A MULTIPLE CASE STUDY EXAMINATION OF MUNICIPAL FINANCIAL DISTRESS IN PENNSYLVANIA

A MULTIPLE CASE STUDY EXAMINATION OF MUNICIPAL

FINANCIAL DISTRESS IN PENNSYLVANIA

By

Donna J. Piper Rupert

ANTHONY PIZUR, PhD, Faculty Mentor and Chair

CLIFFORD BUTLER, PhD, Committee Member

MARY JANE KUFFNER HIRT, PhD, Committee Member

William A. Reed, PhD, Dean, School of Business and Technology

A Dissertation Presented in Partial Fulfillment

Of the Requirements for the Degree

Doctor of Philosophy

Capella University

October 2012

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Abstract

In 1987, the Pennsylvania Legislature enacted the Financially Distressed

Municipalities Act, commonly known as Act 47, which was meant to address financial

distress by providing assistance to municipalities that were suffering from declining

economies, financial mismanagement, and administrative inefficiencies (PA Legislature,

1987). Since 1987, 27 municipalities in Pennsylvania have been declared financially

distressed pursuant to Act 47 (PA Department of Community and Economic

Development, 2012). Currently, 21 municipalities operate under the financial distress

declaration while only six of the 27 have had the declaration rescinded (PA Department

of Community and Economic Development, 2012).

This research examines four (the boroughs of East Pittsburgh, Homestead, North

Braddock, and Wilkinsburg) of the six municipalities that have had a financial distress

declaration rescinded by the Secretary of the Pennsylvania Department of Community

and Economic Development using a mixed method case study approach.

The purpose of this research is to determine whether patterns and trends exist

among the four cases and to determine how, based upon the patterns and trends, each of

the case municipalities were able to have their financial distress declaration rescinded.

Subsequently, the ultimate purpose of this research is to apply the answers to how, to

other financially distressed municipalities across the Pennsylvania Commonwealth. In

addition, identified patterns and trends during the pre-distress study period may also be

applied to other Pennsylvania municipalities and may act as an early warning system for

municipal financial distress in Pennsylvania.

iii

Dedication

To my: daughter, Melissa, sons Ryan and Dylan; and granddaughters Laikyn and

Leah, and grandson Bryson. You are my shining stars – my reasons for being.

iv

Acknowledgements

My deepest appreciation is extended to my former Committee Chairperson, Dr.

Valerie Coxon. Her encouragement and guidance gave me the courage to continue.

I would also like to thank my dear friend Dr. Mary Jane Hirt for her expert advice

and guidance through this process.

Finally, I would like to acknowledge my family and friends and all who have

listened, smiled, and asked how things are coming along. I very much appreciated the

encouraging words.

v

Table of Contents

Acknowledgements iv

List of Tables ix

List of Figures xi

CHAPTER 1. INTRODUCTION 1

Background of the Study 2

Statement of the Problem 3

Purpose of the Study 6

Rationale for the Study 7

Research Management Framework 8

Research Questions 10

Research Study Conceptual Model 11

Significance of the Study 13

Definition of Terms 14

Assumptions and Limitations 20

Nature of the Study 21

Organization of the Remainder of the Study 21

CHAPTER 2. LITERATURE REVIEW 23

Municipal Bankruptcy 23

Municipal Solvency 25

Insolvency: Financial Distress 26

The Municipal Financial Distress Cycle 31

The State’s Roles 34

vi

Pennsylvania’s Approach 39

Causal Factors 43

Stress Factors 46

Measuring Municipal Financial Distress 47

Financial Monitoring Systems 49

Summary 53

CHAPTER 3. METHODOLOGY 55

Purpose of the Study 55


Research Design 57

Description of the Population and Sample Characteristics 58

Measurement Plan 59

Data Collection Plan. 59

Data Analysis and Display 66

Validity and Reliability 67

Ethical Considerations 68

Conclusion 69

CHAPTER 4. RESEARCH FINDINGS 71


Data Collection 73

Data Presentation and Analysis 74

Socioeconomic Characteristics 74

Organizational Structure 84

vii

Financial Analysis 103

Summary of Findings 150

CHAPTER 5. DISCUSSION, LIMITATIONS AND RECOMMENDATIONS FOR

FUTURE RESEARCH 170

Discussion of the Results 173

Conclusions 182

Limitations 184

Recommendations for Future Research 188

REFERENCES 190

APPENDIX A. EAST PITTSBURGH RECOVERY PLAN

RECOMMENDATIONS 197

APPENDIX B. HOMESTEAD RECOVERY PLAN RECOMMENDATIONS 203

APPENDIX C. NORTH BRADDOCK RECOVERY PLAN

RECOMMENDATIONS 215

APPENDIX D. WILKINSBURG RECOVERY PLAN RECOMMENDATIONS 227

APPENDIX E. FINANCIAL DISTRESS IN WILKINSBURG BOROUGH 230

APPENDIX F. FINANCIAL DISTRESS IN NORTH BRADDOCK BOROUGH 239

APPENDIX G. PUBLIC SERVICE DEPARTMENTS AND APPOINTED

OFFICIALS BY CASE MUNICIPALITY 246

APPENDIX H. TAXES LEVIED BY CASE MUNICIPALITY 248

APPENDIX I. EAST PITTSBURGH AND HOMESTEAD REVENUES PER

CAPITA 250

APPENDIX J. NORTH BRADDOCK AND WILKINSBURG REVENUES PER

CAPITA 251

APPENDIX K. EAST PITTSBURGH TAX REVENUES 252

APPENDIX L. HOMESTEAD TAX REVENUES 253

viii

APPENDIX M. NORTH BRADDOCK TAX REVENUES 255

APPENDIX N. WILKINSBURG TAX REVENUES 256

APPENDIX O. REAL ESTATE TAX REVENUES BY CASE MUNICIPALITY 257

APPENDIX P. TOTAL EXPENDITURES BY CASE MUNICIPALITY 258

APPENDIX Q. EAST PITTSBURGH DEPARTMENTAL EXPENDITURES 259

APPENDIX R. HOMESTEAD DEPARTMENTAL EXPENDITURES 260

APPENDIX S. NORTH BRADDOCK DEPARTMENTAL EXPENDITURES 261

APPENDIX T. WILKINSBURG DEPARTMENTAL EXPENDITURES 262

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List of Tables

Table 1. Secondary Data Sources 61

Table 2. Study Analysis Periods: Pre-distress, Distress, and Post-distress 62

Table 3. East Pittsburgh Total Population (1970-2010) 76

Table 4. East Pittsburgh Population Characteristics (1970-2010) 76

Table 5. East Pittsburgh Housing Characteristics (1970-2010) 77

Table 6. East Pittsburgh Housing Occupancy Characteristics (1970-2010) 77

Table 7. Homestead Total Population (1970-2010) 78

Table 8. Homestead Population Characteristics (1970-2010) 79

Table 9. Homestead Housing Characteristics (1970-2010) 79

Table 10. Homestead Housing Occupancy Characteristics (1970-2010) 80

Table 11. North Braddock Total Population (1970-2010) 81

Table 12. North Braddock Population Characteristics (1970-2010) 81

Table 13. Wilkinsburg Total Population (1970-2010) 83

Table 14. Tax Revenue Comparison by Case Municipality 94

Table 15. Financial Distress Criterion Found to be Evident in East Pittsburgh 107

Table 16. Financial Distress Criterion Found to be Evident in Homestead 108

Table 17. Financial Distress Criterion Found to be Evident in North Braddock 110

Table 18. Financial Distress Criterion Found to be Evident in Wilkinsburg 111

Table 19. Assessed Valuation by Case Municipality. 114

Table 20. East Pittsburgh Surplus/ (Deficit) 116

Table 21. Homestead Surplus/ (Deficit) 117

x

Table 22. North Braddock Surplus/ (Deficit) 118

Table 23. Wilkinsburg Surplus/ (Deficit) 119

Table 24. Revenues by Case Municipality 122

Table 25. East Pittsburgh Borough Act 511 Tax Revenues (1987-2004) 135

Table 26. Homestead Borough Act 511 Tax Revenues (1988-2010) 137

Table 27. North Braddock Borough Act 511 Tax Revenues (1990-2008) 139

Table 28. Wilkinsburg Borough Act 511 Tax Revenues (1983-2003) 140

Table 29. Annual Average of Regional Asset District Revenues by Municipality

(1994-2005) 141

Table 30. East Pittsburgh Borough State Funding Assistance 142

Table 31. Homestead Borough State Funding Assistance 143

Table 32. North Braddock Borough State Funding Assistance 143

Table 33. Wilkinsburg Borough State Funding Assistance 144

Table 34. East Pittsburgh Borough Departmental Function Expenditures (1987-1991) 147

xi

List of Figures

Figure 1. Research study conceptual model 34

Figure 2. Number of constituents served per council person by municipality 89

Figure 3. Plan recommendations by function as a percent of total recommendations

across cases 98

Figure 4. Plan recommendations by topic within the functional area of general

government 99

Figure 5. Plan recommendations by topic within the functional area of financial

Management 100

Figure 6. Plan recommendations by topic within the functional area of taxation 101

Figure 7. Plan Recommendations by topic within the functional area of public

Services… 102

Figure 8. Plan recommendations by topic within the functional area of community

and economic development 103

Figure 9. Revenue trends by case municipality 120

Figure 10. Revenues per capita (1980-2009) 123

Figure 11. East Pittsburgh total tax revenues trend (1987-2004 125

Figure 12. Homestead total tax revenues (1988-2008) 127

Figure 13. North Braddock total tax revenues (1990-2008) 128

Figure 14. Wilkinsburg total tax revenues (1986-2003) 130

Figure 15. East Pittsburgh real estate tax revenue trend 131

Figure 16. Homestead real estate tax revenue trend 132

Figure 17. North Braddock real estate tax revenue trend 132

Figure 18. Wilkinsburg real estate tax revenue trend 133

Figure 19. Expenditures by case municipality 145

xii

Figure 20. Percent of departmental expenditures across cases during the pre-distress

study period 148

Figure 21. Percent of department expenditures across cases during the distress study

Period 149

Figure 22. Percent of departmental expenditures across cases during the post-distress

study period 149

Figure 23. Recommendations by (departmental) functional area by case

Municipality 155

Figure 24. Population trends by case municipality (1970-2010) 167

1

CHAPTER 1. INTRODUCTION

Financial distress is not a new problem as it is evident in municipal government in

many states as far back as the late 1800s (Dession, 1936). In Pennsylvania, there is a

long history of municipal financial distress; as examples, the City of Philadelphia

defaulted in 1857, and the City of Pittsburgh defaulted in 1867 and 1877 (Dession, 1936).

Over the past 25 years, financial pressures within municipal government have increased

to a point where many are on the verge of financial distress (Pennsylvania Economy

League, 2007). As a result, health, safety, welfare, and public services may be

compromised as municipalities face continuous financial pressures due to external

political pressures. These pressures are caused by legislative mandates with regard to

organizational structure of municipal government in Pennsylvania and declining external

socioeconomic characteristics that effect revenue generation (Cahill & James, 1992).

In 1987, the Pennsylvania General Legislative Assembly enacted the

Municipalities Financial Recovery Act-commonly referred to as Act 47 (Act 47 of 1987,

P.L. 246; 53 P.S. § 11701.101). The Act was a reactive response to the financial effects

that the collapse of the steel industry had on municipal governments in Beaver and

Allegheny Counties in southwest Pennsylvania (Cahill & James, 1991). Within the first

five years after passage of Act 47, nine Pennsylvania municipalities were declared as

financially distressed under the Act by the Secretary of the Pennsylvania Department of

Community Affairs (PA DCA)-now known as the Pennsylvania Department of

Community and Economic Development (PA DCED, 2012). Seven of the initial nine

municipalities declared financially distressed within the first five years were located in

southwestern Pennsylvania (PA DCED, 2012). Further, since enactment of Act 47 in

2

1987, 27 Pennsylvania municipalities have been declared financially distressed; and to

date, only six of those municipalities have had their financial distress declaration

rescinded (PA DCED, 2012). As shown, municipal financial distress in the

Commonwealth of Pennsylvania is not a new phenomenon nor is it a temporary situation.

Municipal financial distress is probable given current economic circumstances; and

according to the Pennsylvania Economy League (1999) will become stressed by financial

pressures caused by factors associated with organizational structure, mismanagement,

and socioeconomic characteristics.

Background of the Study

Based upon the literature review for this research study, the literature prior to the

1970s on municipal financial distress is limited and focused on governmental units that

defaulted on bonded debt service payments wherein the only recourse was municipal

bankruptcy; and it was not until the 1970s that the United States Advisory Commission

on Intergovernmental Regulations (ACIR) recognized financial distress as an important

topic on the national level. However, even then the focus was on big cities, central cities,

and urban and metropolitan areas (ACIR, 1980). In 1973, the ACIR, recognizing the

magnitude of municipal financial distress, conducted a study on governmental financial

emergencies (ACIR, 1973). Although the focus of the 1973, ACIR study was on big

cities, the study adopted a broad definition of government financial emergency

concluding that these emergencies exist when a governmental unit reaches the point at

which it can no longer perform its existing levels of services, is unable to meet payroll,

3

cannot pay current bills and amounts due to other government agencies, and is unable to

pay debt service on bonds and or short-term notes.

In the 1980s, although big cities remained the focus of further studies, it was

becoming more evident that small municipalities were also struggling (ACIR, 1981). In

1980, the ACIR completed an exploratory study on the types of aid and assistance

provided by each of the 50 states to local units of government identified as experiencing

some form of distress (ACIR, 1980). The importance of that study was that it did not

limit the focus of municipal financial distress to big cities or urban areas, but looked at

each state as a whole to identify the programs in effect that addressed municipal financial

distress for all municipalities and instruments within each state.

Based upon the literature review for this research, there is no literature on

municipal financial distress specific to Pennsylvania prior to 1980; and subsequent to

1980, the literature on municipal financial distress specific to Pennsylvania is limited and

focuses on three areas: a call for municipal financial distress legislation, assessments of

Act 47 of 1987, and studies that focused on regional and state economic outlooks.

Further, since the adoption of Act 47 in 1987, there has been no research on financial

distressed municipalities that have had the financial distress declaration rescinded.

Statement of the Problem

Based upon a review of the literature wherein it was found that Philadelphia

defaulted on bond payments in 1867 and 1877 (Dession, 1936), municipal financial

distress in Pennsylvania has been a long-standing issue. Municipalities face continuous

external political pressures due to the legislatively mandated organizational structures for

4

municipal governments in Pennsylvania (Bradbury, 1983); and socioeconomic trends that

diminish financial resources (Sacks and Callahan, 1970). In Pennsylvania specifically,

local government units (municipalities) are creatures of the state and are governed by the

state constitution and municipal codes based upon their structure of local government

(PA DCED, 2010). The Pennsylvania Constitution places the responsibility for the

health, safety, welfare, and basic quality of life of the citizens with municipal

government; and in Pennsylvania, municipal government is the provider of basic services

that support the local quality of life (PA DCED, 2010). Such basic services provided by

municipal government include police services, fire protection, emergency management,

water, sanitary sewer, solid waste collection, construction and maintenance of public

streets/roads, public health services to include planning/zoning, general code and building

code oversight and enforcement, and recreation and culture including such amenities as

public parks, playgrounds, and public libraries (PA DCED, 2010). The ability of

municipal government to provide for the health, safety, welfare, and basic quality of life

is dependent on financial resources, the capacity of leadership (management), the

capacity of personnel, and sound financial management practices (Pennsylvania

Southwest Planning Commission, n.d.).

Across the Commonwealth of Pennsylvania, there are 67 counties (PA DCED,

2010). Distributed across those 67 units of county government, according to PA DCED

in 2010, there are 2,553 incorporated municipal jurisdictions (56 cities; 958 boroughs; 1

incorporated town; and 1,547 townships). Each of the different structures (cities,

boroughs, towns, and townships) is governed by a separate state code that determines the

municipality’s organizational structure and powers (PA DCED, 2010). Due to the fact

5

that Pennsylvania municipalities are creatures of the state, the state is ultimately

responsible for the financial welfare of every municipality; therefore, the financial health

of municipal government is not only the responsibility of any given municipality, but it is

also a responsibility of the state (PA DCED, 2010).

In 1987, the Pennsylvania Legislature enacted Act 47 to address municipal

financial distress by providing assistance to financially distressed municipalities that were

suffering from declining economies in addition to problems resulting from financial

mismanagement and administrative inefficiency (Gannon, 1993). To be declared

financially distressed under Act 47, a municipality must undergo an assessment by PA

DCED that is based upon 11 financial stability criteria (PA Legislature, 1987). Provided

one or more criteria are found, PA DCED shall exercise its powers and duties to declare

the municipality as financially distressed pursuant to Act 47 (PA Legislature, 1987).

Since 1987, 27 municipalities across the Pennsylvania Commonwealth have been

declared as financially distressed (PA DCED, 2012). At present, 21 municipalities

remain financially distressed, while six municipalities have had the financial distress

declaration rescinded (PA DCED, 2012). The literature available on the causes of

municipal financial distress specific to Pennsylvania provides only broad categories of

causal factors designated as internal and environmental (ACIR, 1973), internal and

structural (Bradbury, 1983; Cahill & James, 1991), administrative and structural (Wolff,

2004); and cyclical and structural (ACIR, 1985; Gasbarre & Hobbs, 1987). Internal

factors are those factors that are under the control of the decision-making practices of

leadership such as the failure to control spending, a history of overestimating revenues

during the budgeting process, or abuse of borrowing (Bradbury, 1983; Cahill & James,

6

1991). External factors, also referred to as structural factors, are economic and/or socio-

demographic factors associated to municipal financial distress that are beyond the direct

control of the decision-making of leadership such as a loss in the economic tax base

within a community and the resulting demographic shifts (ACIR, 1985; Bradbury, 1983;

Cahill & James, 1991; and Gasbarre & Hobbs, 1987).

Given that the scholarly research on municipal financial distress in Pennsylvania

is limited, and that there is a near absence of scholarly research that examines financially

distressed municipalities and there is a gap in knowledge that examines financial distress

from a case study approach. A case study approach allows the researcher to become

immersed within the municipal setting and explore the meaning and understanding of

problems and issues pertaining to municipal financial distress.

Purpose of the Study

This research examines four (the boroughs of East Pittsburgh, Homestead, North

Braddock, and Wilkinsburg) of the six municipalities that have had a financial distress

declaration rescinded by the Secretary of the Pennsylvania Department of Community

and Economic Development using a mixed-method, multiple case study approach to

determine whether patterns and trends exist within and among the four municipalities

over time in regard to organizational structure, financial condition, and socioeconomic

characteristics during their respective periods of pre-distress, distress, and post-distress.

The purpose of this research is to determine whether patterns and trends exist

among the four cases and to determine how, based upon the patterns and trends, each of

the case municipalities were able to have their financial distress declaration rescinded.

7

Subsequently, the answer(s) to how may be applied to other financial distressed

municipalities across the Pennsylvania Commonwealth. In addition, identified patterns

and trends may also be applied to other Pennsylvania municipalities and may act as an

early warning system for financial distress.

For the purposes of this research study, the pre-distress, distress, and post-distress

time periods are dependent upon the year in which each municipality was declared as

financially distressed by the Secretary of the Pennsylvania Department of Community

and Economic Development. For each municipality, the pre-distress years are the five

years priors to their financial distress declaration, the distress years are those years each

municipality remained financially distressed pursuant to Act 47, and the post-distress

years are up to five years after the municipality’s financial distress declaration was

rescinded by the Secretary of the Pennsylvania Department of Community and Economic

Development.

Rationale for the Study

Municipal financial distress compromises the health, safety, welfare, and quality

of life in a community. The issue of municipal financial distress is not a new

phenomenon (Dession, 1936). At one time, financial distress was mainly associated to

urban areas and large cities. Today, municipal financial distress may occur in even the

smallest of communities (Pennsylvania Economy League - PEL, 2007). Important to

understand is the phenomena associated with municipal financial distress in order to

adequately and efficiently address circumstances that contribute to distress (financial

8

disparity/lack of funds) without compromising a community’s health safety, welfare, and

quality of life.

Research Management Framework

Municipal financial distress is not a new problem, as it is evident in municipal

government in many states as far back as the late 1800s (Dession, 1936). Over the past

25 years, financial pressures within municipal government have increased to a point

where many are on the verge of financial distress (Pennsylvania Economy League, 2007).

As a result, health, safety, welfare, and public services (service delivery) may be

compromised as municipalities face continuous financial pressures. These pressures may

be caused by legislative mandates with regard to organizational structure of municipal

government in Pennsylvania and declining external socioeconomic characteristics that

affect revenue generation (Cahill, James, & Levigne, 1994).

This research provided an extensive assessment of how organizational structure,

financial condition, and socioeconomic characteristics have affected municipalities that

were once declared distressed, but have had that distress declaration rescinded by

answering the following management questions (see Figure 1):

• Why are some financially distressed municipalities able to overcome financial

distress while other financially distressed municipalities remain in distress for

many years?

• How can financially distressed municipalities overcome financial distress?

• Does organizational structure affect municipal financial distress?

• Is financial distress a result of state mandated structures of government?

9

• Is financial distress a result of state mandated taxation provisions?

• Is financial distress a result of the established policies and procedures within the

municipality?

• How does financial condition affect municipal financial distress?

• Is financial distress related to changes in assessed real estate valuations?

• Is financial distress related to revenues?

• Is financial distress related to expenditures?

• Is financial distress related to operating position?

• How do socioeconomic characteristics affect municipal financial distress?

• Is financial distress related to changing demographics?

• Is financial distress related to changing social characteristics?

• Is financial distress related to changes in housing characteristics?

• Is financial distress related to changes in economic development characteristics?

The following general research questions provided a starting point for research

into the causal factors of municipal financial distress and the causal factors that remedy

municipal financial distress in Pennsylvania:

• Organizational Structure - In those municipalities wherein a financial distress

designation has been rescinded, are there common identifiable patterns and

trends in organization structure over-time?

• Financial Condition - In those municipalities wherein a financial distress

designation has been rescinded, are there common identifiable patterns and

trends in financial condition over-time?

10

• Socioeconomic Characteristics - In those municipalities wherein a financial

distress designation has been rescinded, are there common identifiable patterns

and trends in the socioeconomic characteristics over-time?

Research Questions

This study address three main research areas (organizational structure, financial

condition, and socioeconomic characteristics) using a case study approach in four

municipalities in Allegheny County, Pennsylvania during their respective periods of pre-

distress, distress, and post-distress by asking three general questions.

General Questions

• Do common patterns and trends in organizational structure exist in North

Braddock, East Pittsburgh, Wilkinsburg, and Homestead boroughs during their

respective periods of pre-distress, distress, and post-distress?

• Do common patterns and trends in financial condition exist in North Braddock,

East Pittsburgh, Wilkinsburg, and Homestead boroughs during their respective

periods of pre-distress, distress, and post-distress?

• Do common patterns and trends in socioeconomic characteristics exist in North



11

Conceptual Framework

Figure 1.

Research Study Conceptual Model

Detailed Questions

Based upon on the findings within the existing body of literature and the

constructed conceptual framework, the three general questions posed may be

methodically narrowed into more explicit questions within the three main areas

(organizational structure, financial condition, and socioeconomic characteristics).

Narrowed and more explicit questions will assist in maintaining the structure of the

Organizational Financial Socioeconomic

Borough Structure

State Mandated

Tax Limitations

Practice/Procedures

Assessed Valuation

Revenues

Expenditures

Operating Position

Demographics

Housing

Economic

Development

Pennsylvania Municipalities

Declared as Financially Distressed

Allegheny County

Rescission of Financial Distress Declaration

12

research design and assist the researcher by providing a tight and detailed research

framework as follows:

Organizational Structure

• Do common patterns and trends in the structure of borough government exist in

North Braddock, East Pittsburgh, Wilkinsburg, and Homestead boroughs during

their respective periods of pre-distress, distress, and post-distress?

