A significant number of Pennsylvania municipalities are considering applying for a state program for the severely financially distressed, while those already in the program appear to be weathering the coronavirus pandemic better than expected.
In March, many city managers, mayors, and experts feared that 16 municipalities already enrolled in a state financial recovery program called Act 47 could suffer the most dramatically as the statewide economic shutdown undercut tax revenues.
But many have remained stable and are braced for fallout from the current surge, while others in better shape before the pandemic are faring worse.
A survey of 430 municipalities conducted this fall by the Pennsylvania Economy League, a civic leadership nonprofit, found that 23 townships, boroughs, and other local governments said they may now apply for Act 47 status as a result of their current financial pressure.
The Act 47 program considers requests from municipalities that are struggling financially and decides whether they are qualified for a formal, state intervention with oversight that restructures debt, reins in costs, and bolsters tax bases. In some cases, technical assistance or grants are provided to tackle issues like insufficient housing and blight, or to invest in downtown areas.
About 40% of the surveyed municipalities said it’s too soon to tell just how bad the fallout from the pandemic will be, said LeeAnne Clayberger, CEO of the Pennsylvania Economy League.
In addition to the 23 municipalities that disclosed that they may request Act 47 status, another 38 said that they are likely to apply to participate in another state program, the Strategic Management Planning Program, which also assists with financial planning, according to the Pennsylvania Economy League survey.
More than half of those surveyed also saw or expected a decline in earned income tax, which is deducted from workers’ paychecks. Amusement tax, along with fees collected from parking and the use of other community facilities, have also taken a hit as events are canceled and restaurants and bars rein in service.
- In West Chester borough in Chester County, officials proposed a 2021 budget with a 32% property tax increase because of a more than $2 million shortfall. In Newtown Township in Bucks County, officials in October proposed a draft budget that included a 178% property tax increase for 2021.
[NOTE: Newtown Township has revised its proposed 2021 budget, which includes a 133% property tax increase, NOT 178%.]
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In April, 2020, the Board of Supervisors “re-allocated” the 1.0 mill real estate tax slated to be used to borrow money to repave more than 5 miles of roads in 2020 to cover General Fund expenses - a drastic move in anticipation of an Earned Income Tax (EIT) revenue shortfall of 8-11% due to the COVID-19 shutdown of local businesses. That shortfall, however, never materialized. According to Keystone Collections, which collects EIT, comparing earned income collections for 1/1/20 – 8/31/20 vs 1/1/19 – 8/31/19, Newtown Township specifically is up about $258,000.00 or 4.8%
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