A deeply divided Johnstown City Council approved the newest version of the municipality’s Financial Recovery Act 47 plan earlier this week.
Deputy Mayor Frank Janakovic, along with council members Rose Howarth, Joseph Taranto and Marie Mock, voted in favor of the outline.
Mayor Tom Trigona and Councilmen William Gentile Jr. and Pete Vizza opposed it. The document provides instructions for handling the city’s economy as a member of Pennsylvania’s program for distressed municipalities.
The three-year plan for 2014-16, even though enacted, can be amended at any time.
“It was the right thing to do for the city,” said Mock. “We need the
Act 47. It was just the right thing to do at this time.”
The divide occurred over the earned income tax issue.
Currently, the city can enact an EIT rate of 1.3 percent for residents, which is higher than the 1 percent permitted for Pennsylvania municipalities that are not in Act 47. The new plan would enable Johnstown to increase its so-called commuter tax to a maximum of 1.5 percent.
Approving the Act 47 plan did not automatically raise taxes. Rather, any increase would need to be passed through the budget process and approved by the Cambria County court system. The new recovery plan did not include any framework for raising property taxes.
“I couldn’t, in true conscience, vote for a tax increase at any level with what is going on right now in the city,” said Vizza. “The taxpayer is being asked to absorb more and more burden, and I just couldn’t do it, and I’m glad that I had the support of Billy Gentile and the mayor. We came up short, but we voted our convictions.”
The plan suggests raising the rate to 1.5 percent in order to address projected deficits, fund the addition of two police officers and a code enforcement officer, and generate positive balances going forward.
Any increase of one-tenth of a percent would generate about $200,000. An individual making $50,000 annually would pay paying an extra $50, according to Janakovic.
Council accepted the plan based on future financial projections that include growing legacy costs. Beginning in 2015, the city’s annual pension obligation is expected to exceed $3 million annually. Johnstown’s municipal pension fund is currently
49 percent funded. It would require an additional $20 million to be fully covered.
“We’re in the same situation as many cities our size with dwindling population and legacy costs,” said City Manager Kristen Denne.
Between 2000 and 2010, Johnstown experienced a 10.13 percent decrease in the size of its labor force. About 78 percent of the city’s general fund comes from tax revenues, “making it extremely vulnerable to environmental and economic conditions,” according to the plan.
Johnstown’s general fund generates less revenue than needed to cover operating expenses.
“It’s kind of depressing to see it all laid out like that,” Taranto said.
The city entered the Act 47 program in 1992 with the goal of receiving some temporary assistance in avoiding an economic collapse. Johnstown is now one of 21 municipalities in Act 47.
Being in the program provides governments some benefits in terms of negotiating contracts, levying taxes and acquiring financial assistance. Only six municipalities have ever left.
“My biggest problem with Act 47 is once you’re in, you almost never get out,” said Pennsylvania Auditor General Eugene DePasquale during a recent visit to The Tribune-Democrat.
“That’s the biggest problem. The goal of any plan to help revitalize a community should be to help you get out of it, not stay in it forever. That’s No. 1.
“No. 2, one of the things I don’t like about it is that the
No. 1 job of the local government is police and fire protection, and it seems like Act 47 only allows them to address the one thing that is the local function, which is the police and fire contracts.”
Dave Sutor is a reporter for The Tribune-Democrat. Follow him on Twitter at twitter.com/Dave_Sutor.