• Do common patterns and trends exist due to state mandated taxing provisions in



• Do common patterns and trends exist in practices/procedures in North



Financial Condition

• Do common patterns and trends exist in assessed real estate valuation in North



• Do common patterns and trends exist in revenue(s) collections in North



• Do common patterns and trends exist in expenditure(s) management in North



13

Socioeconomic Characteristics

• Do common patterns and trends exist in demographic characteristics in North



• Do common patterns and trends in housing characteristics in North Braddock,



• Do common patterns and trends exist in community and economic development

characteristics in North Braddock, East Pittsburgh, Wilkinsburg, and Homestead

boroughs during their respective periods of pre-distress, distress, and post-

distress?

Significance of the Study

In 2003, Carmeli identified theoretical gaps in the literature on fiscal and financial

crises by asking (a) “What are the effects of political, sociological, and economic

structures and processes?”, (b) “How can financially poor local mechanisms break

through the vicious cycle of this phenomenon?”, (c) “What mechanisms must be

established to handle this phenomenon more efficiently and effectively?”, (d) “How can

accountability be applied?” (p. 1428). This study addressed Carmeli’s first two identified

gaps and sought to identify and understand relationships among political, sociological,

and economic phenomenon. The identification of such may reveal the underlying causal

factors of financial distress, which may be generalized across the Commonwealth of

Pennsylvania to serve as early warning signs of financial distress. Such identification,

14

understanding, and generalization will assist in avoiding or alleviating financial distress.

By examining and understanding phenomenon associated with moving from a pre-

distress stage to a distress determination stage, commonalities may be generalized across

the Commonwealth of Pennsylvania that may prevent municipalities from moving from

pre-distress to distress. Additionally, by examining and understanding the phenomenon

associated with moving from a distress stage to a post-distress stage, commonalities may

be observed and generalized across the Commonwealth of Pennsylvania that may be

identified as strategies to emerge from financial distress. Finally, the study will begin a

new direction in scholarly literature with regard to municipal financial distress in the

Commonwealth of Pennsylvania.

Definition of Terms

The following are definitions of key terms that appear frequently in the study.

Advisory Commission on Intergovernmental Relations (ACIR). A permanent,

bipartisan body of 26 members established in 1959 by the 86th Congress for the purpose

of giving continuing study to the relationship among local, state, and national levels of

government (U.S. Code, Title 42, Chapter 53, The Public Health and Welfare, Section

42; Public Law 86-380; 73 Stat 703). The functions of the ACIR were terminated by the

104th Congress effective September 30, 1996, Treasury, Postal Service, and Government

Appropriations Act of 1996 (P.L. 104-52, 109 Stat 514, 248, 480 of 1995).

Amusement Tax. The amusement tax is a tax levied on the privilege of engaging

in an amusement such as the admissions price to places of amusement, entertainment, and

15

recreation; and may include such things as craft shows, bowling alleys, golf courses, ski

facilities, or county fairs. (PA DCED, 2004).

Assets. Assets refer to property owned by a government, which has monetary

value (Rosenberg & Stallings, 1978).

Basics Services. Basic services refer to those services provided by public

organizations as part of tax dollar revenues or fees for services such as fire and police

protection, public water and public sewer services, road maintenance services, and solid

waste collection services (PA DCED, 2010).

Bond. A bond is a written promise to pay (debts) a specified sum of money,

called principle of face value, at a specified future date, called the maturity dates, along

with periodic interest paid at a specified percentage of the principle; and are typically

used for long-term debt (Rosenberg & Stallings, 1978).

Budget (Operating). Operating budget refers to a plan of financial operation

embodying an estimate of proposed expenditures for a given period (typically a financial

year) and the proposed means of financing them (revenue estimates; Rosenberg &

Stallings, 1978).

Capital Assets. Capital assets are those with significant value and having a useful

life of several years (Rosenberg & Stallings, 1978).

Capital Outlays. Capital outlays are expenditures for the acquisition of capital

assets (Rosenberg & Stallings, 1978).

Capital Projects. Capital projects are projects that purchase or construct capital

assets; and typically, are projects that encompass a purchase of land and/or the

construction of a building or a facility (Rosenberg & Stallings, 1978).

16

Debt Service. Debt service is the total of principal and interest paid annually on

all the municipality’s long-term bonds and notes (Rosenberg & Stallings, 1978).

Deficit. Deficit refers to the excess of an entity’s liabilities over its assets (see

also fund balance), or the excess of expenditures over revenues during a single

accounting period (Rosenberg & Stallings, 1978).

Department. Department refers to the Pennsylvania Department of Community

and Economic Development (PA DCED)-formerly known as Pennsylvania Department

of Community Affairs (Pennsylvania Legislature, 1987).

Earned Income Tax. Local income taxes in Pennsylvania are variously termed

earned income taxes, wage taxes or net profits taxes or a combination of these terms and

is levied on the wages, salaries, commissions, net profits or other compensation of

persons subject to the jurisdiction of the taxing body In general, all other jurisdictions

adopting income taxes under the Local Tax Enabling Act are limited to one percent

(where both municipality and school district levy the tax, the one percent limit must be

shared on a 50/50 basis, unless otherwise agreed to by the taxing bodies) (PA DCED,

2004).

Expenditures. Expenditures are the disbursement of revenues or assets of a

municipality (Rosenberg & Stallings, 1978).

Financial Condition. Financial condition refers to a governmental unit’s short-

term and long-term ability and willingness to generate sufficient revenue to meet its

financial obligations as they come due on an ongoing basis and to provide services at the

level the citizen’s desire and at the quality that is necessary to provide for the health,

17

safety, and welfare of the community (International City/County Management

Association, 2003).

Fiscal Capacity. Fiscal capacity is the government’s ability and willingness to

meet its financial obligations as they come due on an ongoing basis (Rosenberg &

Stallings, 1978).

Fund. An independent fiscal and accounting entity with a self-balance set of

accounts recording cash and/or other resources together with all related liabilities,

obligations, reserves, and equities which are segregated for the purpose of carrying on

specific activities or attaining certain objectives (Rosenberg & Stallings, 1978).

Fund balance. Fund balance is the excess of an entity’s assets over its liabilities

(Rosenberg & Stallings, 1978).

Fugitive Document. Fugitive document refers to nonpublished research, typically

written at the request of a state legislative committee or commission, that is difficult to

access either due to a lack of a central repository, index, or policies of confidentiality

standards in many legislatively based research and analysis offices in state legislatures,

which are commonly released only on the authorization of the legislator and/or after a

period of time (Cahill & James, 1992).

General Fund. The fund of the municipality that accounts for all activity not

specifically accounted for in other funds (Rosenberg & Stallings, 1978).

Government Funds. Funds that provide general government services are

government funds and include the general fund, special revenue funds, capital projects

funds, and debt service funds (Rosenberg & Stallings, 1978).

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Governing Body. For the purpose of this research study, the governing body is

the Borough Council.

Leader/leadership. For the purpose of this research study, a leader shall be any

elected or appointed official.

Liability. Liability refers to debt or other legal obligations arising out of

transactions in the past that must be liquidated, renewed, or refunded at some future date,

but does not include encumbrances (Rosenberg & Stallings, 1978).

Mechanical Device Tax. Mechanical device tax is a tax on coin-operated

machines of amusement such as jukeboxes, pinball machines, video games, and pool

tables (PA DCED, 2004).

Mercantile Tax. Mercantile tax (also referred to as the business gross receipts tax

or business privilege tax) is a tax that is levied on the gross receipts of local businesses;

and may be levied on wholesale and retail trade as well as restaurant receipts (the Local

Tax Reform Act of 1988 prohibited imposing any new mercantile taxes after November

30, 1988, although local units of government that were using the mercantile tax as a

source of revenue are permitted to continue to levy the tax) (PA DCED, 2004).

Municipality. Municipal refers to any political subdivision or similar general

purpose unit of government created by the Pennsylvania General Assembly

(Pennsylvania Legislature, 1968).

Municipal Financial Distress. For the purposes of this research, municipal

financial distress shall be defined in accordance with Pennsylvania Act 47 (Pennsylvania

Legislature, 1987).

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Municipal Record. For the purposes of this research, municipal records refer to

all documents of a municipality but excluding confidential information relating to

personnel matters and matters relating to the initiation and conduct of investigations of

violations of law.

PA Act 47. The Financially Distressed Municipalities Act of 1987 is commonly

referred to as the Municipalities Financial Recovery Act or Act 47 (Pennsylvania

Department of Community and Economic Development, 2001).

Official. A person who occupies a municipal legislative, quasi-judicial,

administrative, executive or enforcement position (PA DCED, 2010).

Operating Expenditures. For the purposes of this research, operating

expenditures refer to the combination of local, state, and federal dollars spent for

operating purposes.

PA Commonwealth Agency. The PA Commonwealth Agency is the Governor and

the departments, boards, commissions, authorities, and other officers and agencies of the

Commonwealth, whether or not they are subject to policy supervision and control of the

Governor (Pennsylvania Department of Community and Economic Development, 2001).

Public Official. For the purposes of this research study, a public official shall be

any person serving as an elected or appointed government official.

Real Estate (Real Property) Tax. Taxes levied based on the value of real property

(land, buildings, and other improvements) owned by a taxpayer (PA DCED, 2004).

Realty Transfer Tax. A tax on the sale of real estate (PA DCED, 2004).

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Revenue. A term that designates an increase to a fund’s assets such as proceeds

from a loan, a repayment of an expenditure already made, a cancellation of certain

liabilities, and an increase in contributed capital (Rosenberg & Stallings, 1978).

Secretary. The Secretary of the Department of Community and Economic

Development who is responsible for: declaring a municipality to be in distress,

appointing a financial recovery plan coordinator, commenting on a financial plan

formulated by a coordinator, withholding state funds from a distressed municipality

which refuses to adopt a financial plan, and determining whether a municipality ceases to

be distressed (PA DCED, 2001).

SocioEconomic Characteristics. For the purposes of this research, socioeconomic

characteristics refer to those community characteristics that have interrelationships

between social, economic, and demographic aspects.

Tax Rate Limit. The tax rate limit is the maximum legal rate that a municipality

may levy a tax; and may apply to taxes raised for a particular purpose or for general

purposes (Rosenberg & Stallings, 1978).

Assumptions and Limitations

Assumptions

The study is confined to the geographic boundaries of the state of Pennsylvania

and the municipal governments that operate under the PA Constitution and includes only

those municipalities that have been declared financially distressed by the Secretary of the

PA Department of Community and Economic Development (PA DCED). Further, this

study includes only those municipalities in Allegheny County Pennsylvania that have had

21

their financial distress declaration rescinded by the Secretary of the PA DCED.

Therefore, this research may not be generalized to municipalities in other states and is

limited to only those municipalities in Pennsylvania that have been declared financially

distressed pursuant to PA Act 47.

Limitations

Some data collected that was necessary for this research study was archived and

not easily retrieved. Additionally, some documents that contained necessary data were

not easily reproduced and required extensive and accurate note-taking by the researcher.

Nature of the Study

This research is a multi-case descriptive study that examined organizational

structure, financial condition, service delivery, and socioeconomic characteristics in four

municipalities in Allegheny County, Pennsylvania during their respective periods of pre-

financial distress, financial distress, and post-financial distress. A content analysis of

public documents and reports was used to collect qualitative data. The data was analyzed

on a case-by-case basis and across cases for relationships and similarities using

quantitative descriptive statistics in chart and graph formats and, where necessary,

qualitative narratives depicted in tables were added.

Organization of the Remainder of the Study

This research follows the traditional organization of a doctoral thesis. The

introductory Chapter 1 provides an introduction to the topic, background information on

the topic, and statements of problem, purpose, and rationale for the study. Chapter 2

22

provides a comprehensive literature review necessary to establish the theoretical

foundation for answering the research questions. This necessary framework involves

municipal financial distress as a single distinct body of theoretical knowledge beginning

with a history of municipal financial distress in the United States, and then the literature

proceeds to examine the history of municipal financial distress specific to the

Commonwealth of Pennsylvania. Chapter 3, Methodology, details the research

methodology (design and ethical considerations) and data collection procedures (sample,

instrumentation/measures, analysis, validity, and reliability) of the study. Chapter 4,

Results, provides a summary of the data collected and illustrates how the data was treated

and analyzed. Chapter 5, Discussion, Implications, and Recommendations, summarizes

the study’s findings and limitations, provides implications specific to the objectives for

this research, and provides recommendations for further research in the conclusion.

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CHAPTER 2. LITERATURE REVIEW

The literature review provides an historical perspective of the evolution of

municipal financial distress beginning with municipal defaults as far back as the 1800s

and the Federal government’s solution with inclusion of Chapter IX in the United States

Bankruptcy Act. An important discussion on Dillon’s Rule is included to explain the

differing methods and approaches the states have taken with regard to municipal financial

distress. A large amount of content is devoted to describing and defining municipal

financial distress, which in-part is due to the varying responsibilities of state government

and restrictions within state constitutions and their resulting approaches (proactive,

reactive, and ad-hoc) to municipal financial distress.

Additionally, the literature review discusses the conceptual and theoretical

frameworks that link causal factors (internal versus external), but more importantly the

review describes the stress factors associated to causal factors, and how such are

intertwined within cycles of municipal financial distress. Important to municipal

financial distress is the actual process by which financial distress can be measured–the

financial indicators. A review of scholarly studies, institutional studies, and financial

monitoring systems developed by organizations reinforced the conclusions in the

literature that the financial distress indicators used to measure municipal financial distress

is dependent upon the focus and intended use for measurement (Honadle, 2003).

Municipal Bankruptcy

Prior to 1934, state and federal bankruptcy legislation pertaining to municipalities

in the United States did not exist (McConnell & Picker, 1993); although, municipal

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financial distress (default) is documented by the Advisory Commission on

Intergovernmental Relations (ACIR, 1973) and others (Dession, 1936) as occurring in the

United States since the mid 1800s. During the 1920s and early 1930s, municipal

financial distress defaults became more prevalent and were the impetus for emergency

legislation enacted by Congress in 1934 to add Chapter IX to the Bankruptcy Act of

1898; and in 1936, Chapter IX was declared unconstitutional (Wells and Swanson, 1986).

In 1937, again proposed as emergency legislation, Congress adopted a revised Chapter IX

(as amended in 1938, 1940, 1942, and 1946) (Wells & Swanson, 1986).

Municipal financial distress and municipal defaults reached an all-time high

during the 1930s and 1040s (ACIR, 1973) even though the provisions of Chapter IX of

the Bankruptcy Act were infrequently used due to constitutional inadequacies (Wells &

Swanson, 1986). The U.S. Congress, to address the inadequacies of the Bankruptcy Act,

established a Commission on Bankruptcy Laws in 1970; and was charged with providing

a complete revision of the United States Bankruptcy Code (ACIR, 1973). Subsequently,

Congress enacted Chapter 9 in 1978 (as amended in1994 and 2005), specifically, to

address the unique aspects of municipal defaults (Deal, 2007).

The purpose of Chapter 9 of the U.S. Bankruptcy Code is to provide financially

distressed municipalities with protection from creditors while the municipalities develop

and negotiate plans for adjusting and repayment of debt; and although Chapter 9

Bankruptcy may be used as a tool for municipalities to buy time to stave-off creditors

while developing a debt recovery plan, the option is only available to a municipality

when permitted by the state constitution (Honadle, 2003). Across the 50 states, according

to Honadle (2003) various scenarios are found within state constitutions wherein some

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permitted municipal bankruptcy, some permitted it with special conditions, some

prohibited municipal bankruptcy, and some state constitutions did not address it one way

or another.

The ACIR, while researching municipal bankruptcy in 1973, concluded that the

recovery performance of municipal units in or near financial crises that are located within

States that have court or administrative assistance options are considerably better off than

those in States in which no provisions have been made. The ACIR study further

concluded that because a State is the creator of local government, it must assume the

responsibility for technical assistance, financial controls, and overseeing debt adjustments

for municipal units in financial distress and further recommended that all States enact

laws providing for a state agency that would be responsible for at least the supervision of

municipal units in times of financial distress (ACIR, 1973).

Municipal Solvency

According to Chapter IX of the U.S. Bankruptcy Code of 1937, municipal units of

government were permitted to file under Chapter IX provided they are found to be

insolvent. Insolvent, according to Chapter IX of the U.S. Bankruptcy Code of 1937, is

defined as when liabilities exceed expenditures. Terms closely related to fiscal health

and solvency are financial condition and financial position. Rabin (2005) differentiates

the two terms by defining financial position as a “shorter-run concept when compared to

financial condition–a more long term concept (p. 106). Maher and Nollenberger (2009)

define financial condition as “an organization’s ability to maintain existing service levels,

withstand economic disruption, and meet the demands of growth and decline” (p.62).

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The ICMA defined financial condition as being financially solvent in four areas: cash,

budget, long-run, and service-level (ICMA, 2003). According to the ICMA (2003), cash

solvency refers to the ability to pay 30 day obligations on time; budgetary solvency refers

to the ability to generate revenues to cover 12 month budgetary obligations; and long-run

solvency refers to the ability to pay all obligations timely (including long-term debt and

pension obligations); and service-level solvency refers to the ability to provide general

services at the level appropriate to ensure health, safety, and welfare.

Insolvency: Financial Distress

The literature demonstrated that there is no agreement as to the terminology of

insolvent municipal financial condition. Based upon the literature review for this

research, the terms found to be used interchangeably when describing a condition of

municipal insolvency are: municipal default, unsound financial condition, financial

emergency, financial crises, fiscal crises, fiscal stress, and fiscal distress. Further, a

scholarly discussion has only recently ensued as to a single relevant term to be used; and

the literature does not demonstrate any specific agreement as to the definition of

insolvent municipal financial condition.

In 1938, the State of New Jersey with the enactment of the Fiscal Supervision Act

put forth a definition of unsound municipal financial condition through the Act’s five

tests of financial unsoundness (Marion, 1942). According to the state of New Jersey, a

municipal unit is in a position of unsound financial condition when: (a) it defaults on the

payment of principal of bonded or bond anticipation obligations; (b) is indebted to a

special district, school district, county or the state for two preceding years; (c) has a year-

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end cash deficit situation in the preceding year; (d) has poor real estate and personal

property collection rates-a large percentage of revenues being turned over to delinquent

collection processes; (e) has an excess amount of debt compared to revenues at year end-

excluding dedicated debt service expenditures, and revenues (Marion, 1942).

Prior to the 1970s, there was no universal term or distinction between insolvency

and municipal fiscal distress, municipal defaults, municipal financial emergencies, and

municipal financial crises–all terms found in the literature that address municipal

financial distress. At approximately the same time, Congress realized the inadequacies of

the Bankruptcy Code in the 1960s; the Advisory Commission on Intergovernmental

Relations began to study municipal financial distress and employed municipal defaults

and municipal financial emergencies interchangeably (ACIR, 1973, 1977, 1978, 1980,

1981, 1985). Further, the ACIR term municipal default is not necessarily meant to mean

municipal bankruptcy. According to the ACIR, between 1839 and 1969, there were over

6,000 recorded municipal defaults, but only the largest of the municipalities in default

actually filed under Chapter IX of the Bankruptcy Code (ACIR, 1973). The use of

Chapter IX and Chapter 9 under the U.S. Bankruptcy Code is in fact quite rare (Deal,

2007). As of 2010, research indicated that approximately 500-600 municipal bankruptcy

filings have actually occurred since 1937 (The Allegheny Institute for Public Policy,

2010).

The ACIR report of 1973 provided a broad definition of financial emergency.

This is important because until the 1970s (with the exception of the state of New Jersey),

the literature does not attempt to define a financial emergency situation (other than the

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implied–when a municipality is unable to meet its current obligations; Marion, 1942).

In 1973, the ACIR defined financial emergency

Situations in which a city reaches the point at which it can no longer perform its

existing levels of service because of an inability to meet payrolls, pay current

bills, pay amounts due other government agencies, or pay debt service on bonds

or maturing short-term notes because it lacks either cash or appropriations

authority. (p. 3)

In 1981, Ronca acknowledged the ACIR (1973) definition of financial emergency

while comparing Pennsylvania’s local government financial control programs with those

in other states. In 1986, Wells and Swanson, while writing recommendations for

legislative action on Pennsylvania municipal bankruptcy, provided an extensive

definition of a local financial emergency that encompassed an excessive decline in

revenues and/or expenditures, excess deficits in the current year, excessive long-term

debt, default in payments of principle or interest on bonds or notes, failure to make

payroll, failure to make payment to other governmental units, failure to comply with

applicable municipal finance accounting standards, and the filing of a petition to adjust

debt under Chapter 9 on the U.S. Bankruptcy Code.

In 1981, the ACIR defined financially distressed communities as those where

residents bear substantially higher tax burdens to support levels of public services

comparable to better-off communities. In 1991, in a report to the Local Government

Commission of the General Assembly of Pennsylvania, Cahill and James defined

financial distress as “a persistent shortfall in cash flows experienced by a government,

resulting from an imbalance between revenues and expenditures for given service levels”

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(p.7). Hirsch and Rufolo (1990) defined fiscal crises as when a government no longer

has the budgetary flexibility to make additional expenditure cuts, increase revenues, or

continue to borrow. Inman (1995) defines fiscal crises as when revenue potential is

insufficient to cover expenditures.

In 2003, Honadle conducted a National Survey of state programs relating to fiscal

crises and found that only ten states had formal definitions for local government fiscal

crises. Although Honadle’s purpose for the study was to explore the roles of states when

dealing with local government fiscal crises, the research is important to the literature

because it provides a distinction between fiscal stress and fiscal crises, which have been

used interchangeably in the literature. Honadle makes the distinction that a fiscal stress

situation threatens the status quo of the continued operation of a governmental unit and a

fiscal crises situation is when the governmental unit is unable to meet its obligations of

payroll, bills, and debt repayment.

Carmeli (2003) further refined Honadle’s (2003) explanations of fiscal crises

versus fiscal stress by stating that fiscal stress and fiscal crises are one in the same; the

indicators for fiscal stress are actually indicators of fiscal crises. Further, Carmeli made a

distinction between fiscal crises and financial crises-a fiscal crisis is when a negative gap

between revenues and expenditures exist, and a financial crisis is when an organization

does not make timely payment of financial obligations. In 2005, Kloha, Weissert, and

Kleine further refine the work of Honadle (2003) and Carmeli (2003) by providing a

definition that included long-term considerations; fiscal distress is defined as failure to

make payment and meet community needs over successive years. Jones and Walker

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(2007) defined distress as a local government unit’s “inability to maintain preexisting

levels of services to the community” (p. 396).

Although there is no identifiable agreement in terminology as to the definition of

insolvent municipal financial condition, numerous common characteristics in defining

distress have emerged from the literature:

• When a municipal government unit’s expenditures exceed revenues (Carmeli,

2003; Inman, 1995; Wells & Swanson, 1984)

• When a municipal government unit does not have the ability to pay obligations

(of any type including indebtedness to other governmental units) when due

(ACIR, 1973; Carmeli, 2003; Marion, 1942; Wells & Swanson, 1984).

• When a municipal governmental unit struggles to maintain status quo service

levels (ACIR, 1973; ACIR, 1981; Cahill & James, 1991; Kloha, Weisert &

Kleine, 2005; Marion, 1942).

• When a municipal government unit exhibits a year-end cash deficit (Marion,

1942; Wells and Swanson, 1984).

• When a municipal government demonstrates an excessive amount of long-term

debt (Marion, 1942; Wells and Swanson, 1984).

• When a municipal government unit displays a pattern of low tax revenue

collection (Marion, 1942).

• When a municipal government petitions to file Chapter 9 Bankruptcy (U.S.

Bankruptcy Code, Chapter 9, Section 101, 32, C, i. and ii.).

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For the purposes of this research study, insolvent municipal financial condition

herein referred to as municipal financial distress shall be defined in accordance with the

Pennsylvania Municipalities Financial Recovery Act (Pennsylvania Legislature, 1987).

