizes, manages, and funds local government are necessary, particularly with respect to our cities,” Cornelius said. “The current organization and systems are ill-suited to address the fundamental changes that have taken place since World War II.
“The migration of the middle-class and much of our industrial, business and retail sectors to the suburbs and, in some cases, to other regions or countries, together with an aging urban infrastructure, tax and governance systems that were designed for a high-growth era when our cities were the economic hubs of our regional economies, leaves us with municipal financial challenges that cannot be addressed adequately with existing tools, including Act 47,” he said.
“Regardless of what has brought us to this situation in Reading, everyone—the city, county, region and state—must be a part of the solution,” Cornelius said. “If our cities fail, entire regions will be at risk, economically and socially, and the entire state will suffer in the long term.”
Reading is the 19th Pennsylvania municipality currently active in the program.
A DCED report concluded that the city has experienced a continued pattern of year-end structural deficits that have only been addressed by one-time solutions; a debt burden in excess of 10 percent of revenues; a stagnant tax base; socio-economic and demographic trends that reflect a tax base insufficient to fund public safety services; an ineffective financial management system that cannot provide timely and accurate financial reports; and significant cash flow difficulties.
“Reading’s financial condition has deteriorated significantly over the past six years,” the report said. “The city’s demographics portray a community with high levels of poverty, low housing values and per capita income levels that are significantly below the average for the county and state. These factors raise serious concern about the ability of the city’s current tax base to generate the revenue necessary to support core municipal services.”
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