The Municipal Financial Distress Cycle

Just as “changes in community needs and resources are interrelated in a

continuous cumulative cycle of cause and effect” (Groves & Valente, 1994, p. 112), so

are the effects of community needs and resources related to municipal financial distress

and distress cycles. Community factors that trigger distress cycles are specifically related

to the characteristics of community population such as decline, a rapid increase, density,

age, income and employment, and other community factors such as housing

characteristics (owner occupied versus renter occupied), vacancy rates, property values,

crime rates, and economic activities (ICMA, 2003). For example, a decrease in

population places a decreased demand on housing, which in-turn decreases the value of

housing. Decreases in housing values negatively affect tax assessment valuations.

Decreased assessments are directly related to decreased real estate tax collections. A

decrease in tax collections brings a decrease in real estate tax revenues. Additionally, a

decrease in population typically decreases the average household income across the

municipality, which results in decreased earned income tax collections (and for some

municipalities, decreased per capita tax revenues). A decrease in household income

typically coincides with a decrease in the vitality of the local economy (people don’t have

money to spend). Decreases in tax revenues make it difficult for the municipality to

continue to provide services at status quo levels, which are directly related to quality of

32

life and population shifts (people want to live where the quality of life if good). In order

to maintain services delivery at status quo, it may be necessary for the municipality to

increase the real estate tax levy to make-up for the loss

in tax revenues, which may result in further decreases in population (people want to live

where taxes are low). This is just one example of a distress cycle.

Distress cycles do not necessarily have to begin with decreases in population. A

municipal distress cycle may actually begin prior to a decrease in population where a

decrease in population is precipitated by loss of industry and/or employment

opportunities (PEL, 2007). For example, during times of economic recession, a distress

cycle may begin as a result of a high unemployment rate that causes a decrease in earned

income revenues. In addition, because the population is not earning a wage, the housing

begins to deteriorate that causes a decrease in assessed valuations and decreases in real

estate property tax collections.

Distress cycles may also begin with rapid population growth that places financial

pressures on the municipality for increased service delivery or costs associated to capital

improvements such as public water and sewer extensions and additional road

construction and maintenance costs in new developments (ACIR, 1973). As a final

example, a distress cycle may begin at any time as a consequence of inadequate

accounting and reporting practices and overall administrative mismanagement including

poor decision making as a result of poor accounting practices and/or the lack of

management capacity. For example, legal compliance with balanced budgets and audits

requirements is not enough to understand the true financial condition of a municipality

(Hendrick, 2004). Management must have the capacity to further analyze the effects of

33

an annual budget in regard to program costs (cost benefit analysis) over time and be able

to measure long-term financial condition (Groves & Valente, 1994).

In 2007, the Pennsylvania Economy League (PEL) completed a study on the

financial health of Pennsylvania’s municipalities and proposed five stages of municipal

financial decline. The PEL study indicated that over half of the municipal government

units in Pennsylvania are in stages three through five of financial decline; and concluded

that there is a mismatch between the organizational structure of local government in

Pennsylvania and the movement of resources. Further, PEL (2007) concluded that it is

difficult for local government units to maintain status quo or move–up the pyramid to a

higher stage of viability. Although the five stages are not cyclic in nature, the five stages

are important to the literature because they provide an additional model of municipal

financial distress decline. In addition, there is no steadfast beginning to PEL’s five

stages, but the causal factors, losses in tax revenues and a declining population associated

to PEL’s end-stage are found in Grove’s and Valente’s (1994) distress cycle. An

advantage of PEL’s (2007) model is its ease of use as municipal government leaders can

easily discern their municipality’s stage of distress. The disadvantage of PEL’s model is

that it does not associate specific causal factors to each stage; for example, PEL identifies

decreased tax revenues as a factor associated with Stage 4 distress, but does not give

reason as to why tax revenues are decreasing.

Also contained within the literature is reference to a distress cycle that takes on an

entirely different meaning compared to the two previous models. In a 1991 report to the

Local Government Commission of the General Assembly of Pennsylvania, Cahill and

James referred to a fiscal distress cycle as when municipal government experiences fiscal

34

distress and with State assistance and intervention is able to overcome distress. The state

subsequently withdraws and within a few years the municipality again finds itself

experiencing fiscal distress. Cahill and James based their discussion on a particular

municipality in Michigan, but writing in 1991, just four years after enactment of

Pennsylvania Act 47, it was not known whether this type of distress cycle would appear

in Pennsylvania. Cahill and James referred to this distress cycle as a “vicious cycle of

repeated state interventions” (p. 46). The Pennsylvania Economy League (1999) referred

to it as “perpetual life support to severely distressed local governments” (p. 29).

The State’s Roles

The United States Constitution does not recognize the powers or authority of a

municipal government unit. Therefore, while the U.S. Constitution directs powers to

State government, a municipal government unit receives its powers and authority from its

State Constitution. The cornerstone court decision that applies to state and municipal

powers and authorities is derived from Judge John F. Dillon of Iowa in 1865–known and

commonly referred to as Dillon’s Rule (Clark v. City of Des Moines, 19 Iowa 199, 208,

1865); wherein, according to Judge Dillion, a local government unit within a state has

only the power that is granted to it by the state. In a landmark case (Clinton v. Cedar

Rapids & Missouri River R.R. Co., 24 Iowa 455, 1868), Judge Dillon wrote on the

powers of municipal government as sanctioned by the state and concluded: (a) that a state

only has the authority to exercise the powers that are expressly stated, implied, and those

essential to accomplish the express objectives and purposes of the organization; and (b) if

by action of the courts, a doubt exists, then the power is denied.

35

In a 2003 discussion paper prepared by Richardson, Gough, and Puentes (2003)

for the Brookings Institution Center on Urban and Metropolitan Policy, four categories of

implementation of the court ruling of Judge Dillon in 1865 were identified: (a) 31 states

have implemented the ruling in-full, (b) eight states have only partially implemented the

ruling, c) ten states have rejected the ruling in-full, (d) one state has conflicting case law

on the authority and powers of the state and local government units.

Specific to Pennsylvania, the principles of Dillon’s Rule are well established and

the responsibility for the health, safety, welfare, and basic quality of life of the citizens on

municipal government (Gasbarre & Hobbs, 1987). Municipal governments in

Pennsylvania are the providers of public services (PA DCED, 2010). The ability of

municipal government in Pennsylvania to provide for the health, safety, welfare, and

public services is dependent on the incorporated structure and the municipal code by

which it is governed; and a municipality’s financial capacity is limited to only those

aspects permitted in the municipal code under which it operates (Bradbury, 1983). Such

limitations may include allowable forms of taxation and specific limits associated to

those forms of taxation, debt and spending limits, tax levy limits, and financial reporting

requirements (Bradbury, 1983). As a result, a municipality has no legal recourse when it

finds itself in a situation of fiscal distress due to restrictive taxing or debt limitations; it

has no powers or authority to remedy financial problems (Ronca, 1981).

In 1973, the ACIR completed a study that looked at how each of the fifty states

provided oversight to its governmental units in the areas of budgeting, accounting,

financial reporting, the issuance of short-term operating debt, and the programs, and

agencies in place charged with exercising control over their local government unit

36

finances. ACIR found a wide variety of local government unit and state relationships

ranging from no administrative supervision of municipal finance to complete supervision

of virtually every aspect of municipal finance. ACIR then placed each of the 50 states

into three distinct categories: (a) No Substantive State Administrative Control, (b)

Limited State Administrative Control, (c) Complete State Administrative Control (ACIR,

1973). The ACIR concluded that “states have neglected their overall responsibility for

supervising and assisting in the improvement of local financial management” (p. 69).

The ACIR report (1973) provided four recommendations on how a State may

structure an agency or program to provide at least minimal oversight of their local

government units in the area of municipal finance. The purposes for such oversight

included: to preserve local autonomy to the fullest extent possible, but with the consistent

goal of promoting sound financial management; to provide a system that is flexible

enough to promote continued education for the improvement of financial practices; and to

enable state officials to detect symptoms of financial difficulty in the earliest possible

stages (ACIR, 1973). Also according to the ACIR (1973), the most directive approach to

achieve minimal oversight of local government units, would be for a State to place the

responsibility of oversight with the State’s department of community affairs or the State

Auditor’s Office. The ACIR report further provided additional alternatives in achieving

minimal oversight: (a) for a State to create a small board composed of State officials such

as the governor, attorney general, and auditor and a small team of full-time professionals;

(b) for the State to create a bi-level, bipartisan board (from local official’s associations

and other interest groups; and (c) for the State/Governor to appoint a small board of

professionals with experience in local government finance.

37

The ACIR finding of 1973 specific to the Commonwealth of Pennsylvania were

(a) the Commonwealth did have administrative oversight and controls in place for short-

term municipal operating debt, and (b) the Department of Community Affairs (DCA –

now the Department of Community and Economic Development) was the responsible

state agency for receiving and reviewing the adopted budgets (submitted on uniform

forms) of all local government units with the exceptions of the cities of Philadelphia,

Pittsburgh, and Scranton (ACIR, 1973).

In 1999, the Pennsylvania Economy League (PEL) in making the

recommendation that Pennsylvania’s “Act 47 should contain provisions for a fiscal

recovery board with authority to exercise all the rights, powers, privileges, prerogatives

and duties of municipal governing bodies” (p. 17) questioned whether Article III, Section

31 of the Pennsylvania Constitution does in fact prohibit the General Assembly from

establishing a fiscal recovery board with said powers in financially distressed

municipalities. In an attempt to answer this question, PEL consulted with a law firm in

Pittsburgh, Pennsylvania; which suggested that the Pennsylvania Constitution would not

prohibit the General Assembly from establishing a financial recovery board and could be

justified on three grounds: (a) voluntary acceptance by the financially distressed

municipality, (b) established limits in exercising legislative taxing powers, and (c) a state

agency is not considered a commission per the provisions of the Pennsylvania

Constitution, Article III, Section 31 of 1874. According to PEL (1999), the consulting

law firm concluded that the provisions of the Pennsylvania Constitution (Article III,

Section 31 of 1874) were intended to prevent independent commissions from taking

38

control of the decision making processes in municipal government and more specifically

to expend revenues without public accountability in order to achieve their own goals.

State Approaches: Proactive, Reactive, and Others

In 2003, Honadle studied the roles of states when dealing specifically with local

government fiscal crises. The research concluded that only 10 states had formal

definitions of local government fiscal crises and the remainder of states varied between

having a working definition of fiscal crises to having no definition of fiscal crises

(Honadle, 2003). Honadle further developed a theoretical framework of the potential

roles that states take before, during, and/or after fiscal distress occurs that consisted of

four broad categories or roles that states take when dealing with local government fiscal

crisis’s. The first role is that of prediction wherein the state has established controls such

as financial reporting requirements and fiscal distress indicators that would allow an

assigned state agency to be able to predict a potential fiscal crises situation (Honadle,

2003). The second role is to avert wherein the state has established programs that would

assist the local government in avoiding (or averting) the fiscal crises (Honadle, 2003).

The third role identified by Honadle is to mitigate wherein the state has established

programs that would assist the local government in resolving (or mitigating) the fiscal

crises (2003). The last role identified is to prevent reoccurrence wherein the state has

established programs that would assist the local government in preventing another fiscal

crisis (Honadle, 2003). Honadle (2003) was further able to develop a set of emerging

themes or categorical approaches with regard to how states respond to municipal fiscal

crisis. The emerging themes or categorical approaches (which are not mutually

exclusive) put forth by Honadle are: (a) the directive approach, (b) the proactive

39

approach, (c) the ad-hoc approach, (d) the special legislation approach, (e) the reform

approach, (f) the takeover approach, and (g) the responsive approach. Kloha et al. (2005)

taking into consideration the work of Honadle (2003), proposed three classifications of

the roles that states have taken: (a) a proactive which stresses the monitoring of early

warning signs in an effort to avert drastic measures, (b) a reactive approach which

signifies the state to take more drastic actions, and (c) an ad-hoc approach for providing

public information in an effort to make local government more transparent and

accountable (Kloha et al., 2005).

Pennsylvania’s Approach

According to Honadle (2003), Pennsylvania’s approach is a reactive approach. As

an example, Pennsylvania’s reactive approach was found in the literature in a study

conducted in 1973 by the Advisory Commission on Intergovernmental Relations and is

summarized as follows:

In September 1971, (prior to Act 47 of 1987 and Chapter 9 of the U.S.

Bankruptcy Code) the borough of Darby, sent a telegram to the

Pennsylvania Department of Community Affairs (DCA) and to the

Pennsylvania Auditor requesting financial assistance because the borough

could not meet its financial obligations through the end of the year and

was considering bankruptcy. In 1971, the DCA did not have any

experience dealing with such a situation, but sent a team of investigators

to Darby within a week after receiving the telegram. DCA’s team quickly

discovered Darby borough had made no effort or thought it necessary to

40

maintain financial records for the years between 1962 and 1970. The

investigators were able to discern that the cash deficit in the general fund

actually began in 1967 with a year-end deficit of $17,000, which grew to

$27,000 at year-end in 1968, $55,000 at year-end in 1969, and an

estimated $151,000 at year-end in 1970. In the years prior to 1970, the

Borough was able to avoid a crisis by using cash from restricted funds to

cover the cash deficit in the general fund. In addition, Darby was in

default on a $200,000 tax anticipation note (TAN) from 1970 and

repayment was carried into 1971 (despite the provisions of PA law on

short-term borrowing for operating that prohibit such practices. Rather

than pay the TAN in 1970, tax revenues were used to fund current

expenditures in 1970. By the time Darby officials contacted DCA, the

general operating fund deficit was $181,000, an unidentified amount was

due to restricted funds, and the municipality was in default on a $200,000

TAN. The telegram to DCA and the Auditor General in September of

1971 was precipitated by the Bank’s intention to hold the Borough’s

deposits for repayment of the TAN. During this period of time, annual

financial statements were required to be submitted to DCA. As part of the

investigation, the DCA team found that the submitted financial statements

did indicate a revenue-expenditure deficit in all but one of the nine years

between 1962 and 1970.

As is indicated in the Darby Borough example above, Pennsylvania’s approach

was a reactive approach because the DCA had clear warning of the developing situation

41

in Darby. However, the DCA did not step-in until Darby Borough requested assistance.

Provided DCA had taken a proactive approach, the year-end deficits would have been

questioned by DCA prior to Darby actually making the contact to DCA because DCA

requires that municipalities submit financial statements for their review on an annual

basis.

In 1984, Dr. Wesley W. Posvar, Chancellor of the University of Pittsburgh,

convened a conference addressing municipal financial distress (PA Local Government

Commission, 1985). In February of 1985, Dr. Posvar presented the report Municipal

Fiscal Distress: Choices for Pennsylvania to the Local Government Commission of the

General Assembly in Harrisburg, Pennsylvania that contained 19 recommendations; and

called for the State to take a more proactive and reactive role (PA Local Government

Commission, 1985).

In 1985, the Local Government Commission authorized the formation of a Task

Force to study problems and to formulate a legislative proposal to alleviate municipal

financial distress (Cahill and James, 1991). In 1987, the Task Force submitted draft

legislation to the General Assembly (Cahill & James, 1991). Sixteen years after the

situation in Darby, the Pennsylvania General Assembly enacted PA Act 47, The

Financially Distressed Municipalities Act, 1987 (Commonwealth of Pennsylvania Act of

1987, P.L. 246, No.47). Section 202 of the Act provides a list of 10 scenarios wherein

appropriate standing is considered in requesting a review for determination of municipal

financial distress from the DCED Secretary, paraphrased as follows: (a) the DCED, (b)

the government body, (c) a creditor with a matured claim, (d) a percentage of the

electorate, (e) a percentage of beneficiaries of a pension fund that is being inappropriately

42

managed, (f) a percentage of employees who have not been paid, (g) trustees of a

municipal bond indenture, (h) the elected auditors, (i) a trustee or actuary of a pension

fund, and (j) the chief executive of any city (Commonwealth of Pennsylvania Act of

1987, P.L. 246, No.47). In nine of the ten situations wherein standing is appropriate, the

request for review for determination by DCA is left to the elected and appointed local

officials, current and former employees, and creditors (Pennsylvania Legislature, Act of

1987, P.L. 246, No.47). Therefore, Act 47 at the onset was a reactive approach to

municipal financial distress; and further, the Act was designed in passage to react, or is

responsive according to Honadle (2003) to municipal financial distress after a financial

crises is identified.

In a 1991, a Program Evaluation report on Act 47, by Cahill and James concluded

that the provisions of Act 47 are “at best a partial and stop-gap measure which can

partially mitigate the effects of distress, but will not lead to meaningful change in the

bleak financial condition of many Pennsylvania municipalities” (p. 47). The

Pennsylvania Economy League (1999) recommended that municipalities be identified

and assisted as early as possible; specifically those municipalities that are “sliding

towards distress” and those that meet the Act 47 criteria for financial distress (p. 24).

PEL justified this recommendation as a more effective and less costly way to assist ailing

municipalities and further recommended that the State implement an early warning

system that would position PA DCED to provide proactive support to ailing

municipalities.

Twenty-five years after enactment of Act 47, the Act remains unaltered.

Fortunately, throughout the 25 years (1987-2012) there have been only 27 municipalities

43

declared by the Secretary as financially distressed pursuant to Act 47 (PA DCED, 2012).

However, according to the Pennsylvania Economy League (2007), this low number is not

representative of municipal financial distress in Pennsylvania. In 2007, PEL identified

304 Pennsylvania municipalities experiencing a significant onset of financial distress

(PEL, 2007).

Causal Factors

In 1973, the ACIR researched the 1929 pre and post depression period during a

ten year period beginning in 1922 and ending in 1932 (ACIR, 1973). The study is

important because it makes the first reference in the literature to factors associated with

municipal fiscal distress by classifying factors as environmental and internal. The study

defined environmental factors as those factors that stemmed directly from the economic

depression of 1929 that were outside of the decision making control of local officials

such as significant declines in taxable income and wealth, numerous bank failures,

increased expenditures caused a lack of revenues, and decreased revenues caused by

pronounced increases in tax delinquencies (ACIR, 1973). Internal factors were defined

as those factors within the decision making control of local officials such as expenditure

revenue imbalances due to a failure to control expenditures, use of debt service revenues

to fund operating expenditures, failure to follow sound budgeting and reporting practices

to include inaccurate record keeping, and an unwillingness on the part of elected officials

to accept advice of fund securement agents due to a combination of political pressure to

retain the status quo and a lack of appreciation of the seriousness of the financial situation

(ACIR, 1973). The study concluded that large municipal debt increases between 1922

44

and 1932 were attributed to three “traditional factors” including: (a) the provision of

services exceeded tax revenues, (b) overdevelopment of real estate due to cost of

infrastructure, and (c) the lack of meaningful controls over indebtedness (ACIR, 1973, p.

14).

Sacks and Callahan (1970) in their research on select demographic and

socioeconomic characteristics contended that such characteristics (environmental factors)

must be sorted out in any study area before fiscal disparities can be analyzed. Their study

attributed fiscal distress to environmental factors such as demographic, social, and

economic characteristics including population trends, income trends, age and race

composition, housing composition, and service delivery demands (Sacks & Callahan,

1970).

Bradbury (1983) identified six environmental factors: size of tax base; amount of

intergovernmental aid; tax collection revenue rates; service needs/range of services

provided by the governmental unit; costs associated with governmental operations; and

externally imposed limitations on tax rates due to organization structure. As a result,

Bradbury contended that a local government unit’s shortfalls can also be somewhat

attributed to the quality of fiscal management because management may not have the

capacity to measure revenues versus the costs associated to service delivery and

operations. Therefore, although Bradbury’s research (1983) focused on structural factors

(those that are largely outside of the control of the local government), it was also

suggested that the end result may also be attributed to internal factors (those within the

control of local government) when the abilities and capacity of management are

questionable.

45

In 1985, the ACIR described causal factors of municipal distress as being either

cyclical or structural. Cyclical forces are short-term in duration and coincide with

fluctuations in an organizations business calendar (ACIR, 1985). An example of a

cyclical force in municipal government would be the timing of real estate tax revenue

collections. Structural forces as defined by ACIR are long-term in duration and coincide

with fluctuations in the economy that are beyond the control of state or federal

government.

In a 1987 report to the Local Government Commission of the Pennsylvania

General Assembly, Gasbarre and Hobbs reinforced cyclical and structural forces as the

causes of fiscal distress. Cyclical forces are described as short-term (2-5 years in

duration) that correspond to swings in the business cycle; whereas, structural forces are

long-term and reflect changes in the economy which are beyond the control of state or

local government (Gasbarre & Hobbs, 1987). Further, according to Gasbarre and Hobbs,

a 1985 ACIR report classified economic down-swings or negative changes in the

economy in terms of community distress and government distress. Community distress is

concerned with measuring the relative economic and social conditions of people where

government distress is concerned with measuring fiscal condition in terms of short and

long term revenues and expenditures (Gasbarre & Hobbs, 1987). Therefore, fiscal

distress can be cyclical or structural, short-term or long-term, and is a result of

community distress (economic and social factors) and government distress

(administrative, economic, and political factors).

In a 1991 report to the Local Government Commission of the Pennsylvania

General Assembly, Cahill and James defined the causes of a persistent imbalance as

46

structural versus internal; whereas structural refers to economic events (regional, state, or

national) that are outside of the control of the local officials, and internal refers to

“inappropriate, questionable, or inefficient managerial or political actions which are

within the control of the governing body” (p. 8). They concluded that the combination of

both internal and structural causal factors present in varying degrees in the six

municipalities they studied contributed to the fiscal distress of the municipalities.

In the literature there are no consistent causal classifications. Some scholars refer

to them as internal and environmental (ACIR, 1973), internal and structural (Bradbury,

1983; Cahill & James, 1991), administrative and structural (Wolff, 2004), and cyclical

and structural (ACIR 1985; Gasbarre & Hobbs, 1985).

Stress Factors

Given the absence of agreement in the literature as to the identification of the

causal classifications, for the purpose of this research, the causal classifications shall be

referred to as internal stress factors and external stress factors. Further, for the purposes

of this research, internal stress factors are those within the control of the decision making

of local government (municipal) leadership such as the lack of financial accountability,

the lack of accurate financial records, a lack of regard to financial obligations,

misappropriation of funds, and lack of spending controls; and external stress factors are

those outside of the control of the decision making of local government (municipal)

leadership such as a failing local economy, losses in population, decreasing real estate

values, and high unemployment rates.

47

Financial distress within a local government unit may be caused by either/or a

combination of both types of stress factors. In a case study of six financially distressed

municipalities in southwestern Pennsylvania, Cahill and James (1991) found various

internal causal factors for the financial distress situation relating to gross financial and

administrative inefficiency and mismanagement to include lack of financial

accountability (annual audits, budgeting, and reporting), lack of accurate financial

records, lack of regard to financial obligations and misappropriation of funds, lack of

spending controls, general fund deficits, and high levels of short and long term debt. In

addition, Cahill and James (1991) found various external causal factors for the financial

distress situations to include loss in population and decreases in real estate values

(commercial, industrial, and residential).

Measuring Municipal Financial Distress

The use of financial indicators as a financial comparative and forecasting tool is

not a new idea; as their use, according to Peterson (1977) originated in the 1870s. The

term fiscal indicator as defined by Peterson (1977) is a two-part definition. The term

fiscal exhibits an interest in “the conduct and condition of the treasury…its transactions

and position” (Peterson, 1977, p. 300) of the local government unit and the term indicator

is a “general and directional measure that can be applied across time or to a large number

of subjects” (Peterson, 1977, p. 300).

The construction of a fiscal indicator is dependent upon its desired purpose or

objective and involves a series of analytical judgments based upon qualitative and

quantitative factors. Indicators are used for various purposes such as measuring tax

48

burdens, distributing assistance effectively across the local government unit, measuring

economic activity and for measuring the costs of service delivery (Peterson, 1977). As a

result, fiscal indicators are constrained by the data available, the degree of forecasting per

the objectives of the analyst, and the scope of generality being applied if used for cross-

case comparative analysis. The importance of using fiscal indicators is dependent upon

the focus or purpose for use (Honadle, 2003).

There are various purposes for assessing a local government unit’s financial

capacity and financial condition (PA DCED, 2011). Most commonly, the use of financial

indicators is a method by which a local government unit can diagnose problems through

analyzing current conditions based upon past trends (PA DCED, 2011); and second, to

trend a local government’s revenue and expenditures for the purpose of making sound

decisions during the annual budgeting process–to compare past trends in order to forecast

future trends (PA DCED, 2011). Hughes and Laverdiere (1986) presented a general

conceptual framework for comparative local government financial analysis from a budget

preparation perspective. They contended that local government officials attempt to

allocate resources annually during the budget process but do not have the necessary data

and information available to permit the development of efficient and effective annual

budgets (Hughes & Laverdiere, 1986). Campbell (1990) presented a general conceptual

framework similar to Hughes and Laverdiere except that Campbell’s purpose was to

compare financial conditions and policy decisions in local government units from within

a larger region such as county-wide, states, or the nation as a whole.

49

Financial Monitoring Systems

A thorough understanding of various analytical tools to include their purposes,

data requirements, their limitations, and capabilities will guide a researcher to the

indicators that will best meet particular information needs (Honadle, Costa, & Cigler,

2004). Therefore, this section summarizes various governmental, scholarly, and

institutional studies and comprehensive financial monitoring systems.

One of the first studies to examine fiscal health of local governments was an

ACIR study that analyzed 30 large cities across the United States for the purpose of

identifying regional fiscal distress (ACIR, 1973). Based upon the ACIR’s review of the

30 cities, six common characteristics emerged: (a) an operating fund revenue-expenditure

imbalance in which current expenditures significantly exceeded current revenues in one

fiscal period, (b) a consistent pattern of current expenditures exceeding current revenues

by small amounts for several years, (c) an excess of current operating liabilities over

current assets (a fund deficit), (d) short-term operating loans outstanding at the

conclusion of a fiscal year (or in some instances the borrowing of cash from restricted

funds or an increase in unpaid bills where funds were used for operating–in lieu of short-

term operating loans), (e) a high and rising rate of property tax delinquency, and (f) a

sudden substantial decrease in assessed values for unexpected reasons. The indications

used to determine distress were a mix of socioeconomic, demographic, and financial

information from the 30 cities. Subsequent to the ACIR studies in the 1970s, several

state and national government offices and national organizations followed suit and

developed indicators of local fiscal stress such as the Congressional Budget Office (U.S.

Congress, 1978), the U.S. Department of Treasury (1978), the Municipal Finance

50

Officers Association (1978), and the International City/County Management Association

(Groves & Valente, 1994). In addition, several scholarly works were introduced such as

Peterson (1977), Hughes and Laverdiere (1986); Campbell (1990); Brown (1993), Kloha

et al. (2005); and Wang, Dennis, and Tu (2007). These studies examined various

monitoring systems at the state or national level as opposed to developing or introducing

a comprehensive monitoring system. Peterson (1977) suggested a need for simplification

and standardization of state and local government fiscal indicators and further stresses the

state’s responsibilities to examine submitted financial reports and supervise local

government finances to ensure they are fiscally healthy. Hughes and Laverdiere (1986)

asserted the importance of local decision making based upon laws within the state and the

development of decision support systems are dependent upon the needs of the users.

Campbell (1990) defended the use of monitoring systems as comparative tools to assess

the financial condition of one locality and compare it to the financial condition of

another. Kloha et al. (2005) assessed a state’s monitoring of local fiscal conditions to

examine what types of indicators are being used to monitor financial condition of

municipalities within each state. Wang, Dennis, and Tu (2007) evaluated the GASB 34

financial reporting model and the financial condition dimensions (cash, budget, long-run,

and service-level solvencies) and the 11 financial condition indicators for reliability and

validity.

Also in the 1970s, several institutions and organizations began to develop and

propose financial monitoring systems for use by local governments including the

Municipal Finance Officers Association, the International City/County Management

Association, the Allegheny League of Municipalities with assistance from the University

51

of Pittsburgh, the Pennsylvania Department of Community and Economic Development,

and more recently, the Pennsylvania Economy League.

In 1978, the Municipal Finance Officers Association (currently the Government

Finance Officers Association-GFOA), published their first in a series of handbooks on

evaluating local government financial condition using 29 fiscal indicators (Rosenberg and

Stalling, 1978).

In 1980, the International City/County Management Association (ICMA)

developed a set of 36 indicators (collectively referred to as the Financial Trend

Monitoring System–FTMS) for the purpose of evaluating the financial condition of cities

and counties over-time (Groves & Valente, 1994). The ICMA (2003) revised the FTMS

to contain 42 indicators that are categorized as financial indicators and environmental

indicators; wherein there are 11 categories of factors. More specifically, the FTMS

financial factors include revenues, expenditures, operating position, debt structure,

unfunded liabilities, and condition of plant; and the environmental factors include

community needs and resources, intergovernmental restraints, disaster risk, political

culture, and external economic conditions (ICMA, 2003). In a comparative review using

three different assessment tools to analyze the financial condition of a county

government, Honadle (1998) found the FTMS to be somewhat demanding to implement

at a county level, but is necessary and useful at the municipal level.

In 1984, the Intergovernmental Cooperation Program of the Allegheny Leagues of

Municipalities (ICP/ALOM) developed a financial monitoring system specific to

Pennsylvania’s structure of municipal government (Allegheny League of Municipalities,

1984). The indicators were based on the 1978 GFOA’s financial monitoring system and

52

the ICMA’s 1980 financial monitoring system (Allegheny League of Municipalities,

1984). The ICP/ALOM looked at over 100 individual factors and developed a financial

monitoring system that contained 26 financial indicators specific to the structures of local

government in Pennsylvania as an extension of the work on municipal financial distress

by the Graduate School of Public International Affairs of the University of Pittsburgh

(Allegheny League of Municipalities, 1984).

In 1999, the PA DCED, Governor’s Center for Local Government Services

published the first edition of the Financial Monitoring Workbook for use by Pennsylvania

units of local government–the third edition was published in 2011 (PA DCED, 2011).

The workbook is a continuation of the work completed in 1984 by the ICP/ALOM (Dr.

Mary Jane Kuffner Hirt, Indiana University of Pennsylvania).

In 2007, the Pennsylvania Economy Leagues (PEL) conducted a study on 2,551

local units of government in Pennsylvania to identify municipal financial decline and

distress using indicators based on tax capacity and tax effort (PEL, 2007). Tax capacity

was defined by PEL (2007) as “the tax base per household” and tax effort was defined as

“tax collections compared to the tax base” (p. 11). According to PEL (2007), the findings

for the statistical analysis for each municipality in their study were compared across local

government units (cases) and to the State’s (Pennsylvania) averages and survey data

collected from key informants. The responses were categorized into four groups: (a)

need for change, (b) depth of ties to specific geographic entities or municipalities, (c)

access to and preference for services, and (d) perceived control of their government

(PEL, 2007). The indicators PEL used in the study were all based on socioeconomic and

demographic characteristics obtained from the U.S. Census Bureau (1970, 1980, 1990,

53

2000) and various Pennsylvania State Agencies. Each of the 2,551 municipalities (cases)

were placed into geographic regions. Based upon the socioeconomic and demographic

data as compared to the state average for the same data and real estate and non real estate

tax revenues, PEL (2007) then categorized each of the municipalities (cases) into one of

five distress levels based upon statistical methods (PEL, 2007). This study is not

characteristic of a study of financial condition, which typically uses numerous financial

indicators, but is important because it demonstrates that socioeconomic and demographic

data and just a few financial indicators may also be used to determine municipal financial

distress.

In summary, this review of the literature focuses on scholarly fiscal indicator

studies and comprehensive fiscal indicator systems. According to Honadle (2003), the

importance of using fiscal indicators is dependent upon the focus or purpose for use. The

fiscal indicators to be used for any particular research are therefore dependent upon the

researcher’s purposes. Collectively, 10 themes emerged from the various fiscal

indicators systems: revenues, expenditures, operating fund, tax collection, assessed

valuation, operation position, debt, fiscal capacity, capital outlay, and socioeconomic and

demographics.

Summary

The literature review provides a chronological perspective of municipal fiscal

distress that begins with a discussion on municipal bankruptcy (defined as insolvency)

and demonstrates how the focus on municipal insolvency has evolved to focus on

financial condition and the four types of municipal solvency (budgetary, cash, long-term,

54

and service level). Interestingly, the review revealed no identifiable agreement in

terminology and the following terms were found to be used interchangeably when

describing a condition of municipal insolvency: municipal default, unsound financial

condition, financial emergency, financial crises, fiscal crises, fiscal stress, and fiscal

distress. In addition, the review revealed no identifiable agreement in definition of terms

other than the broad statement of when expenditures exceed revenues. Further, there was

no agreement in the terminology of the causal factors and were identified in the literature

as: internal and environment, internal and structural, administrative and structural, and

cyclical and structural. Finally, the literature review examined a number of financial

monitoring systems and a number of scholarly studies that used financial and

socioeconomic indicators that collectively contained over 65 indicators.

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CHAPTER 3. METHODOLOGY

This chapter outlines the methodology to be used for the mixed method multi-case

study of four municipalities in Allegheny County, Pennsylvania and the research design

to include: population, sample frame and sample size, instrumentation and measures, data

collection, data display and analysis, research design assumptions, limitations and

delimitations, and ethical considerations.

Purpose of the Study

The purpose of this study is to examine the organizational structure, financial

condition, and socioeconomic characteristics of four municipalities in Allegheny County,

Pennsylvania (East Pittsburgh borough, Homestead borough, North Braddock borough,

and Wilkinsburg borough) using a multiple-case descriptive study that combines

qualitative data collection methods with quantitative descriptive statistical display

methods that will be used to analyze patterns and trends within and among the cases over

time (pre-distress, distress, post-distress).

Research Questions

Based upon on the findings within the existing body of literature, the management

research framework, and the conceptual framework, the three general questions posed

were methodically narrowed into nine explicit research questions within the three main

areas to be examined (organizational structure, financial condition and socioeconomic

characteristics). Narrowed and more explicit questions will assist in maintaining the

56

structure of the research design and assist the researcher by providing a tight and detailed

research framework.











Financial Condition










57











distress?

Research Design

The purpose of this research is to examine four of the six municipalities that have

had a financial distress declaration rescinded by the Secretary of DCED (the boroughs of

East Pittsburgh, Homestead, North Braddock and Wilkinsburg) using an descriptive

multiple case study approach to determine whether patterns and trends exist within and

among the four municipalities over time in regard to organizational structure, financial

condition and socioeconomic characteristics during their respective periods of pre-

distress, distress, and post-distress. The research is designed as a mixed method, multiple-

case study and is heavily dependent upon the qualitative approach in the data collection

stage; although, the quantitative approach will also be used in data analysis and data

display stages using descriptive quantitative techniques.

58

According to Cooper and Schindler (2003), the qualitative approach for data

collection is best-suited for complex, descriptive studies. Creswell (1998) contended that

a qualitative approach allows a researcher to obtain a true understanding of social

phenomenon through examination, explanation, and description. Further, a qualitative

research approach can be used to understand phenomenon that has done been rigorously

studied (Strauss & Corbin, 1990), and the case study approach is the best suited approach

for examining real-life events over time (Yin, 2003). Therefore, the mixed method

approach permits this researcher to understand the phenomenon by contrasting,

comparing, and classifying data in the data collection stage as well as the data

presentation and findings stages of the research process.

Description of the Population and Sample Characteristics

For the purpose of this study, population refers to Pennsylvania municipalities

that have been declared as financially distressed by the Secretary of PA DCED. The

sampling frame consists of six municipalities that were declared as financially distressed,

but have since had the financial distress declaration rescinded by the Secretary of PA

DCED. The sampling frame is further delimited to only those municipalities located in

Allegheny County, Pennsylvania.

The purposive sampling technique used for the selection of the sample (four

cases) is based upon their relative geographic closeness as all are within a five mile

radius of one another. Finally, each of the four cases is classified as a borough under the

Pennsylvania State Code, and is organized and structured pursuant to the Pennsylvania

59

Borough Code. The purposive sample consists of the boroughs of East Pittsburgh,

Homestead, North Braddock, and Wilkinsburg.

Measurement Plan

Secondary data was collected through a content analysis of public records and

documents. The instruments and measures are grounded within the techniques used by

the Government Finance Officers Association, the International City Managers

Association, and the Pennsylvania Department of Community and Economic

Development. The data collected from numerous sources were qualitatively analyzed

using a quantitative descriptive statistical method to identify patterns and trends.

Data Collection Plan

All data collected for this research study was in the form of secondary data and

was obtained from various sources such as the U.S. Census Bureau, the PA Department

of Community and Economic Development, the Pennsylvania Southwest Planning

Commission, Allegheny County Tax Assessment Department, and U.S. government and

municipal agencies. A majority of the data was collected from the case municipalities of

East Pittsburgh, Homestead, North Braddock, and Wilkinsburg boroughs.

The various data was retrieved from the U.S. Census Bureau, municipal and state

financial reports and financial audits, municipal ordinances and resolutions, municipal

meeting minutes, and state codes (Table 1). Further, all data used for this research was

classified as public domain or public information and required by the Open Records Act

through right-to-know requests. In situations where only original documents existed and

60

copies could not be obtained due to cost of reproduction or other matters, the secondary

data was analyzed by the researcher on location through extensive and detailed note

taking. The estimated time frame for the collection of all data sets was three to six

months. Subsequent to the collection of data, the researcher compiled the data into Excel

spreadsheets. Through the use of various data sources, the data was checked for

accuracy. The researcher collected and analyzed data as it became available. The

estimated time frame for the collection of all data sets and the analysis of all data was six

to nine months.

The secondary data collected for each case municipality referred to a specific time

period or snapshot specific to each case municipality (see Table 2). The time period was

based upon the year the municipality was declared as financially distressed by the

Secretary of PA DCED. The first stage/snapshot or period of review was the five years

prior to the distress declaration. The second period of review was those years the

municipality was in financial distress pursuant to Act 47. The third period of review was

five years or to current from the time the municipality’s financial distress designation was

rescinded by the Secretary of PA DCED.

The data collected and analyzed for each of the periods of review were divided

into three basic categories: socioeconomics, organizational, and financial.

Organizational Data

Within the organizational data category there were three subcategories for

analysis: organization structure, state mandated limits, and organization

practices/procedures. To conduct the organizational analysis for each of the case

municipalities it was necessary for the researcher to obtain documents for each case

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Table 1.

Secondary Data Sources

Secondary Data Location/Holder

Application for Financial Distress

Case Municipality

PA DCED: Harrisburg and Pittsburgh, PA

Application for Financial Distress

Rescission

Case Municipality


Hearing Transcripts for Financial Distress Case Municipality


Hearing Transcripts for Financial Distress

Rescission

Case Municipality


Written correspondence relating

to financial distress

Case Municipality


Financial Distress Recovery Plans Case Municipality


Financial Distress Recovery Plan Revisions Case Municipality


Minutes of Council Meetings Case Municipality

Municipal Audit reports and

Adopted Budgets

Case Municipality


Census Data

US Census Bureau

Southwest Planning Commission, Pittsburgh, PA

Adopted Ordinances Case Municipality

municipality that relate to the financial distress declaration and rescission decisions, court

decisions and hearing transcripts, recovery plans, revised recovery plans, coordinators

reports, minutes of Council Meetings, adopted municipal ordinances and resolutions of

Council, the PA Borough Municipal Code, and historical information about each specific

case municipality that was housed in local libraries and museums. Based upon the

information contained within these documents, the researcher extracted and defined the

62

structure of government, the state mandated restrictions based upon the structure of

government, and practices and procedures.

Table 2.

Study Analysis Periods: Pre-distress, Distress, and Post-distress

Time Period East Pittsburgh

Borough Homestead

Borough North Braddock

Borough Wilkinsburg

Borough

Pre-distress 1987-1991 1988-1992 1990-1994 1983-1987

Distress 1992-1999 1993-2007 1995-2003 1988-1993

Post-distress 2000-2009 2008-2009 2004-2009 2005-2009

Financial Data

Within the financial category the researcher proposed to analyze five

subcategories of financial data for analysis: revenues, expenditures, operating position,

debt structure, and unfunded liabilities. However, due to study limitations, debt structure

and unfunded liabilities were not analyzed (see Limitations discussion in Chapter 5 and

Appendices I and J).

Revenues. Within the revenues subcategory, the researcher proposed to analyze

14 factors: revenues per capita, taxes per capita, revenues per household, restricted

revenues, intergovernmental revenues, elastic tax revenues, one-time revenues, real estate

tax revenues, tax collection rates, real estate exempt ratio, exempt in-lieu ratio, earned

income tax revenues, user charge coverage(s), and revenue deficit/surplus. However, due

to study limitations, the researcher analyzed eight factors: total revenues, revenues per

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capita, total tax revenues, Act 511 tax revenues, earned income tax revenues, Regional

Asset District tax revenues, and state funding assistance revenues.

To conduct the revenue analysis it was necessary for the researcher to obtain

census and interim census reports (USCB-DP 1-4), local and county tax assessment

reports, reports from the PA DCED (DCED-CL-GS 30 and 69), annual financial reports,

and annual audits from each of the municipal cases as follows: East Pittsburgh borough

1987-2009; Homestead borough 1988-1992; North Braddock borough 1990-2009; and

Wilkinsburg borough 1983-2009.

Expenditures. Within the expenditures subcategory, the researcher proposed to

analyze seven factors: expenditures per capita, expenditures per household, expenditures

by function, employees per capita, fixed costs, fringe benefits expenditures, and

maintenance effort. However, due to study limitations, the researcher analyzed total

expenditures and expenditures by function.

To conduct the expenditure analysis it was necessary for the researcher to obtain:

census and interim census reports (USCB-DP 1-4), local and county tax assessment

reports, reports from the PA DCED (DCED-CL-GS 30 and 69), and annual financial

reports and annual audits from each of the municipal cases as follows: East Pittsburgh

borough 1987-2009; Homestead borough 1988-1992; North Braddock borough 1990-

2009; and Wilkinsburg borough 1983-2009. The data needed for expenditure analysis

was per capita, number of households, number of employees, total number of employee

hours worked, net operating expenditures, gross operating expenditures, fringe benefit

expenditures, total salary and wages expenditures, total expenditures for repairs and

maintenance of general fixed assets, and gross value of general fixed assets. As discussed

64

in the Limitations section of Chapter 5 of this research study, all data needed as listed

above was not available to the researcher.

Operating position. Within the operating position subcategory, the researcher

proposed to analyze seven factors: capital outlays, operating deficit/surplus, enterprise

losses, fund balance, operating position, liquidity, and fiscal capacity. However, due to

study limitations, the researcher analyzed the operating deficit/surplus for each case

municipality.

To conduct the operating position analysis it was necessary for the researcher to

obtain reports from the PA DCED (DCED-CL-GS 30 and 69), annual financial reports,

and annual audits from each of the municipal cases as follows: East Pittsburgh borough

1987-2009; Homestead borough 1988-1992; North Braddock borough 1990-2009; and

Wilkinsburg borough 1983-2009. The data needed for the operating position analysis

was the amount of capital outlay from operating funds, net operating funds, general fund

operating deficit/surplus, net operating revenue, enterprise fund profits/losses, unreserved

fund balance, general fund operating expenditures, and current liabilities. As discussed in

the Limitations section of Chapter 5 of this research study, all data needed as listed above

was not available to the researcher.

Socioeconomic Data

Within the socioeconomic category, the researcher proposed to analyze five

subcategories: demographic characteristics, social characteristics, economic

characteristics, housing characteristics, and community and economic development

characteristics.

65

Demographic characteristics. Within the demographics subcategory there were

three indicators proposed for analysis: population, age, and race. However, due to study

limitations, an analysis of age was eliminated.

To conduct the demographic characteristics analysis it was necessary for the

researcher to obtain census and interim census reports (USCB-DP 1-4) for each of the

municipal cases as follows: East Pittsburgh borough 1987-2009; Homestead borough

1988-1992; North Braddock borough 1990-2009; and Wilkinsburg Borough 1983-2009.

The data needed for the demographic characteristics analysis was population, population

density, and race.

Social characteristics. Within the social characteristics subcategory there were

three indicators proposed for analysis: marital status, education, and crime rates.

However, due to study limitations as discussed in Chapter 5, all three social characteristic

indicators were eliminated.

Economic characteristics. Within the economic characteristics subcategory

there were six indicators proposed for analysis: employment status, occupation class,

household income, per capita income, number of families below poverty level, and

number of individuals below poverty level. However, due to study limitations as

discussed in Chapter 5, all economic characteristics were eliminated.

Housing characteristics. Within the housing characteristics subcategory there

were five indicators proposed for analysis: housing type, housing age, housing

occupancy, housing value, and median housing value of occupied units. However, due to

study limitations as discussed in Chapter 5, housing type, housing age, housing value,

66

and median housing value of occupied units was eliminated from the analysis for this

study.

To conduct the housing characteristics analysis it was necessary for the researcher

to obtain census and interim census reports (USCB-DP 1-4) for each of the municipal

cases as follows: East Pittsburgh borough 1987-2009; Homestead borough 1988-1992;

North Braddock borough 1990-2009; and Wilkinsburg borough 1983-2009. The data

needed for the housing characteristics analysis was total housing units, housing

occupancy, total vacant units, vacancy rates, and occupancy rates.

Community and economic development characteristics. Within the

community and economic development characteristics subcategory this research

proposed to analyze seven factors: community jobs, employment base, community

characteristics by parcel, top five assessed value property owners, top five tax exempt

property owners, top five employers, and development activities. However, due to study

limitations, this research discussed development activities as an observation across case

municipalities as a means for increasing revenues.

Data Analysis and Display

The data for analysis and display was divided into three main sections:

socioeconomic characteristics, organizational characteristics, and financial

characteristics; and was analyzed and displayed individually and across cases according

to the review periods of pre-distress, distress, and post-distress. Within each of the three

main sections and subsections the data was displayed using tables, charts, and graphs

(where applicable) and narratives were used to describe their meanings. Miles and

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Huberman (1994) stated the primary method for displaying qualitative data is through

“matrix displays [defined as] visual formats that present information systematically” (p.

91). The various matrix displays” (tables, charts, and graphs) serve two primary

purposes: (a) to provide a means for the readers ease of understanding, and (b) to provide

the researcher with a means for obtaining a higher level of data analysis. All data

collected was stored in a secure location within the researcher’s place of residence. Since

all data is considered public record, it was not necessary to destroy the data.

Validity and Reliability

The use of a mixed methodology approach is best suited for this research because

it allows this researcher to use a combination of methods to understand the phenomenon

more fully than may be possible when using either quantitative or qualitative methods

separately. The case study approach permits this researcher to become immersed within

the setting and maintain the true meanings of the data collected. Additionally, this

researcher was able to obtain the necessary understanding of real-life events over time

(pre-distress, distress, and post-distress).

More specifically, this study explored patterns and trends among and across cases

at specific time periods relative to each case. The patterns and trends were constructed

based upon the contents of and data obtained from public records. The patterns and

trends were described within each case and across cases. Multiple sources of data

(financial factors, socioeconomic factors, and organizational factors) were used to

establish a chain of evidence. This process allowed the researcher to understand the

intricate details of each case. As outlined, the researcher looked at various recognized

68

factors/indicators; comparing and analyzing each separately and across cases. This

method of developing pattern and trends across cases according to individual indicators

allowed the researcher to preserve case configurations and avoid forcing of data.

Additionally, this method permitted the researcher to easily identify deviant cases and

typologies that may be generalized across cases. Finally, this method allowed the

researcher to display the data in a form that other researchers are able to replicate.

Ethical Considerations

In conducting this research, all standards per the Capella University Institutional

Review Board were followed. Specifically, this research process adhered to the

applicable standards and procedures set forth in regard to informed consent, participant

rights, confidentiality and privacy, data collection and analysis, and data security and

destruction as follows:

• Informed consent: The governing body of each case municipality was contacted

in writing and asked to voluntarily participate in the research study. In all cases,

participants were ensured that they would not be harmed and that there were no

risks or benefits to persons or to the case municipality. In addition, the purpose

of the research was explained to the governing body of all four case

municipalities and each was given the opportunity to ask questions.

• Participant rights: The governing body of all four case municipalities was

provided the right to withdrawal at any time.

• Confidentiality and privacy: All data accessed to complete this study was found

and extracted from records of public availability. Within the records of public

69

availability such as minutes from public meetings, specific names of persons

were intentionally omitted and wherein, situations based on information

contained within the secondary data were described in general terms. In

addition, the researcher did not access any public realm protected information

such as personnel records.

• Data security and destruction: All data accessed and obtained for the completion

of this study is in the form of records of public availability. However, the

researcher has all secondary data collected, organized and stored in a locked

filing cabinet within the researcher’s home office.

• Researcher bias: Researcher assumptions and beliefs in the development of this

study and throughout the analysis of the data obtained for this study was

omitted. The researcher made a conscious effort to prevent researcher bias by

analyzing the data based upon the patterns and trends that developed strictly

from the data.

• Conflicts of interest: In accordance with the standards set forth by the Capella

University Internal Review Board, this research was designed so that no

conflicts of interest would exist.

Conclusion

This research was designed as a mixed method, multiple-case study. The mixed

method approach permitted this researcher to understand the phenomenon by contrasting,

comparing, and classifying data in the data analysis stage as well as the data presentation

and findings stages of the research process. The population was delimited through

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purposive population selection including only those (four) municipalities located in

Allegheny County, Pennsylvania (boroughs of East Pittsburgh, Homestead, North

Braddock and Wilkinsburg) that have had a financial distress declaration rescinded by the

Secretary of PA DCED. Data collection for analysis was from public documents and

public records. The analysis was divided into three main sections: financial factors,

organizational factors, and socioeconomic factors. Each of the three main sections were

analyzed and displayed individually for each case municipality and across cases

according to the municipality’s pre-distress, distress, and post-distress time lines.

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CHAPTER 4. RESEARCH FINDINGS

This chapter summarizes the organizational structure, financial condition, and

socioeconomic characteristics of the four cases (municipalities). The researcher

conducted this multi-case descriptive study by utilizing a mixed-method study approach

that combined qualitative data collection methods with quantitative descriptive statistical

display methods to analyze patterns and trends within and among the cases over time

(pre-distress, distress, and post-distress).

Research Questions

The results of the study’s findings are presented according to three general topic

areas: socioeconomic characteristics, organizational structure, and financial condition.

Based upon on the findings within the existing body of literature and the constructed

conceptual framework, three general questions were posed and were then methodically

narrowed into nine explicit questions:








72




Financial Condition



















73


distress?

Data Collection

All data collected for this study was in the form of secondary data and was

obtained from various sources such as: the U.S. Census Bureau, the Pennsylvania

Southwest Planning Commission; and each of the case municipalities. Although all data

used for this research is classified as public domain or public information as is required

by the Pennsylvania Open Records Act, the researcher obtained written consent forms

from representatives from each of the case municipalities.

The secondary data consisting of organizational data, financial data, and

socioeconomic data collected for each case municipality is limited to three specific time

periods: pre-distress, distress, and post-distress (see Table 2). The time periods are based

upon the year that the financial distress declaration was made by the Secretary of PA

DCED.

For each municipality, the pre-distress years shall be the five years priors to their

financial distress declaration; the distress years shall be those years each municipality

remained financially distressed pursuant to the Pennsylvania Municipalities Financial

Recovery Act; and the post-distress years shall be up to five years after the municipality’s

financial distress declaration was rescinded by the Secretary of the Pennsylvania

Department of Community and Economic Development.

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Data Presentation and Analysis

The researcher used a mixed method, multiple-case study approach that was

heavily dependent upon the collection of qualitative and quantitative secondary data.

According to Cooper and Schindler (2003), the qualitative approach for data collection is

best suited for complex, descriptive studies; which according to Creswell (1998) allows a

researcher to obtain a true understanding of social phenomenon through examination,

explanation and description. Further, Strauss and Corbin (1990) state that a qualitative

research approach can be used to understand “any phenomenon about which little is yet

known” (p. 19), and Yin (2003) contends that a case study approach is the best suited

approach for examining real-life events over time.

This research studied the social, economic and cultural phenomenon of financial

distress over time. The mixed method approach allowed the researcher to examine and

understand the phenomenon by contrasting, comparing, and classifying the data within

and across cases.


All four case municipalities are located in the east-central portion of Allegheny

County, Pennsylvania. All are within five miles from one another; and all are located

within less than 15 miles from the heart of downtown Pittsburgh in southwest

Pennsylvania. Three of the four case municipalities (East Pittsburgh, Homestead, and

North Braddock) are located along the Monongahela River.

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East Pittsburgh Borough

East Pittsburgh Borough is located in the east central portion of Allegheny

County, Pennsylvania, and is eleven miles east of the heart of downtown Pittsburgh. The

Borough shares common boundaries with four municipalities (North Braddock Borough,

North Versailles Township, Turtle Creek Borough, and Wilkins Township) and has a

landmass of nearly .04 square miles (U.S. Census Bureau). The Borough’s tax base is

primarily residential with the exception of a major industrial site located (Keystone

Commons) along the Monongahela River at the southern boundary. The industrial site

was formerly the home of the Westinghouse Electric Corporation which closed its

operations in 1987. Currently, the site is actively promoted for redevelopment by the East

Pittsburgh Economic Development Corporation and the Southwestern Pennsylvania

Regional Industrial Development Corporation.

Population statistics indicate that East Pittsburgh Borough has been experienced a

39% decline in population over the 30-year period of 1970-2000 (Table 3). Along with

total population changes, the population density has also changed. For example, the

population density in 1970 was 7,515 persons per square mile, compared to a population

density in 2010 of 4,555 persons per square mile.

In addition to population losses, the racial composition also changed. For

example, based upon U.S. Census Bureau statistics for 1970, the population of White

persons residing in East Pittsburgh was 96% and the total population of nonwhite was

4%; by the year 2000, that ratio had changed to 78% of the population residing in East

Pittsburgh was White, and nonwhite was 24% (Table 4).

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Table 3.

East Pittsburgh Total Population (1970-2010)

Year Population Percent Change

1970 3,006 ---

1980 2,493 -17%

1990 2,160 -14%

2000 2,017 -7%

2010 1,822 -10%

Note: Table created from data available from the U.S. Census Bureau. (2012). People. Retrieved from

http://www.census.gov/people/

Table 4.

East Pittsburgh Population Characteristics (1970-2010)

Population Characteristics 1970 1980 1990 2000

White 96% 97% 97% 78%

Nonwhite 4% 3% 7% 22%



The housing characteristics also indicate a decline in total number of housing

units and the occupancy characteristics of those units also changed. As shown in Table 5,

the housing stock declined over the 30 year period between 1970 and 2000. In 1970, the

total number of housing units was 1,100 with 96% occupancy. In 2000, the total number

of housing units increased to 1107 but only 85% were occupied.

According to the U.S. Census Bureau, the composition of occupied units has also

changed (Table 6). In 1970, the occupancy characteristic of owner occupied and renter

occupied was divided nearly equally. By 2000, only 36% of occupied units were owner

occupied.

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Table 5.

East Pittsburgh Housing Characteristics (1970-2000)

Housing Characteristics 1970 1980 1990 2000

Total Housing Units 1,100 1,135 1,090 1,107

Occupied Units 1,059 1,050 999 936

Vacant Units 41 85 91 171

Seasonal Units 2 0 0 1



Table 6.

East Pittsburgh Housing Occupancy Characteristics (1970-2000)

Occupancy Characteristics 1970 1980 1990 2000

Owner Occupied 525 489 465 402

Renter Occupied 534 561 534 534

Note: Table created from data available from the U.S. Census Bureau. (2012). People. Retrieved from http://www.census.gov/people/

Homestead Borough

Homestead Borough is located in the east central portion of Allegheny County,

Pennsylvania, and is eight miles southeast of the heart of downtown Pittsburgh. The

Borough has a landmass of 0.65 square miles (U.S. Census Bureau). It borders the

Monongahela River at its northern boundary and shares common boundaries with three

municipalities (City of Pittsburgh on the south side of the Monongahela River, Munhall

Borough and West Homestead Borough). Homestead was the home of U.S. Steel

(Homestead Steel Works) established by Andrew Carnegie in the 1880s. Homestead

prospered as a major industrial established community due to its location along the

Monongahela River. In addition, the Pennsylvania Railroad mainline was built along the

river which provided transportation of raw materials to Homestead and the national



78

exportation of steel from Homestead. Today, the Homestead Steel Works is the site of

one of the region’s most successful economic development efforts – The Waterfront (a

700,000 square foot commercial shopping area that spans the boroughs of Homestead,

West Homestead, and Munhall).

Population statistics indicate that Homestead Borough has been experienced a

48% decline in population over the 30-year period of 1970-2010 (Table 7). Along with

total population changes, the population density has also changed. For example, the

population density in 1970 was 9706 persons per square mile, compared to a population


Table 7.

Homestead Total Population (1970-2010)

Year Population Number Change

1970 6,309 ---

1980 5,092 -19%

1990 4,179 -18%

2000 3,569 -15%

2010 3,299 -8%




example, based upon U.S. Census Bureau statistics for 1970, the percentage of White

persons residing in Homestead was 72% and the total percentage of nonwhite was 28%;

by the year 2000, that ratio had changed to 43% of the population residing in Homestead

was White, and nonwhite was 57% of the total population (Table 8).


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In addition to population losses, the racial composition in Homestead also

changed. For example, based upon U.S. Census Bureau statistics for 1970, the

population of White persons residing in Homestead was 96% and the population of

nonwhite was 4%; by the year 2000, that ratio changed to 43% of the population being

White, and 57% of the population being nonwhite (Table 8).

Table 8.

Homestead Population Characteristics (1970-2010)

Population Characteristics 1970 1980 1990 2000

White 72% 62% 55% 43%

Nonwhite 28% 38% 45% 57%



The housing characteristics also indicate a decline in total number of housing

units and the occupancy characteristics of those units also changed. As shown in Table 9,

the housing stock declined over the 30-year period between 1970 and 2000. In 1970, the

total number of housing units was 2,631with 95% occupancy. In 2000, the total number

of housing units increased to 2,071 but only 78% were occupied.

Table 9.

Homestead Housing Characteristics (1970-2000)

Housing Characteristics 1970 1980 1990 2000

Total Housing Units 2,631 2,692 2,370 2,071

Occupied Units 2,497 2,389 1,911 1,607

Vacant Units 134 303 393 464

Seasonal Units 0 13 1 2





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According to the U.S. Census Bureau, the composition of occupied units has also

changed (Table 10). In 1970, 40% of the housing units were occupied by owners and

60% was occupied by renters. By 2000, only 32% of occupied units were owner

occupied.

Table 10.

Homestead Housing Occupancy Characteristics (1970-2000)

Occupancy Characteristics 1970 1980 1990 2000

Owner Occupied 989 971 827 671

Renter Occupied 1,508 1,418 1,150 936



North Braddock Borough

The Borough of North Braddock is located in the east-central portion of

Allegheny County, Pennsylvania and is located 11 miles southeast of the heart of

downtown Pittsburgh. The Borough has a landmass of 1.6 square miles. It borders the

Monongahela River at its southern boundary and shares common boundaries with seven

municipalities (Braddock Borough, Braddock Hills Borough, Chalfant Borough, East

Pittsburgh Borough, Forest Hills Borough, Swissvale Borough and Wilkins Township).

Because of its location along the Monongahela River, North Braddock was the home of

the Edgar Thomson Steel Works established in the 1870s for the mass production of

heated liquid steel known as the Bessemer process. Today, the former industrial site is

being redeveloped by the Enterprise Zone Corporation of Braddock in cooperation with

the Allegheny County Department of Economic Development.


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Population statistics indicate that North Braddock has experienced an 80% decline

in population over the 40-year period of 1970-2010 (Table 11). Along with total

population changes, the population density has also changed. For example, the

population density in 1970 was approximately 10,888 persons per square mile, compared

to a population density in 2010 of approximately 2,159 persons per square mile.

Table 11.

North Braddock Total Population (1970-2010)

Year Population Number Change

1970 10,888 ---

1980 8,711 -20%

1990 7,036 -19%

2000 6,410 -9%

2010 2,159 -66%




example, based upon U.S. Census Bureau statistics for 1980, the percentage of White

persons residing in North Braddock was 85% and the total percentage of minority races

was 15%; by the year 2000, that ratio had decreased to 62% of the population residing in

Homestead was White, and nonwhite had increased to 38% of the total population (see

Table 12).


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Table 12.

North Braddock Population Characteristics (1980-2010)

Population Characteristics 1980 1990 2000

White 85% 77% 62%

Nonwhite 15% 23% 38%



Wilkinsburg Borough

The Borough of Wilkinsburg is located in the east central portion of Allegheny

County, Pennsylvania, and is less than ten miles east of the heart of downtown

Pittsburgh. The Borough shares common boundaries with seven municipalities (Penn

Hills, Braddock Hills, Churchill, Edgewood, Forest Hills, Swissvale and the City of

Pittsburgh). The Borough is a densely populated urban area that is accessed by major

regional transportation circulation corridors (Route 376 - Penn-Lincoln Highway aka

Parkway East, Route 22, and Route 30). In addition, local routes (Frankstown Road and

Penn Avenue) and Pittsburgh’s public transportation busway all link the borough to the

City of Pittsburgh. The community was established as a residential community to the

City of Pittsburgh due to its close proximity to the downtown central business district.

Population statistics indicate that Wilkinsburg Borough has been experienced a

34% decline in population over the 40-year period of 1970-2010 (see Table 13). Along

with total population changes, the population density has also changed. For example, the

population density in 1970 was 11,643 persons per square mile, compared to a population



83

Table 13.

Wilkinsburg Total Population (1970-2010)

Year Population Percent Change

1970 26,780 ---

1980 23,669 -12%

1990 21,080 -11%

2000 19,196 -9%

2010 17,684 -8%



Study Limitations Pertaining to Socioeconomic Characteristics

This research study, in regard to socioeconomic characteristics was limited to six

socioeconomic characteristics (population, population density, the racial composition of

the population, total number of housing units, housing occupancy, and housing

occupancy ownership). During the course of the study, the researcher attempted to

analyze additional socioeconomic characteristics using U.S. Census data, such as: age,

income, education, and employment characteristics of the populations; and age and

values of the housing stocks. A more in-depth analysis to include additional

socioeconomic characteristics was not possible across cases due to the limitation of the

availability of U.S. Census data.

The first of the four cases to be designated as financially distressed was

Wilkinsburg in 1988. For Wilkinsburg, the distress period was 1988-1998 and the pre-

distress period as defined by this study was 1983-1987. Therefore, the 1970 U.S. Census

data was used as a baseline marker for data prior to pre-distress; the 1980, 1990, and

2000 U.S. Census data was used as comparable data (during distress and post-distress

study years). This procedure was followed for all four cases.


84

In reviewing U.S. Census data beginning in 1970 and through 2000 for

socioeconomic characteristics for analysis, it was discovered that the U.S. Census Bureau

limits their analysis of certain socioeconomic characteristics based upon the size

(population) of the political subdivision. For example, the U.S. Census Bureau provides

much statistical data for political subdivisions with populations that exceed 10,000

persons; and there is limited data for political subdivisions with populations of less than

5,000 persons; and additionally, there is more limited data for political subdivision of less

than 2,500 persons. Therefore, the socioeconomic data provided for Wilkinsburg

Borough (having a population of 26,780 persons in 1970) and North Braddock Borough

(having a population of 10,888 persons in 1970) was not available for East Pittsburgh

Borough (having a population of 3,006 persons in 1970) and Homestead Borough

(having a population of 6,309 persons in 1970). In addition, data available for North

Braddock Borough in 1970 (based on population) was not available in subsequent years

because the population declined to less than 10,000 persons; and in East Pittsburgh, the

population subsequent to 1970 declined to less than 2,500 persons. Therefore, additional

socioeconomic indicators such as: age, income, education, and employment

characteristics of the populations; and age and values of the housing stocks could not be

used for a comparative analysis across cases.


This section discusses the structure of government (organizational structure) for

each of the four case study municipalities and is arranged according to the following

topics: powers and authority, structure of borough councils, departmental structures, and

85

taxing structures. In addition, this section also includes an examination of the findings

(or criteria for financial distress pursuant to Act 47) by the Department of Community

and Economic Development; and the recommendations contained within each adopted

Recovery Plan (by case municipality).

For the purposes of this study, the recommendations were categorized among

seven functional areas in local government: General Government, Finance, Taxation,

Public Services, Community and Economic Development, and Capital Planning. A

complete listing of the Recovery Plan recommendations for East Pittsburgh Borough is

provided in Appendix A, Homestead Borough in Appendix B, North Braddock Borough

in Appendix C, and Wilkinsburg Borough in Appendix D. Finally, an extensive

examination and documentation of the events and actions of Wilkinsburg Borough

Council prior to the financial distress declaration by the Secretary of the Department of

Community Affairs (currently known as the Department of Community and Economic

Development) was compiled and is presented in great detail in Appendix E. This

researcher was unable to examine and document the actions of Homestead Borough

Council and East Pittsburgh Borough Council due to the inability of the researcher to

obtain the public record (minutes of Borough Council meetings). The minutes of

Borough Council meetings for North Braddock Borough were reviewed; and although the

minutes were of sufficient detail in that they provide a public record of the actions of

Borough Council, the detail is not sufficient enough to grasp an in-depth understanding of

the culture of the organization prior to financial distress (see Appendix F).

86

Introduction

Municipal governments in Pennsylvania are the providers of basic services that

support the local quality of life (PA DCED, 2010). Such basic services provided by

municipal government are police services, fire protection and emergency management,

water, sanitary sewer, solid waste collection, construction and maintenance of public

streets/roads, public health services to include planning/zoning, general code and building

code oversight and enforcement, and recreation and culture to include such amenities as

public parks and playgrounds and public libraries (PA DCED, 2010). The ability of

municipal government to provide for the health, safety, welfare, and quality of life is

dependent on financial resources; the capacity of leadership (management); the capacity

of personnel; and sound financial management practices (Pennsylvania Southwest

Planning Commission, nd).

Powers and Authority

Pennsylvania’s boroughs, as in the cases of East Pittsburgh, Homestead, North

Braddock, and Wilkinsburg are governed and structured by the Pennsylvania Borough

Code (Act of February 1, 1965, P.L. 1656, No.581, as amended). The Pennsylvania

Borough Code outlines the authority granted to boroughs by the state (PA

Commonwealth), such as: incorporation, the establishment of boundaries, election of

officers, the powers and duties of elected officers, eminent domain process, public

services, and taxation and finance.

Structure of Borough Councils

All four case municipalities have a weak council-mayor form of government and

operate under the provisions of the Pennsylvania Borough Code; wherein the powers of

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individual board members are vested in a committee structure of government and not

individual members of Council. The Mayor’s authority is limited to the powers and

duties as described by the Pennsylvania Borough Code; and as such, the mayor is

responsible for the police department, has powers to cast a vote to break a tie vote of

Council, and also has veto powers over ordinances adopted by Borough Council – with

Borough Council having the authority to override the Mayor’s veto.

Specific to this research study, all four case municipalities are governed by a

Borough Council which is responsible for establishing and implementing policy,

establishing and enforcing local laws, and establishing, implementing, and maintaining

the annual budget and financial resources of the Borough.

All members of Council are elected by borough residents every other year on odd-

numbered years. Per the Pennsylvania Borough Code, each Council’s members are

elected to four-year staggering terms with no limitations on the number of terms a

Council member may serve, except that members of Borough Council are not permitted

to hold any other elective office. Specific to this research study, East Pittsburgh Borough

is governed by a four-member Board of Council. Homestead, North Braddock and

Wilkinsburg boroughs are governed by nine-member Boards of Council.

In East Pittsburgh Borough and prior to the financial distress designation in 1992,

the Borough was governed by a nine-member board (PA DCA, 1992). The reduction to a

five-member board was the implementation of a recommendation of the 1993 Financial

Distress Recovery Plan (PA DCA, 1993a). According to the Act 47 Plan Coordinator,

there was “a lack of cohesiveness and duplicity of opinions” pertaining to the

administration of the borough and the recommendation to reduce the size of the

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governing body from nine members to five members was based upon population trends

and the ratio of council persons to constituents (PA DCA, 1993a, p. IV-2). In addition,

prior to 1992 and prior to the financial distress designation, the responsibilities of Council

were divided among nine committees: public safety, public works, fire and safety,

finance, parking, council of governments, property/zoning, recreation, and utilities and

taxes. With the change in size in Council, the number of committees of Council was also

reduced to three (public works/recreation, public safety, and finance).

Homestead Borough has always been governed by a nine-member board of

Council. The adopted Recovery Plan (PA DCA, 1993b) amended the draft recovery plan

as initially proposed wherein the Act 47 Coordinator had recommended that the size of

Borough Council be reduced from a nine-member board to a five-member board (p. 2).

Upon further consideration, the Act 47 Coordinator amended the recommendation to

prevent a less than adequate mix in councilmen in terms of race and gender. In addition,

the Coordinator gave weight to the then harmonious make-up of Council in making the

decision to amend the recommendation. A comparison of the number of constituents

(population) per the number of council persons serving those constituents (by

municipality) is shown in Figure 2 for the years 1970-2000. The Borough Code does not

address the minimum or maximum constituents to be served per the number of borough

council members. However, a quick analysis using population data for the years 1970-

2000 indicates that the ratio varies across cases. Wilkinsburg Borough, having the largest

population has the highest ratio (in 2000: 1 to every 2,133). East Pittsburgh and

Homestead had almost equal ratios from 1990-2000; which is a result of East Pittsburgh

decreasing the number on Borough Council from nine members to five members. In

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addition, the number of constituents served per council person in all four case

municipalities had decreased since 1970 due to population losses.

Figure 2.

Number of Constituents Served Per Council Person by Municipality Note: Figure created from data available from the U.S. Census Bureau. (2012). People. Retrieved from

http://www.census.gov/people/; Pennsylvania Department of Community Affairs. (1988b). Wilkinsburg Borough consultative evaluation report. Harrisburg: Author.; Pennsylvania Department of Community

Affairs. (1992a). East Pittsburgh Borough consultative evaluation report. Harrisburg: Author.;

Pennsylvania Department of Community Affairs. (1993c). Homestead Borough consultative evaluation

report. Harrisburg: Author. Pennsylvania Department of Community Affairs. (1995). North Braddock

Borough consultative evaluation report. Harrisburg: Author.

Each Council is responsible for reorganizing annually on the first Monday in

January in each even numbered year by electing one member as president and one

member as vice-president (PA Borough Code, Act of February 1, 1965, P.L. 1656,

No.581, as amended). Members may receive compensation as set by ordinance on a

sliding scale dependent upon the size of the population being served. Currently, council

members in East Pittsburgh and North Braddock Boroughs receive $1,875 in annual

compensation. Council members in North Braddock receive $2,500 in annual


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compensation and Council members in Wilkinsburg Borough receive $4,125 in annual

compensation (PA Borough Code, Act of February 1, 1965, P.L. 1656, No.581, as

amended, Article X).

Annually, during January when Borough Council reorganizes, each member of

each Council is assigned to special Committees established by the Council President.

The PA Borough Code does not designate the type of committees to be established;

however, according to the Sunshine Act (Pennsylvania Sunshine Act 65 Pa. C.S.A. § 701,

et. seq.), no committee shall consist of a majority of Council. Therefore, the number of

and structure of committees of Council are left to the discretion of Council and are

primarily based upon the type of public services that a municipality provides. In

addition, members of Council may also be assigned to various boards, commissions, and

authorities as passive representative of Council that enables the body of Council to keep

abreast of topics, events, activities and business that concerns the municipality as a

whole.

Prior to the financial distress designations in East Pittsburgh and North Braddock

boroughs, the committees of Council were extensive. The adopted Recovery Plans is

both communities (DCA, 1993a; DCA 1996) called for a reduction in the number of

committees. For example, in North Braddock and prior to the financial distress

designation, there were 10 standing committees of Borough Council. In a 1992 report

prepared by state department consultants, it was recommended that the number of

committees of council be reduced to five: General Government and Finance, Public

Works, Public Safety, Economic/Community Development and Housing, and Quality of

Life (DCA, 1992b). The 1992 report stated

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The committee system can be very effective in carrying out its role if organized

and operated efficiently. Presently there are 10 committees of Council. Some

responsibilities overlap. Meetings are infrequent. Communication among Council

members concerning committee affairs is lacking. The main purpose of the

committees seems to be the review of bills incurred by the specific department or

function (p. 12).

Departmental Structures

According to the Pennsylvania Borough Code, the Council of a borough has the

power and authority to create municipal departments and appoint officers as it deems

necessary for the conduct of borough business such as Borough Manager, Secretary,

Treasurer, Solicitor, and Engineer; and to hire borough employees such as administrative

office personnel, police officers, street workers, and zoning and code enforcement

officers. Typically such appointments are made based on the types of public services that

a borough provides. In addition, Borough Council has the authority to create various

commissions, boards, and authorities; and to appoint members to fill the positions created

as it deems necessary for the conduct of borough business.

Specific to the case study municipalities, all study municipalities (with the

exception of East Pittsburgh Borough) have a long history of maintaining a Council-

Manager form of government. In regard to East Pittsburgh, a professional manager was

appointed by Council immediately subsequent to the financial distress designation as per

the recommendation of the Act 47 Coordinator.

In comparing the functions of local government and the services provided among

the case municipalities, the departmental structure of East Pittsburgh, Homestead and

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North Braddock boroughs are nearly identical. Wilkinsburg Borough has the most

extensive structure and employed the largest number of department head and staff

positions due to the size (population) of the municipality. For example, in the 1990’s,

Wilkinsburg Borough was three times the size of North Braddock Borough, five times the

size of Homestead Borough, and ten times the size of East Pittsburgh Borough.

Appendix G provides a synopsis of the departmental structures of each of the case

municipalities during the post-distress study period. The similarities or common patterns

across all four cases are as follows: (a) all four case municipalities employed a Borough

Manager, and appointed: solicitors, professional engineers, and auditors; (b) in the Public

Safety Department, all four case municipalities provide police protection services, code

enforcement services, solid waste collection services, and public water and sanitary sewer

services; c) all four case municipalities have established Planning Commissions, Zoning

Hearing Boards, and Civil Service Commission; and d) all four case municipalities

participate in Regional Economic Development initiatives and are members of a regional

Council of Governments.

Taxing Structure

The primary source of revenues is taxation; wherein the taxing power authority

and regulatory limits are established by the Pennsylvania State Legislature; such as in Act

511 that establishes general purpose non-real estate tax levy limits (Act 511 - Act of

December 31, 1965, P.L. 1257, No. 511 53 P.S. 6901 et. seq. as amended on December 1,

2004, P.L. 1729, No. 22s 2).

Basically, there are two types of taxes that may be levied in a borough (as defined

by acts of the Pennsylvania State Legislature): (a) General Purpose Taxes and (b) Special

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Purpose Taxes. Within each of the two purposive categories, there are two methods for

calculating a tax levy: (a) taxes levied based on assessed value of real estate, and (b)

taxes levied in some manner other than using real estate valuation as a basis.

The real estate tax is the most important single source of tax revenues for the

majority of Pennsylvania boroughs (PA DCED, 2004). The real estate tax levy (or mill

rate) is established annually (beginning January 1 and ending December 31) by Borough

Council; and may vary from one year to the next, provided the general purpose mill rate

does not exceed the 30 mill legislative mandated maximum levy.

In addition, there are various types of non-real estate taxes that a borough may

elect to levy and collect – with limits established according to each individual tax. All

non-real estate tax levies are established by Ordinance of Council. Tax levy ordinances

for non-real estate levies may be amended from one year to the next; however, the levy

may not exceed the limit as established by the Pennsylvania State Legislature.

The data contained in Table 14 provides a comparison of tax revenue collections

by tax type (real estate and non-real estate/Act 511) for each of the case municipalities in

1995; which is the first year that all four case municipalities were in financial distress

collectively. As indicated, real estate tax collections were the single most important

source of revenues and tax revenues in 1995, consisting of 65%-70% of tax revenues

collected and 22%-37% of total revenues across cases. A borough’s annual tax rates are

determined by expenditure needs as proposed in the annual budget; therefore, a

comparison by municipality, of the actual tax rates among the various taxes is not relative

to this study.

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A review of tax types across cases was completed (see Appendix H). The

analysis of tax types revealed that all case municipalities collected the general purpose

and special purpose real estate tax, special purpose earned income tax, special purpose

occupation privilege tax (until such time as Act 511 was amended effective 2004), and

real property transfer tax. Once designated as financially distressed, all case

municipalities levied an increased (that exceeded borough code limitations) earned

Table 14.

Tax Revenue Comparison in 1995 by Case Municipality

East

Pittsburgh Homestead

North Braddock

Wilkinsburg

Real Estate Tax Collections $263,182 $354,779 $494,971 $3,063,280

Act 511 Taxes Collections $141,219 $281,665 $210,059 $145,217

Total Tax Revenues $404,401 $636,444 $705,030 $4,468,497

Real Estate Tax Collections as a %

of Total Tax Revenues 65.08% 55.74% 70.21% 68.55%

Total Revenues $853,274 $1,608,574 $1,335,049 $8,475,392

Real Estate Tax Collections as a %

of Total Revenues 30.84% 22.06% 37.08% 36.14%

Note: Table created from data available from Pennsylvania Department of Community and Economic

Development. (2012). Municipal statistics. Retrieved from http://www.newpa.com/local-

government/municipal-statistics

income tax (per court approval) based upon budgetary needs; and an additional earned

income tax (per court approval) on nonresident earned income.

In addition to the general and special purpose taxes, Act 77 of 1993, created the

Allegheny County Regional Asset District; wherein the sales and use tax in Allegheny

County beginning in 1994, was increased by one percent (from six percent to seven

percent). According to Jensen and Turner (2000), the purpose of Act 77 was three-fold:

(a) to provide supplemental funding sources for local assets such as the Pittsburgh Zoo,

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Phipps Conservatory and the Pittsburgh National Aviary; (b) to promote

intergovernmental cooperation through revenue sharing with intergovernmental entities

such as Councils of Governments; and (c) to provide tax relief through revenue sharing

with local municipalities based upon need through a weighted revenues per capita

formula (p. 17).

The adoption of Act 77, in 1993, provided a much needed additional source of

revenues at a critical point in time for the four case municipalities, as three of the four

case municipalities (East Pittsburgh in 1992, Homestead in 1993, and Wilkinsburg in

1988) had already been declared as financially distressed by the time Act 77 was

implemented in 1994. North Braddock was declared the year after (1995) the Regional

Asset District Tax Act was implemented.

Analysis of Financial Distress Recovery Plan Recommendations

The provisions of Act 47 require that any municipality that is declared to be

financially distressed is to formulate a Recovery Plan that is unique to that municipality.

The Recovery Plan is to be used as a guide to assist the municipality in restoring financial

integrity; and the ultimate purpose, through implementation of recommendations is to

enable a municipality to remedy the financial situation (PA Act 47, Section 241). A

Recovery Plan may be developed for a financially distressed municipality by a state

assigned consultant (Act 47, Section 241); or the financially distressed municipality may

develop adopt and implement its own Recovery Plan (PA Act 47, Section 246).

According to Section 241 of PA Act 47, a Recovery Plan shall include recommendations

that serve to alleviate the financial distress.

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Collectively, among the four case municipalities in this research study, there are

536 recovery plan recommendations (East Pittsburgh – 98, Homestead – 206, North

Braddock – 199, and Wilkinsburg – 33). The actual number of recommendations

contained in a Recovery Plan cannot be used as a measure of a municipality’s financial

distress severity. For example, in comparing the financial distress across the case

municipalities in this research study, Wilkinsburg Borough had the largest amount of

financial debt when declared distressed but only had a total of 33 recovery plan

recommendations. Therefore, the difference in the number of plan recommendations

contained within any given plan may more likely be attributed to the preparer (contracted

consultant) of a given plan. Looking across the four case municipalities in this research

study, the Wilkinsburg Plan was prepared by the western Pennsylvania division of the

Pennsylvania Economy League; and the East Pittsburgh, Homestead and North Braddock

Plans were prepared by Resource Development and Management Inc. of Pittsburgh, PA.

Additionally, there is no relationship between the number of plan

recommendations and the number of years a municipality is declared as financially

distressed. Act 47 outlines the 11 criteria for financial distress and wherein if one

criterion if found to be present, the municipality may be declared as financially

distressed. With regard to the rescission of a financial distress determination, the

financial affairs of a municipality is evaluated and if it is found that the criterion

associated to the financial distress designation has been relieved, the financial distress

designation may be rescinded – whether or not all of the plan recommendations have

been implemented.

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Therefore, in analyzing the financial distress of a municipality in accordance with

Recovery Plan recommendations, it is more feasible to assess the content of a Recovery

Plan (the various recommendations) as it pertains to functions within local government.

Such analysis will provide an understanding as to where, based upon a professional

opinion, a municipality’s procedures for doing business (governmental operations in the

due course of providing public services) is lacking.

For the purposes of this research study, the 536 recommendations as collectively

contained in the four case municipality Recovery Plans, were categorized, based upon

emerging themes relating to governmental functions as follows: general government,

finance, tax collection, public services, community and economic development, and

capital planning (see Appendices A-D). The purpose for categorizing the plan

recommendations by function enabled the researcher to identify the areas in which the

state assigned professional consultants believed to be the most deficient areas in the each

of the case study municipalities.

As shown in Figure 3, the majority of Recovery Plan recommendations were

divided nearly equally among four of the six functional areas: one fourth (24.44%) of all

recommendations being related to Public Services, 22.57% were directed at General

Government Administration, 21.64% were related to Finance or Financial

Administration, 20.71% dealt with Taxation, less than 10% were related to Community

and Economic Development, and the remaining 2% applied to Capital Planning.

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Figure 3.

Plan Recommendations by Function as a Percent of Total Recommendations

Across Cases Note: Figure created from data available from: Pennsylvania Department of Community Affairs. (1988a).

Financial recovery plan for Wilkinsburg Borough, Allegheny County, Pennsylvania. Harrisburg: Author.; Pennsylvania Department of Community Affairs. (1993a). Financial recovery plan for East Pittsburgh

Borough, Allegheny County, Pennsylvania. Harrisburg: Author.; Pennsylvania Department of Community

Affairs. (1993b). Financial recovery plan for Homestead Borough, Allegheny County, Pennsylvania.

Harrisburg: Author.; Pennsylvania Department of Community Affairs. (1993c). Homestead Borough consultative evaluation report. Harrisburg: Author.; Pennsylvania Department of Community Affairs.

(1996). Financial recovery plan for North Braddock Borough, Allegheny County, Pennsylvania.

Each of the six functional areas of local government was further analyzed based

upon themes that emerged from within each functional area. The recommendations that

pertain to the function of general government were divided among the following

themes/topics: administration, personnel, insurance, and those that relate to legal issues

(see Figure 4). An analysis based upon the percent of the total General Government

recommendations across cases revealed that the majority of recommendations made were

in regard to personnel issues.

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Figure 4.

Plan Recommendations by Topic within the Functional Area of General Government Note: Figure created from data available from: Pennsylvania Department of Community Affairs. (1988a).




Harrisburg: Author.; Pennsylvania Department of Community Affairs. (1993c). Homestead Borough

consultative evaluation report. Harrisburg: Author.; Pennsylvania Department of Community Affairs.


The recommendations that pertain to the functions of Finance and Financial

Management were divided, based upon emerging themes in the data, among the

following four topic areas: administration, revenue enhancement, debt service, pension

administration. The analysis of the four topic areas revealed that 34.48% of the

recommendations pertained to administration of the Finance Department, approximately

24% pertained to recommendations for improving or enhancing revenues, 22% addressed

debt service, and nearly 19% pertained to pension administration issues (see Figure 5).

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Figure 5.

Plan Recommendations by Topic within the Functional Area of Financial Management Note: Figure created from data available from: Pennsylvania Department of Community Affairs. (1988a).







Across cases, recommendations contained within Taxation were divided

according to the following topic areas – tax types: real estate, earned income,

occupational privilege, mechanical device, mercantile/business, per capita, and

amusement taxes. As discussed in a previous section (Taxing Structures), the

occupational privilege tax is no longer levied and was replaced by amendments to Act

511 with the Emergency and Municipal Services Tax (EMS); and Act 511 was further

amended to rename the EMS tax to the Local Services Tax. However, the financial

distress declaration for each of the four case municipalities preceded the amendments to

Act 511 and are included herein this analysis of the functional area of Taxation.

The analysis of the Taxation recommendations and based upon the differing types

of taxes that may be levied in a borough indicates that across cases, recommendations

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concerning earned income tax collections (38.39%) and real estate tax collections

(30.36%) were the most prevalent (see Figure 6).

* Less than 1%

Figure 6.

Plan Recommendations by Topic within the Functional Area of Taxation Note: Figure created from data available from: Pennsylvania Department of Community Affairs. (1988a).







The recommendations that pertain to the function of Public Services are divided

among the various types of services provided by a case municipality. Not all services

that are provided by local government are addressed in the Recovery Plans; however,

across cases, the four Recovery Plans did make recommendations in the follow public

service areas (see Figure 7): Public Safety, Public Works, Planning and Code

Enforcement, and Recreation with the majority (63.36%) of the recommendations

focusing on Public Works.

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Figure 7.

Plan Recommendations by Topic within the Functional Area of Public Services Note: Figure created from data available from: Pennsylvania Department of Community Affairs. (1988a).

Financial recovery plan for Wilkinsburg Borough, Allegheny County, Pennsylvania. Harrisburg: Author.; Pennsylvania Department of Community Affairs. (1993a). Financial recovery plan for East Pittsburgh Borough, Allegheny County, Pennsylvania. Harrisburg: Author.; Pennsylvania Department of Community





The final areas of analysis pertaining to recommendations contained within the

case municipality Recovery Plans is Community and Economic Development. Based

upon the emerging themes in the data, the Community and Economic Development

recommendations were divided into two topic areas: housing rehabilitation and

development (57.14%), and community revitalization (42.86%; see Figure 8).

103

Figure 8.

Plan Recommendations by Topic within the Functional Area

of Community and Economic Development Note: Figure created from data available from: Pennsylvania Department of Community Affairs. (1988a).







Financial Analysis

A distress cycle may begin at any time as a consequence of inadequate accounting

and reporting practices and overall administrative mismanagement to include poor

decision making as a result of poor accounting practices and or the lack of management

capacity (Hendrick, 2004). As an example, legal compliance with balanced budgets and

audits requirements is not enough to understand the true financial condition of a

municipality; as management must have the capacity to further analyze the effects of an

annual budget in regard to program costs (cost benefit analysis) over time and be able to

measure long-term financial condition (Groves & Valente, 1994).

Relative to poor accounting practices and or the lack of management capacity

(Hendrick, 2004), this research found to be evident across cases, numerous examples of

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mismanagement issues to include poor decision making and a lack of financial

management capacity during the pre-distress period. In Wilkinsburg Borough, the

financial management and oversight of the administration was so lacking that an

investigation by the Pennsylvania Department of the Auditor General was initiated prior

to the financial distress designation. In Homestead Borough, an investigation was

initiated three years after the financial distress designation while the Borough was

currently under the auspices of an Act 47 Coordinator assigned by the Department of

Community Affairs. In North Braddock Borough, the citizenry of the community

initiated the financial distress review process due to the governing body’s refusal to take

action and request state assistance. A comprehensive chronology, based on information

retrieved from minutes of Borough Council meetings, of the events leading to financial

distress in Wilkinsburg and North Braddock can be found in Appendix E and F

respectively. As is demonstrated in the chronological discussion pertaining to

Wilkinsburg and North Braddock, there was a complete awareness of political unrest,

excessive spending, year-end deficits, and organizational chaos prior to the financial

distress declaration.

Act 47 Criteria for Financial Distress by Case Municipality

This section begins with a review of the criteria, pursuant to Act 47, found to be

present in each case municipality prior to being declared as financially distressed; and is

included in this section due to its relevance to a municipality’s financial condition. In

addition, this section provides a financial review of each of the case municipalities during

their respective pre-distress, distress, and post-distress periods.

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Section 201 of Act 47 outlines the criteria for municipal financial distress in

Pennsylvania. Pursuant to Act 47, if one criterion is found to be present; and if it found

after an extensive evaluation of the financial affairs of the municipality that the finding(s)

is an indication of municipal financial distress, the municipality shall (pursuant to the

Public Hearing provisions of Act 47) be declared as financially distressed by the

Secretary of the Department of Community and Economic Development.

East Pittsburgh Borough Financial Distress Criterion. The Borough, on

September 9, 1992, requested that the Department of Community Affairs conduct an

evaluation of the Borough’s financial status to determine the Borough’s eligibility as a

financially distressed municipality under the Municipalities Financial Recovery Act.

Borough Council in their request, believed the Borough to be experiencing four financial

distress criteria (pursuant to Act 47); which would qualify East Pittsburgh Borough as a

financially distressed community under Act 47: (a) the borough maintained a deficit over

a three-year period; (b) the borough’s expenditures exceeded the borough’s revenues for

a period of three or more years; (c) the borough defaulted on payment of principle or

interest on bonds/notes or in payment of rentals due an authority; and (d) the borough, for

a period of at least 30 days beyond the due date, failed to forward taxes withheld on the

income of employees or did fail to transfer employer or employee contributions for social

security (East Pittsburgh Borough, Resolution 92-02, August 21, 1992).

A Public Hearing was held on October 13, 1992 in East Pittsburgh Borough. The

Consultative Evaluation Report was presented at the Public Hearing and provided

evidence that East Pittsburgh Borough had been operating at a deficit during the four

prior years, had defaulted on loan payments and had failed to submit employer/employee

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wage tax withholdings to the Internal Revenue Service (DCA, 1992a). In addition, the

Consultative Evaluation Report was used as evidence at the Public Hearing that

documented the significant tax base erosion due to economic industrial loss and the

Borough’s financial management shortcomings (PA DCA, 1992).

The Secretary of the Department of Community Affairs, on November 16, 1992,

declared the Borough of East Pittsburgh as the 13th

financially distressed municipality in

Pennsylvania pursuant to Act 47. In addition, the Borough was granted a $179,000

emergency loan (under section 302 of Act 47) to cover the 1992 year-end deficit and

prevent the disruption of basic municipal services through the end of 1992. In

designating East Pittsburgh Borough as a financially distressed community, the

Department maintained the policy of Act 47 that requires the state to foster the financial

integrity of municipalities so that a municipality can provide for the health, safety and

welfare of their citizenry. East Pittsburgh Borough was declared a financially distressed

municipality pursuant to Act 47 based upon the criterion as established by Act 47 (DCA,

1993a) as shown in Table 15.

Homestead Borough Financial Distress Criterion. The Borough, on January

15, 1993, requested that the Department of Community Affairs conduct an evaluation of

the Borough’s financial status to determine the Borough’s eligibility as a financially

distressed municipality under the Municipalities Financial Recovery Act (Act 47 of 1987,

as amended). Borough Council in their request, believed the Borough to be experiencing

four financial distress criteria (pursuant to Act 47); which would qualify East Pittsburgh

Borough as a financially distressed community under Act 47: (a) the municipality has

maintained a deficit over a three year period, with a deficit of 1% or more in each of the

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Table 15.

Financial Distress Criterion Found to be Evident in East Pittsburgh

Criteria per Act 47 Criteria Description

Criteria 1

The municipality has maintained a deficit over a three-year period, with a deficit of

1% or more in each of the previous financial years.

Criteria 2 The municipality’s expenditures have exceeded revenues for a period of three years

or more.

Criteria 3 The municipality has defaulted in payment of principle or interest on any of its

bonds or notes or in payment of rental due any authority.

Criteria 6 The municipality for a period of at least 30 days beyond the due date, has failed to

forward taxes withheld on the income of employees or has failed to transfer

employer or employee contributions for Social Security.

Criteria 7 The municipality has accumulated and has operated for each of two successive years

at a deficit equal to 5% or more of its revenues.

Note: Pennsylvania Department of Community Affairs. (1993a). Financial recovery plan for East

Pittsburgh Borough, Allegheny County, Pennsylvania. Harrisburg: Author.

previous financial years, (b) the municipality’s expenditures have exceeded revenues for

a period of three years or more, (c) the municipality has accumulated and has operated for

each of two successive years a deficit equal to 5% or more of its revenues, and (d) the

municipality has experienced a decrease in a quantified level of municipal service from

the preceding financial year which has resulted from the municipality reaching its legal

limit in levying real estate taxes for general purposes.

A Public Hearing was held on February 22, 1993, in Homestead Borough. The

1991 Financial Review and Analysis report compiled by consultants assigned by the

Department was presented at the Public Hearing. The report provided evidence that the

Borough: 1) was at the legal limit for the real estate tax levy; 2) had a declining tax base;

3) had borrowed monies from other funds for operating; 4) had issued short-term debt;

and 5) had, during the budgeting process, overestimated revenues and underestimated

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expenditures (Borough of Homestead, Financial Review and Analysis of 1991 Borough

Budget, p. 1). In addition, the consultant, in the Financial Review and Analysis report

(1991) stated “the Borough already meets at least one and as many as five of the Act’s

criteria for distress (p. 34).

On March 22, 1993, Homestead Borough was declared a financially distressed

municipality pursuant to Act 47 based upon the following criterion as established by Act

47 (DCA, 1993b) as shown in Table 16.

Table 16.

Financial Distress Criterion Found to be Evident in Homestead


Criteria 1




or more.



Criteria 11 The municipality has experienced a decrease in a quantified level of municipal

service from the preceding financial year, which has resulted from the municipality

reaching its legal limit in levying real estate taxes for general purposes.

Note: Pennsylvania Department of Community Affairs. (1993b). Financial recovery plan for Homestead

Borough, Allegheny County, Pennsylvania. Harrisburg: Author.

North Braddock Borough Financial Distress Criterion: In early 1995,

concerned citizens gathered over their concerns for the financial well being and stability

of North Braddock Borough and passed a petition that was signed by 10 percent of

electors of North Braddock that participated in the preceding municipal election. The

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petition, along with the required documentary evidence was submitted to the Department

of Community Affairs as a request for technical assistance as a financially distressed

community pursuant to the Pennsylvania Financial Recovery Act (Act 47). The

representative electorate alleged that five criteria as established by Act 47, were believed

to be present in North Braddock Borough: (a) the borough maintained a deficit over a

three-year period; (b) the borough’s expenditures exceeded the borough’s revenues for a

period of three or more years; (c) the borough failed to forward earned income taxes or

failed to transfer employer/employee contributions for social security; (d) the borough

accumulated and operated for each of the two successive years at a deficit equal to 5% or

more of its revenues; (e) as a result of reaching the legal real estate tax levy limits for

general operating purposes (per the Borough Code), the borough’s capacity to provide

municipal services (police, highway and other) were being affected (Request For A

Determination of Municipal Financial Distress, February 20, 1995).

The Borough was notified of the petitioner’s request for a financial distress

determination and the Department of Community Affairs thereafter initiated a

consultative review process and scheduled a Public Hearing on the matter for April 20,

1995. The Consultative Evaluation report as submitted into evidence at the Act 47 Public

Hearing on April 20, 1995, provided evidence that North Braddock Borough had

operated with a deficit in 1991-1994 that ranged from approximately 20% to 34% of the

Borough’s average annual operating revenues, and that the Borough’s ability to deliver

basic services was significantly strained as a result of the operating deficit (p.4) which

was brought on by a significant tax base erosion between 1970 through the mid 1980s as

a result in the decline of the steel industry in the Mon Valley (PA DCA, 1995b, p. 8).

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On May 22, 1995, North Braddock Borough was declared a financially distressed

municipality pursuant to Act 47 based upon the following criterion as established by Act

47 (DCA, 1996) as shown in Table 17.

Table 17.

Financial Distress Criterion Found to be Evident in North Braddock


Criteria 1




or more.



Criteria 8 The municipality has failed to make the budgeted payment of its minimum

municipal obligation as required by section 302, 303, or 602 of the act of December

18, 1984 (P.L. 1005, No. 205), known as the Municipal Pension Plan Funding

Standard and Recovery Act, with respect to a pension fund during the financial year

for which the payment was budgeted and has failed to take action within that time

period to make required payments. ((8) amended Dec. 19, 1988, P.L. 1272, No. 157).

Note: Pennsylvania Department of Community Affairs. (1996). Financial recovery plan for North

Braddock Borough, Allegheny County, Pennsylvania. Harrisburg: Author.

Wilkinsburg Borough Financial Distress Criterion: In December of 1987, the

Pennsylvania Economy League (PEL) was contracted by DCA to complete a report of

findings related to Act 47 distressed community criteria. In addition, the Borough’s

Finance Director had just resigned and representatives from PEL were brought-in in

December to assist the Borough with budget development for 1988 (Wilkinsburg

Borough, Borough Council Public Meeting Minutes, December 1, 1987). The report of

findings by PEL, released on January 13, 1988, reported that four of the eleven criteria

111

identified in Section 201 of Act 47 were found to be present in Wilkinsburg Borough. On

January 19, 1988, Wilkinsburg Borough was declared a financially distressed

municipality pursuant to Act 47 (DCA, 1988a) as shown in Table 18.

Table 18.

Financial Distress Criterion Found to be Evident in Wilkinsburg


Criteria 3

The municipality has defaulted in payment of principle or interest on any of its

bonds or notes or in payment of rental due any authority.

Criteria 4 The municipality has missed a payroll for 30 days.

Criteria 7 The municipality has accumulated and has operated for each of two successive years at a deficit equal to 5% or more of its revenues.

Criteria 11 The municipality has experienced a decrease in a quantified level of municipal

service from the preceding financial year, which has resulted from the municipality

reaching its legal limit in levying real estate taxes for general purposes.

Note: Pennsylvania Department of Community Affairs. (1988a). Financial recovery plan for Wilkinsburg


Assessed Valuation

The assessed valuation of real estate declined rapidly in all four case

municipalities during the pre-distress period. As indicated in a previous section, the real

estate tax is the single most important source of tax revenue in Pennsylvania boroughs.

The assessed valuation of real estate is directly related to the real estate tax levy, as the

real estate mill rate is levied against the real estate assessed valuation. A decline in

assessed valuation is equal to a decline in real estate tax revenues.

In East Pittsburgh and Wilkinsburg and prior to the financial distress designation,

the real estate mill rate was near the maximum limit as permitted by the Pennsylvania

legislature. Therefore, an increase in millage rates to collect additional real estate tax

112

revenues was not a viable option. In 2001, Allegheny County completed a property

reassessment to bring the assessed value of real estate more in-line with market values.

As a result, the assessed valuation in each of the case municipalities was increased;

however, all municipalities in a county-wide reassessment must, in that same year,

readjust their mill rate tax levy to coincide with the previous year’s tax levy revenue total.

The mill rate tax levy revenue readjustment results in a decrease in the mill rate; which

provides those municipalities that are near the state maximum threshold to increase the

mill rate in future years.

As indicated in data Table 19, East Pittsburgh Borough suffered the most

dramatic decline during the first year of the pre-distress period (1988) with the

reassessment of the Westinghouse Electric Corporation industrial site. Homestead

Borough’s most significant decline occurred throughout the five year period (1988-1992)

prior to the distress designation. A decline in real estate assessed valuation is also

evident during the pre-distress period (1990-1994) in North Braddock but theirs was not a

drastic or substantial decline. Wilkinsburg’s real estate assessed valuation during the pre-

distress period (1983-1987) had minimal fluctuations but overall, did not decline.

During financial distress (1992-1999) in East Pittsburgh, the real estate assessed

valuation fluctuated with increases and decreases but was stable with no major declines.

In Homestead and North Braddock, the real estate assessed valuation during their

respective distress periods (1993-2007, 1995-2003) was relatively stable initially but

increased substantially prior to the rescission of financial distress. Wilkinsburg’s real

estate assessed valuation during distress (1988-1998) again showed minimal fluctuations

but overall, held steady.

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In East Pittsburgh during the post-distress period of 2000-2004 and removing the

real estate assessed valuation for the year 2000 from the analysis, the Borough’s real

estate assessed valuation is relatively stable but is showing signs of a declining trend.

The real estate assessed valuation in Homestead increased during the post-distress period

(2008-2010) and will continue to increase with the continuing development of The

Waterfront commercial shopping district. North Braddock’s post-distress period (2004-

2008) indicates a declining real estate assessed valuation. The real estate assessed

valuation in Wilkinsburg during the post-distress period (1999-2003) (removing 1999 and

2000 from the analysis) indicates a trend that could go either way (increase or decrease).

Based upon an analysis of the real estate tax revenue data, it is probable that the

real estate assessed value in Homestead (and adjacent municipalities) has increased due

to the development of The Waterfront (a 256 acre commercial development that opened

in 2002; Western Pennsylvania Brownfields Center, 2007). The economic impacts of this

development have been extraordinary and have exceeded the revenues initially projected

for the development (PA DCED, Evaluation Report for the Borough of Homestead,

November 20, 2006). The Waterfront has continued to expand to current day and the

revenues directly attributable to the development have increased from $100,000 in 2000

to nearly $700,000 in 2006 (PA DCED, 2006). In addition to an increase in real estate

tax revenues, the payments related to the Tax Increment Financing (TIF) Program

associated to the development have also increased Homestead Borough’s revenue stream

(PA DCED, 2006). For example, in 2000, the Borough received approximately $78,000

in TIF Program revenues; by 2003, the Borough received $160,000 in additional revenues

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Table 19.

Assessed Valuation Across Case Municipalities

Year East Pittsburgh Homestead North Braddock Wilkinsburg

1983 Not Applicable Not Applicable Not Applicable Pre-distress

Not Available

1984 Not Applicable Not Applicable Not Applicable Not Available


1986 Not Applicable Not Applicable Not Applicable $68,403,351

1987 Pre-distress

$13,052,000 Not Applicable Not Applicable $68,697,241

1988 $7,237,990 Pre-distress

$15,945,000 Not Applicable

Distress

$70,094,245

1989 $7,025,000 $14,910,000 Not Applicable $70,084,900

1990 $7,169,258 $13,494,000 Pre-distress

$14,020,000 $69,792,945

1991 $7,034,658 $10,437,000 $14,039,000 $69,487,200

1992 Distress

$7,035,600 $10,474,000 $14,007,000 $70,988,064

1993 $7,029,920 Distress

$9,540,000 $13,925,000 $69,968,270

1994 $6,926,990 $8,545,000 $12,871,000 $70,207,467

1995 $7,029,000 $8,395,000 Distress

$13,010,000 $70,544,720

1996 $7,070,000 $8,813,000 $13,082,000 $70,830,185

1997 $7,257,510 $8,860,000 $13,112,000 $70,397,710

1998 Not Available Not Available Not Available $69,372,000

1999 $8,585,985 Not Available Not Available Post-distress

$69,331,000

2000 Post-distress

$6,932,010 $12,546,255 $13,372,530 $69,478,700

2001 $50,216,300 $103,855,082 $84,588,970 $362,700,747

2002 $48,402,000 $128,988,830 $84,049,070 $318,992,030

2003 $48,442,100 $133,252,780 $79,601,820 $357,125,830

2004 $48,238,600 $167,008,880 Post-distress

$70,394,770 Not Applicable

2005 Not Applicable $168,014,433 $85,727,970 Not Applicable



2008 Not Applicable Post-distress

$161,670,283 $67,242,970 Not Applicable

2009 Not Applicable Not Available Not Applicable Not Applicable



Note: Table created from data available from: Pennsylvania Department of Community Affairs. (1988a).

Financial recovery plan for Wilkinsburg Borough, Allegheny County, Pennsylvania. Harrisburg: Author.;

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Pennsylvania Department of Community Affairs. (1993a). Financial recovery plan for East Pittsburgh






from TIF monies; and by 2005, the Borough received in excess of $527,000 in additional

revenues from TIF monies (PA DCED, 2006, p. 13).

Total Revenues Versus Total Expenditures

As indicated in a prior section of this study (Act 47 Criteria for Financial Distress

by Case Municipality) and as shown in the data tables below (see Tables 20-23), East

Pittsburgh, Homestead, and North Braddock all experienced a deficit of one percent or

more in the three years prior to the financial distress designation (Criteria 1); that East

Pittsburgh, Homestead and North Braddock all experienced a situation where

expenditures did exceed revenues for a period of three years (Criteria 2); and, that all four

case municipalities experienced a deficit of five percent or more during the two

successive years prior to the financial distress designation (Criteria 7).

As shown in (see Tables 20-23) by case municipality, the deficits during the pre-

distress periods ranged: in East Pittsburgh between 1% and 58% ; in Homestead between

13% and 38%; in North Braddock between 3% and 19%; and in Wilkinsburg between

11% and 22%.

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Table 20.

East Pittsburgh: Surplus/(Deficit)

Year Revenues Expenditures Surplus or (Deficit) % of Surplus or

Deficit

1987 $573,297 $593,221 ($19,924) -3%

1988 $436,500 $585,303 ($148,803) -34%

1989 $457,664 $721,889 ($264,225) -58%

1990 $646,148 $676,179 ($30,031) -5%

1991 $534,279 $495,022 $39,257 7%

1992 $525,274 $550,379 ($25,105) -5%

1993 $515,408 $602,647 ($87,239) -17%

1994 $890,937 $705,123 $185,814 21%

1995 $853,274 $672,632 $180,642 21%

1996 $847,995 $874,420 ($26,425) -3%

1997 $823,654 $796,214 $27,440 3%

1998 $978,587 $918,736 $59,851 6%

1999 $849,179 $901,228 ($52,049) -6%

2000 $981,242 $957,985 $23,257 2%

2001 $966,462 $1,151,058 ($184,596) -19%

2002 $1,062,651 $1,160,546 ($97,895) -9%

2003 $1,071,469 $1,104,696 ($33,227) -3%

2004 $1,002,528 $1,018,136 ($15,608) -2%

Note: Table created from data available from the Pennsylvania Department of Community and Economic

Development. (2012). Municipal statistics. Retrieved from http://www.newpa.com/local-government/municipal-statistics

In addition, East Pittsburgh maintained a surplus in 4 of the 8 years; in

Homestead, 12 of the 15 years; in North Braddock, 2 of the 8 years; and in Wilkinsburg,

8 of the 11. During the distress periods, the deficits continued ranging between 3% and

17% in East Pittsburgh; between 3% and 23% in Homestead; between 1% and 13% in

North Braddock; and between 1% and 11% in Wilkinsburg.

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Table 21.

Homestead: Surplus/(Deficit)


(Deficit)

1988 $1,124,250 $1,273,975 ($149,725) -13%

1989 $1,094,808 $1,327,879 ($233,071) -21%

1990 $1,173,667 $1,491,708 ($318,041) -27%

1991 $1,168,097 $1,486,102 ($318,005) -27%

1992 $1,119,614 $1,452,172 ($332,558) -30%

1993 $1,141,527 $1,404,153 ($262,626) -23%

1994 $1,618,345 $1,528,441 $89,904 6%

1995 $1,608,574 $1,738,408 ($129,834) -8%

1996 $1,505,864 $1,500,752 $5,112 .34%

1997 $1,596,407 $1,491,226 $105,181 7%

1998 $2,279,854 $2,043,805 $236,049 10%

1999 $2,524,970 $2,259,353 $265,617 11%

2000 $3,115,906 $2,961,763 $154,143 5%

2001 $2,660,536 $2,462,535 $198,001 7%

2002 $2,685,848 $2,768,528 ($82,680) -3%

2003 $3,765,516 $3,336,615 $428,901 11%

2004 $3,929,933 $3,760,320 $169,613 4%

2005 $4,934,481 $4,015,279 $919,202 19%

2006 $3,850,822 $3,005,024 $845,798 22%

2007 $4,463,308 $3,433,540 $1,029,768 23%

2008 $3,545,425 $3,304,791 $240,634 7%

2009 Not Available Not Available Not Available Not Available






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Table 22.

North Braddock: Surplus/(Deficit)


(Deficit)

1990 $1,136,830 $1,167,950 ($31,120) -3%

1991 $1,308,669 $1,284,322 $24,347 2%

1992 $1,256,418 $1,225,330 $31,088 2%

1993 $1,268,353 $1,506,514 ($238,161) -19%

1994 $1,305,717 $1,445,300 ($139,583) -11%

1995 $1,335,049 $1,496,476 ($161,427) -12%

1996 $1,535,876 $1,376,659 $159,217 10%

1997 $2,665,614 $1,899,730 $765,884 29%

1998 $2,960,352 $2,987,604 ($27,252) -1%

1999 $2,502,381 $2,606,197 ($103,816) -4%

2000 $2,701,189 $2,908,001 ($206,812) -8%

2001 $2,566,025 $2,607,571 ($41,546) -2%

2002 $2,381,563 $2,685,200 ($303,637) -13%

2003 $2,677,366 $2,948,366 ($271,000) -10%

2004 $2,946,484 $3,062,900 ($116,416) -4%

2005 $2,550,053 $2,719,830 ($169,777) -7%

2006 $2,727,610 $2,093,635 $633,975 23%

2007 $3,353,073 $2,497,585 $855,488 26%

2008 $3,072,309 $2,366,741 $705,568 23%




During the post-distress years, East Pittsburgh and Wilkinsburg showed a surplus

only in the first year post-distress and deficits in the remaining five years. Although the

data is not available for a five year post-distress period in Homestead, the case

municipality did show a surplus in the first year post-distress. North Braddock showed

small deficits during the first two years of post-distress and surpluses ranging between

23% and 26% during the last three years of post-distress.

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Table 23.

Wilkinsburg: Fund Surplus/(Deficit)


(Deficit)




1986 $5,322,101 $6,472,712 -$1,150,611 -22%

1987 $5,430,081 $6,000,671 -$570,590 -11%

1988 $5,559,873 $5,602,248 -$42,375 -1%

1989 $5,836,073 $5,338,905 $497,168 9%

1990 $6,480,438 $6,005,549 $474,889 7%

1991 $6,686,217 $7,141,708 -$455,491 -7%

1992 $6,845,583 $7,262,488 -$416,905 -6%

1993 $7,408,832 $7,403,673 $5,159 .07%

1994 $8,346,947 $7,345,677 $1,001,270 12%

1995 $8,475,392 $8,270,362 $205,030 2%

1996 $8,822,803 $8,448,366 $374,437 4%

1997 $8,941,676 $8,026,584 $915,092 10%

1998 $9,764,912 $9,310,989 $453,923 5%

1999 $14,497,722 $10,938,974 $3,558,748 25%

2000 $11,180,903 $12,298,473 -$1,117,570 -10%

2001 $11,980,968 $14,016,506 -$2,035,538 -17%

2002 $10,307,061 $11,732,563 -$1,425,502 -14%

2003 $12,175,776 $13,359,596 -$1,183,820 -10%




Revenue Trends

Based on revenue data (see Table 24) and the trending of the data (Figure 9), East

Pittsburgh’s revenue trend is a stable and positive trend with small incremental revenue

increases beginning in the pre-distress period through the end of the post-distress period.

The revenue trend for Homestead is a positive trend with the largest increases beginning

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in the last few years of the distress period. North Braddock’s revenue trend during the

pre-distress years is flat and does not begin to increase until the third year into the distress

period; and through the distress and post-distress periods, shows small increases and

decreases. Wilkinsburg’s revenue trend shows the greatest increases among the four

municipalities beginning in pre-distress and thorough the post-distress period.

Figure 9:

Revenue Trends by Case Municipality Note: Figure created from data available from the Pennsylvania Department of Community and Economic Development. (2012). Municipal statistics. Retrieved from http://www.newpa.com/local-


The revenue trend across case municipalities (Figure 9) indicates similar features:

(a) in all cases, revenues in the first year of the pre-distress period were less than

revenues in the final year of post-distress; (b) based on averages, revenues during the five

years of pre-distress were less than those during the distress years; (c) based on averages,

revenues during the distress period were less than those during the post-distress period.

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Revenues Per Capita

Using revenues per capita, as a factor in determining similar patterns/trends across

cases indicates that all four case municipalities had an increasing revenue per capita trend

every 10 years beginning in 1980 (see Figure 10). In deriving at the revenues per capita

for each case municipality (see Appendices I and J), the average annual revenues for each

10 year period (1980-1989, 1990-1999, and 2000-2009) were divided by the applicable

U. S. Census Bureau population statistic (1980-1989, 1980 U. S. Census; 1990-1999,

1990 U. S. Census; and 2000-2009, 2000 U. S. Census). North Braddock’s pre-distress

period did not begin until 1990, therefore, the revenues per capita for North Braddock for

1980-1989 is not shown. In addition, the revenues per capita for Homestead Borough for

the years 2000-2009 was intentionally removed because of its position as an extreme

outlier in this factor analysis. In Homestead Borough during 2000-2009, the outlier was

caused by a substantial increase in tax revenues from the development of The Waterfront

commercial shopping district.

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Table 24.

Revenues by Case Municipality

Year East

Pittsburgh Homestead North

Braddock Wilkinsburg

1983 NA NA NA UA

1984 NA NA NA UA

1985 NA NA NA UA

1986 NA NA NA $5,322,101

1987 $573,297 NA NA $5,430,081

1988 $436,500 $1,124,250 NA $5,559,873

1989 $457,664 $1,094,808 NA $5,836,073

1990 $646,148 $1,173,667 $1,136,830 $6,480,438

1991 $534,279 $1,168,097 $1,308,669 $6,686,217

1992 $525,274 $1,119,614 $1,256,418 $6,845,583

1993 $515,408 $1,141,527 $1,268,353 $7,408,832

1994 $890,937 $1,618,345 $1,305,717 $8,346,947

1995 $853,274 $1,608,574 $1,335,049 $8,475,392

1996 $847,995 $1,505,864 $1,535,876 $8,822,803

1997 $823,654 $1,596,407 $2,665,614 $8,941,676

1998 978,587 $2,279,854 $2,960,352 $9,764,912

1999 849,179 $2,524,970 $2,502,381 $14,497,722

2000 981,242 $3,115,906 $2,701,189 $11,180,903

2001 966,462 $2,660,536 $2,566,025 $11,980,968

2002 1,062,651 $2,685,848 $2,381,563 $10,307,061

2003 1,071,469 $3,765,516 $2,677,366 $12,175,776

2004 1,002,528 $3,929,933 $2,946,484 NA

2005 NA $4,934,481 $2,550,053 NA

2006 NA $3,850,822 2727610 NA

2007 NA $4,463,308 3353073 NA

2008 NA $3,545,425 3072309 NA

NA Not Applicable UA Unavailable




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Figure 10.

Revenues Per Capita 1980-2009 Note: Figure created from data available from the Pennsylvania Department of Community and Economic



Total Tax Revenues

Total tax revenues include revenues from the two basic types of taxes that may be

levied in a borough (as defined by acts of the Pennsylvania State Legislature): 1) General

Purpose Taxes which are levied according to real estate valuation; and 2) Special Purpose

Taxes which include taxes levied based on assessed value of real estate, and taxes levied

in some manner other than using real estate valuation as a basis – such as those that are

established by Act 511. Act 511 tax revenues include but are not limited to: per capita,

occupational privilege, earned income, mechanical device, amusement, business

privilege, and real estate transfer.

East Pittsburg Borough. In 1987, when East Pittsburgh’s pre-distress period

began, the total tax revenues in 1987 included real estate tax collections from the

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Westinghouse Electric Corporation – a large industrial site along the Monongahela River.

The Westinghouse Electric Corporation was the Borough’s largest employer until 1987

when the manufacturing company closed its doors. After closing the manufacturing site,

the Westinghouse Electric Corporation petitioned Allegheny County Tax Assessment for

a real estate reassessment and was awarded in 1988 a major reduction in assessed

valuation. Based upon data contained within the DCA Consultative Evaluation (1992),

the assessed real estate valuation of the Westinghouse site in 1985 was $7,581,300

compared to a 1988 valuation of $1,546,875 and $1,485,375 in 1990. The closing of the

plant site and the reassessment of associated real estate caused a catastrophic loss in

revenues (real estate tax collections) during the pre-distress years and was the primary

cause of financial distress in East Pittsburgh Borough. This loss in revenues is evident in

the total tax revenue trend in 1988 as shown in Figure 11. In 1990, the trend indicates a

small increase is total tax revenues. A review of tax revenue data indicates that the

increase was due to an increase in real estate tax collections; however the source for the

increase is unknown. The trend stabilizes from 1990-1993. In 1994, the Westinghouse

industrial site was redeveloped and opened as Keystone Commons for industrial uses by

the Southwest Pennsylvania Regional Industrial Development Corporation (RIDC). In

addition, in 1994, a review of the tax revenue data also indicates substantial increases in

earned income tax revenues in 1994 and 1995 and is probably a result of the Financial

Distress Recovery Plan recommendation that encouraged the Borough to pursue

delinquent earned income tax revenues from prior years. In 1994 and subsequent years,

the Borough began to receive Regional Asset District tax revenues (as discussed in a

previous section Taxing Structure. The total tax revenues trend is relatively stable

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beginning in 1997 through 2002. In 2003 and 2004, the trend indicates a positive

increase in tax revenues; and a review of the tax revenue data indicates that the source of

the increase in from real estate tax revenues. The source for the increase in real estate tax

revenues is unknown but it may be assumed that the increase is related to the

development of Keystone Commons. Overall, during the pre-distress years of 1987-1991,

during the distress years of 1992-1999, and during the post-distress years of 2000-2004,

the Borough’s total tax revenue trend is a fairly steep positive trend as is indicated by the

dotted line in Figure 11.

Figure 11.

East Pittsburgh: Total Tax Revenues Trend 1987-2004 Note: Figure created from data available from the Pennsylvania Department of Community and Economic



Homestead Borough. In 1988 when the pre-distress period began and through

1993, the total tax revenue trend in Homestead Borough is relatively stable. In 1994 and

subsequent years, the Borough began to receive Regional Asset District tax revenues (as

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discussed in a previous section Taxing Structure. In addition, beginning in 1994, a

review of the tax revenue data (Appendix L) also indicates substantial increases in earned

income tax revenues and is probably a result of the Financial Distress Recovery Plan

recommendation that encouraged the Borough to pursue delinquent earned income tax

revenues from prior years. Once in the financial distress period beginning in 1993 and

through 2002, the tax revenue trend indicates a positive trend with a spike in tax revenues

in 2003. A review of the tax revenue data indicates large increases in real estate tax

revenues and real estate transfer tax revenues in 2003 and are probably associated to the

development of The Waterfront commercial shopping district. The decrease in 2004 and

subsequent years is indicative of a stabilized trend less the large increase in real estate

transfer tax revenues in 2003. In 2007 and 2008, the increase and decrease again is

associated to a one-time real estate transfer tax revenue increase and a stabilizing trend

the following year. Overall, during the pre-distress years of 1988-1992, during the

distress years of 1993-2007, and during the post-distress years of 2008-2010, the

Borough’s total tax revenue trend is a fairly steep positive trend as is indicated by the

dotted line in Figure 12.

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Figure 12.

Homestead: Total Tax Revenues Trend 1988-2008 Note: Figure created from data available from the Pennsylvania Department of Community and Economic



North Braddock Borough. The tax revenue trend in North Braddock during the

pre-distress years of 1990-1994 is relatively stable with only a slight negative trend

beginning in 1994 and 1995. In 1997, the trend indicates a large increase in tax revnues.

A review of the tax revenue data (Appendix M) indicates a substantial increase in earned

income tax revenues and is probably a result of the Financial Distress Recovery Plan

recommendation that encouraged the Borough to pursue delinquent earned income tax

revenues from prior years. The tax revenue trend is relatively stable from 1999-2005. In

2006 the trend indicates an increase and is stable through to the end of post-distress

period. A review of the tax revenue data indicates an increase in all tax types with the

largest increase in real estate tax collections. Although the exact source for the increase

in real estate tax revenues is unknown; it is probable that the increase was due to the

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completion of Phase I of the Braddock Field housing development in mid 2005. Overall,

during the pre-distress years of 1990-1994, during the distress years of 1995-2003, and

during the post-distress years of 2004-2008, the Borough’s total tax revenue trend is a

positive trend as is indicated by the dotted line in Figure 13.

Figure 13.

North Braddock: Total Tax Revenues Trend 1990-2008 Note: Figure created from data available from the Pennsylvania Department of Community and Economic



Wilkinsburg Borough. The pre-distress period in Wilkinsburg Borough begins in

1983; however, the financial data for 1983-1985 was not available to this researcher.

Therefore, a review of the total tax revenues during the pre-distress period (1983-1987)

for Wilkinsburg Borough begins in 1986. During the years 1986-1989, the tax revenue

trend indicates a positive stable trend. In 1990, the tax revenue trend indicates an

increase. A review of the tax revenue data (Appendix N) for 1990, indicates an increase

in real estate tax collections – the source for which is unknown. In 1995, the trend and

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tax revenue data show a decline in tax revenue collections in all tax types collected by the

Borough that year; and continued declines beginning in 1997 through 2000. In 2000,

Allegheny County completed the county-wide reassessment and the Borough during

2001-2003 raised the real estate mill rate in each year – which accounts for the increase

in tax revenues in those years. Overall, during the pre-distress years of 1986-1987,

during the distress years of 1988-1998, and during the post-distress years of 1999-2003,

the Borough’s total tax revenue trend is a positive trend as is indicated by the dotted line

in Figure 14.

Real Estate Tax Revenues

Real Estate tax revenues are the single most important source of revenues and tax

revenues; and are based upon the assessed valuation of real estate (PA DCED, 2004). In

Pennsylvania, there are two basic ways in which real estate tax revenues may be

increased. First, real estate tax revenues will increase when the assessed valuation of real

estate increases; and second, when the governing body increases the real estate tax

millage rate. Therefore, trends in real estate tax revenues will more or less follow trends

in real estate assessed valuation (as discussed in a previous section) – except when the

governing body elects to increase or decrease the real estate tax millage rate.

130

Figure 14.

Wilkinsburg: Total Tax Revenues Trend 1986-2003 Note: Figure created from data available from the Pennsylvania Department of Community and Economic



As shown in Figures 15-18, all four case municipalities have a positive overall

real estate tax revenue trend (as indicated by the dotted line) during their respective

periods of pre-distress, distress, and post-distress. Based upon a review of the real estate

tax revenue data (Appendix O) East Pittsburgh’s real estate tax revenues increased 7% in

an 18 year period beginning in 1987 (first year pre-distress) through 2004 (final year of

post-distress). This increase although not large, is remarkable when considering that East

Pittsburgh’s real estate tax revenues declined 40% in one year - in 1988 when compared

to 1987. Homestead Borough’s real estate tax revenues showed the largest increase of

the four case municipalities at 71% in a 20 year period beginning in 1988 (first year of

pre-distress) through 2010 (third year of post-distress). North Braddock’s real estate tax

revenues showed a 9% increase in a 19 year period beginning in 1990 (first year pre-

distress) through 2008 (final year of post-distress). Wilkinsburg’s real estate tax

131

revenues showed a 9% increase in a 21 year period beginning in 1983 (first year of pre-

distress) through 2003 (final year of post-distress).

In East Pittsburgh the increase in real estate tax revenues is largely attributed to

industrial economic development efforts with the development of Keystone Commons.

Homestead’s increase in real estate tax revenues is attributed to commercial economic

development efforts with the development of The Waterfront commercial shopping

district. North Braddock’s increase in real estate tax revenues is largely attributed to

residential redevelopment efforts with Braddock’s Field Housing development and the

redevelopment of blighted properties throughout the Borough. Wilkinsburg’s increase in

real estate tax revenues is largely attributed to adopted increases in the real estate tax

millage rates.

Figure 15.

East Pittsburgh Borough Real Estate Tax Revenue Trend Note: Figure created from data available from the Pennsylvania Department of Community and Economic



132

Figure 16.

Homestead Borough Real Estate Tax Revenue Trend Note: Figure created from data available from the Pennsylvania Department of Community and Economic



Figure 17.

North Braddock Borough Real Estate Tax Revenue Trend Note: Figure created from data available from the Pennsylvania Department of Community and Economic



133

Figure 18.

Wilkinsburg Borough Real Estate Tax Revenue Trend Note: Figure created from data available from the Pennsylvania Department of Community and Economic



Act 511 Tax Revenues

As discussed in a previous section (Taxing Structure), Pennsylvania’s boroughs

have taxing power under Act 511 to include such tax revenue options as: earned income,

per capita, business gross receipts, amusement, occupational privilege, and realty transfer

taxes. Based upon a review of the taxing structure of each case municipality, each case

municipality does collect various Act 511 taxes and all four have structured these nonreal

estate tax revenue options under Act 511 differently.

East Pittsburgh Borough levied: earned income tax, occupational privilege tax,

real property transfer tax, and the mechanical device tax (see Table 25). The earned

income tax generates the largest revenues of the Act 511 tax revenues. In 1994, and

during the third year of the financial distress period, East Pittsburgh’s earned income tax

revenues increased substantially. This increase was partly due to the Borough’s efforts in

collecting delinquent earned income tax revenues per a recommendation of the Financial

134

Distress Recovery Plan; and partly due to a court approved increase in the earned income

tax rate for residents, and a court approved earned income tax levy on nonresident wages

per the recommendations of the Financial Distress Recovery Plan. During the post-

distress years (2000-2004), it is reasonable to expect a reduction in the earned income tax

collections due to the reduction in the earned income tax levy – the court approved tax

rate increases (resident and nonresident) is no longer valid once a financial distress

designation has been rescinded. Overall, the Act 511 tax revenues in East Pittsburgh

Borough more than doubled (103% increase) during this 18 year study period (pre-

distress, distress, and post-distress).

Homestead Borough levied: earned income tax, a per capita tax, real property

transfer taxes, occupational privilege tax (1988-2004), emergency and municipal services

tax (2005-2007), local services tax (2008-current),mercantile taxes, business privilege

taxes, and mechanical device taxes (see Table 26). The earned income tax generates the

largest revenues of the Act 511 tax revenues. In 1994, and during the second year of the

financial distress period, Homestead’s earned income tax revenues increased

substantially. This increase was partly due to the Borough’s efforts in collecting

delinquent earned income tax revenues per a recommendation of the Financial Distress

Recovery Plan; and partly due to a court approved increase in the earned income tax levy

for residents, and a court approved earned income tax levy on nonresident wages per the

recommendations of the Financial Distress Recovery Plan. During the post-distress years

(2008-through current), it is reasonable to expect a reduction in the earned income tax

collections due to the reduction in the earned income tax levy – the court approved

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increases (resident and nonresident) is no longer valid once a financial distress

designation has been rescinded.

Table 25.

East Pittsburgh Borough Act 511 Tax Revenues (1987-2004)

Tax Year

Earned Income Real Property Transfer

Occupational Privilege

Mechanical Devices

Total Act 511 Tax Revenues

1987 $35,572 $2,384 $7,040 $6,025 $51,021

1988 $44,778 $3,356 $6,718 $6,325 $61,177

1989 $40,361 $4,832 $3,520 $2,475 $51,188

1990 $40,576 $2,125 $2,598 $4,550 $49,849

1991 $44,140 $3,272 $3,315 $1,350 $52,077

1992 $45,556 $1,676 $4,170 $2,850 $54,252

1993 $43,287 $5,592 $4,815 $6,525 $60,219

1994 $71,149 $5,282 $4,180 $5,825 $86,436

1995 $123,851 $6,708 $6,010 $4,650 $141,219

1996 $96,276 $3,926 $9,541 $3,675 $113,418

1997 $66,630 $8,349 $12,032 $9,450 $96,461

1998 $75,734 $4,050 $5,941 $12,550 $98,275

1999 $65,721 $8,782 $6,209 $19,650 $100,362

2000 $68,234 $6,732 $8,268 $14,175 $97,409

2001 $67,027 $10,894 $7,830 $11,300 $97,051

2002 $67,042 $5,864 $7,926 $10,350 $91,182

2003 $90,212 $4,966 $6,535 $13,050 $114,763

2004 $67,508 $10,118 $7,477 $18,700 $103,803




Occupation privilege tax revenues were relatively consistent through 2000. In

2001 and subsequent years, the occupation privilege tax revenues increased substantially

and can be attributed to the creation of jobs with The Waterfront commercial shopping

district development. In addition, in 2005, the occupation privilege tax was replaced by

the emergency and municipal services tax (Act 22 of 2004, that amended the Local Tax

Enabling Act - Act 511 of 1965); which permitted a flat rate levy that substantially

136

increased tax collection revenues. In 2007, Act 7 of 2007, amended the Local Tax

Enabling Act (Act 511 of 1965) by changing the name of the emergency and municipal

services tax to the local services tax; and in addition, amended the manner in which the

tax could be collected and provided conditions under which certain persons could be

exonerated from the tax. As a result, local services tax revenues decreased (as shown in

Table 26) during the post-distress year of 2008 in Homestead Borough.

During the 20 year study period, the Act 511 tax revenues in Homestead Borough

increased by more than 13 times over when comparing the revenues from the first year of

pre-distress (1988) and those of the first year of post-distress (2008).

North Braddock Borough levied earned income tax, real property transfer taxes,

occupational privilege tax (1990-2004), emergency and municipal services tax (2005-

2007), local services tax (2008-current), an amusement tax, and mechanical device taxes

(see Table 27). The earned income tax generates the largest revenues of the Act 511 tax

revenues. In 1996, and during the second year of the financial distress period, North

Braddock’s earned income tax revenues increased substantially. This increase was partly

due to the Borough’s efforts in collecting delinquent earned income tax revenues per a

recommendation of the Financial Distress Recovery Plan; and partly due to a court

approved increase in the earned income tax levy for residents, and a court approved

earned income tax levy on nonresident wages per the recommendations of the Financial

Distress Recovery Plan. During the post-distress years (2004-2008), it is reasonable to

expect a reduction in the earned income tax collections due to the reduction in the earned

income tax levy – the court approved increases (resident and nonresident) is no longer

valid once a financial distress designation has been rescinded.

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Table 26.

Homestead Borough Act 511 Tax Revenues (1988-2010)

Tax Year

Earned Income

Per Capita

Real Property

Transfer

Occup. Privilege

/ EMST/

Local

Services

Mercant Bus. Priv.

Mech. Device

Total Taxes

1988 $51,438 $0 $9,385 $8,162 $0 $18,400 $0 $87,385

1989 $73,503 $0 $5,116 $8,270 $0 $15,100 $0 $189,374

1990 $72,269 $0 $7,074 $7,304 $0 $10,850 $0 $199,486

1991 $76,206 $0 $6,089 $9,144 $0 $14,450 $0 $203,386

1992 $76,635 $0 $6,213 $7,881 $0 $14,825 $0 $211,443

1993 $71,332 $9,635 $4,856 $8,276 $0 $19,450 $0 $219,103

1994 $158,533 $14,261 $5,695 $6,565 $6,500 $30,305 $0 $335,408

1995 $232,245 $6,002 $8,621 $6,637 $0 $0 $28,160 $503,524

1996 $226,048 $6,025 $4,760 $6,663 $0 $3,025 $24,075 $552,261

1997 $211,750 $0 $27,112 $6,455 $0 $0 $46,175 $562,088

1998 $196,706 $0 $52,938 $6,270 $0 $0 $33,900 $581,306

1999 $215,786 $0 $61,297 $8,558 $0 $14,746 $38,400 $628,601

2000 $242,162 $0 $19,668 $7,956 $0 $18,099 $61,700 $688,372

2001 $260,042 $0 $50,890 $19,466 $0 $20,320 $33,875 $734,178

2002 $303,728 $0 $35,602 $40,292 $0 $21,117 $44,375 $829,707

2003 $358,638 $0 $465,649 $35,839 $0 $22,866 $38,700 $1,366,806

2004 $425,624 $0 $104,901 $32,628 $0 $25,150 $63,700 $1,573,695

2005 $218,628 $0 $46,261 $173,406 $0 $24,966 $61,425 $1,176,689

2006 $94,411 $0 $56,292 $174,430 $0 $25,611 $57,075 $932,505

2007 $142,104 $0 $509,963 $192,562 $0 $23,074 $56,400 $1,331,922

2008 $143,540 $0 $20,231 $114,896 $0 $19,775 $51,300 $1,273,845

2009 NA NA NA NA NA NA NA NA






NA: Data not available

As shown in Table 27, during the years 1990-1995, the occupational privilege tax

revenues are inconsistent; and further, during 1990-1995, the data table reflects that no

revenues were received for the amusement tax. In addition, the amusement tax revenues

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during the distress period also appears very inconsistent; and the occupation privilege tax

does not indicate an increase as would be expected during the distress period due to the

resident and nonresident court approved tax rate. It is the opinion of this researcher that

the tax revenue data was either misreported to the Department of Community and

Economic Development, or the Department made error in the tax revenue data

spreadsheets. Therefore, no analysis can be completed for the revenues for the

occupation privilege tax for North Braddock Borough.

In looking at total tax revenues during the 19 year study period, the Act 511 tax

revenues in North Braddock Borough increased by 66% when comparing the revenues

from the first year of pre-distress (1990) and those of the fifth year of post-distress

(2008).

Wilkinsburg Borough levied earned income tax, real property transfer taxes,

occupational privilege tax, and a business privilege tax (see Table 28). The earned

income tax generates the largest revenues of the Act 511 tax revenues. During the

financial distress period, Wilkinsburg’s earned income tax revenues increased

substantially. This increase was partly due to the Borough’s efforts in collecting

delinquent earned income tax revenues per a recommendation of the Financial Distress

Recovery Plan; and partly due to a court approved increase in the earned income tax levy

for residents, and a court approved earned income tax levy on nonresident wages per the

recommendations of the Financial Distress Recovery Plan. In 2002, one year prior to the

financial distress rescission, Wilkinsburg reduced the earned income tax rate for residents

and did not levy an earned income tax on nonresidents.

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Table 27.

North Braddock Borough Act 511 Tax Revenues (1990-2008)

Tax Year

Earned Income

Real Property

Transfer

Occup. Priv. /EMS/ Local

Services

Amuse. Mechanical Devices

Total Taxes

1990 $152,856 $9,113 $3,892 $0 $6,015 $171,876

1991 $152,034 $7,298 $13,820 $0 $4,400 $177,552

1992 $160,818 $7,784 $14,319 $0 $3,700 $186,621

1993 $170,051 $7,260 $11,355 $0 $4,600 $193,266

1994 $169,088 $9,378 $11,204 $0 $13,250 $202,920

1995 $180,938 $11,331 $3,590 $0 $14,200 $210,059

1996 $301,572 $9,265 $11,777 $3,661 $11,950 $338,225

1997 $684,304 $10,619 $11,979 $10,409 $10,150 $727,461

1998 $344,932 $8,664 $11,192 $27,782 $9,400 $401,970

1999 $208,745 $12,564 $9,541 $10,201 $10,050 $251,101

2000 $209,172 $13,502 $10,473 $21,345 $10,100 $264,592

2001 $206,121 $8,800 $19,461 $5,406 $9,300 $249,088

2002 $196,704 $12,099 $11,054 $6,840 $7,400 $234,097

2003 $230,669 $15,879 $8,696 $0 $5,650 $260,894

2004 $217,213 $13,931 $8,212 $0 $13,400 $252,756

2005 $195,291 $13,187 $42,093 $5,824 $11,100 $267,495

2006 $212,651 $17,992 $46,799 $8,789 $20,600 $306,831

2007 $211,172 $10,826 $44,722 $17,000 $25,000 $308,720

2008 $211,282 $10,632 $31,956 $8,767 $22,500 $285,137




In looking at total tax revenues during the 18 year study period for which data is

available, the Act 511 tax revenues in Wilkinsburg Borough increased by 18% when

comparing the revenues beginning in 1986 and those in the fifth year of post-distress

(2003).

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Table 28.

Wilkinsburg Borough Act 511 Tax Revenues (1983-2003)

Tax Year

Earned Income Real Property Transfer

Occup. Priv. / EMST/ Local

Services

Business / Mercantile

Total Taxes

1983 NA NA NA NA NA

1984 NA NA NA NA NA

1985 NA NA NA NA NA

1986 $615,000 $79,393 $28,000 $223,084 $945,477

1987 $628,200 $79,105 $34,000 $226,159 $967,464

1988 $628,000 $47,571 $30,500 $221,667 $927,738

1989 $813,156 $63,578 $27,960 $221,760 $1,126,454

1990 $1,176,698 $88,221 $28,906 $279,046 $1,572,871

1991 $1,121,657 $66,743 $25,625 $211,693 $1,425,718

1992 $1,218,393 $81,988 $24,028 $211,467 $1,535,876

1993 $1,162,204 $68,026 $24,192 $217,609 $1,472,031

1994 $1,175,249 $66,746 $22,577 $193,260 $1,457,832

1995 $1,142,063 $56,920 $23,345 $182,889 $1,405,217

1996 $1,055,925 $73,171 $22,914 $239,259 $1,391,269

1997 $1,093,229 $67,628 $27,693 $257,445 $1,445,995

1998 $896,774 $75,284 $23,454 $247,809 $1,243,321

1999 $884,470 $95,669 $19,937 $213,578 $1,213,654

2000 $856,809 $94,524 $20,288 $200,134 $1,171,755

2001 $871,440 $88,167 $21,713 $231,591 $1,212,911

2002 $912,319 $94,591 $20,253 $216,502 $1,243,665

2003 $775,169 $94,163 $20,794 $223,652 $1,113,778

Note: Table created from data available from the Pennsylvania Department of Community and Economic Development. (2012). Municipal statistics. Retrieved from http://www.newpa.com/local-


NA: Data not available

Other Tax Revenues


Allegheny County Regional Asset District. All municipalities in Allegheny County who

participate in the Regional Asset District receive 25% of 1% from sales and use tax

collected. The state then directly distributes 25% of the 1% in revenues to the

municipalities based upon a weighted revenues per capita formula (Allegheny Regional

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Asset District, 2012). Although RAD revenues are dependent on the regional economy,

the adoption of Act 77, in 1993, provided a much needed additional intergovernmental

source of revenues at a critical point in time for the four case municipalities (see Table

29; which indicates the amount in RAD tax revenues received in each of the four case

municipalities for the years 1994-2005).

Table 29.

Annual Average of RAD Revenues by Municipality (1994-2005)

Case Municipality 1994-2005 Annual Average

East Pittsburgh $467,025 $38,919

Homestead $1,426,647 $118,887

North Braddock $2,057,482 $171,457

Wilkinsburg $6,374,557 $531,213

Note: Table created from data available from the Allegheny County Regional Asset District (2012). Local

government sales tax distribution 1994-2011. Retrieved from http://www.radworkshere.org/docs/

MUNI11web.pdf

State Funding Assistance

Any municipality that has been designated as financially distressed by the

Secretary of the Department of Community and Economic Development (formerly the

Department of Community Affairs) may apply to the Department for funding assistance

in the way of grants or low interest/no interest loans (Act 47, Sections 301 and 302).

Grants and loans may be used to fund the implementation of recommendations from the

Recovery Plan. In addition, according to the Act, financially distressed municipalities

may also request emergency funds for immediate financial assistance when monies are

critical to providing for the health, safety, and welfare of residents, or when a

municipality is in danger of insolvency (Section 302.b).

http://www.radworkshere.org/docs/

142

During financial distress in East Pittsburgh, the Borough received one loan in the

amount of $179,000 and four grants totaling $790,000. The $179,000 loan was used to

supplement the deficit for operating costs; and the grant monies were used to implement

various plan recommendations (see Table 30).

Table 30.

East Pittsburgh Borough State Funding Assistance

Year Type of

Assistance Amount Purpose

1992 Loan $179,000 Deficit/Operating Costs

1993 Grant $95,000 Shared Finance Officer & Comprehensive Housing

Strategy

1993 Grant $45,000 Ordinance Codification, Municipal Building Evaluation,

Pension Fund Analysis

1993 Grant $150,000 Shared Public Works (Turtle Creek Valley COG)

1999 Grant $500,000 Community Revitalization Assistance Grant –

Improvements to Traffic Flow at RIDC site

Total State Funding $969,000

Note: Pennsylvania Department of Community and Economic Development. (1999). Evaluation report on

East Pittsburgh Borough. Harrisburg: Author.

During financial distress in Homestead, the Borough received one loan in the

amount of $511,000 and twelve grants totaling $283,500. The $511,000 loan was used to

supplement the deficit for operating costs, and the grant monies were used to fund

various Recovery Plan recommendations (see Table 31).

During financial distress in North Braddock, the Borough received 11 grants

totaling $242,000, and two loans totaling $700,000. A $500,000 loan was used to

supplement the deficit for operating costs; a $200,000 loan was used for capital

improvements; and the grant monies were used to implement various plan

recommendations (see Table 32).

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Table 31.

Homestead Borough State Funding Assistance

Type of

Assistance Amount Purpose

Loan $511,000 Deficit/Operating Costs

Grant $30,000 Shared Finance Officer

Grant $16,000 COG Code Enforcement Officer

Grant $20,000 Assistant Clerk

Grant $15,000 Computer Analysis/Hardware and Software

Grant $22,000 Street Lighting Downsizing

Grant $50,000 Comprehensive Housing Strategy

Grant $4,500 RAAC Comprehensive Plan (local share)

Grant $20,000 Shared Finance Officer

Grant $40,000 Police Administration

Grant $30,000 Comprehensive Plan

Grant $4,500 Ordinance Codification Total State Funding $794,500

Note: Pennsylvania Department of Community and Economic Development. (2006). Evaluation report of

Homestead Borough. Harrisburg: Author.

Table 32.

North Braddock Borough State Funding Assistance

Type of Assistance Amount Purpose

Loan $500,000 Deficit/Operating Costs

Loan $200,000 Capital Improvements

Grant $15,000 Ordinance Codification

Grant $30,000 Shared Code Enforcement Grant $45,000 Shared Collections Coordinator

Grant $12,000 Shared Finance Officers

Grant $5,000 Computer Acquisition (Municipal Offices)

Grant $20,000 Street Light Removal

Grant $5,000 Communications Equipment (Public Works)

Grant $20,000 Intergovernmental Housing Strategy

Grant $40,000 Housing Strategy

Grant $40,000 Comprehensive Plan

Total State Funding $942,000

Note: Pennsylvania Department of Community and Economic Development. (2002). Evaluation report of

North Braddock Borough. Harrisburg: Author.

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During financial distress in Wilkinsburg, the Borough received five grants

totaling $250,750 and two loans totaling $955,820. The two loans were used to

supplement the deficit for operating costs. The grant monies were used to implement

various plan recommendations (see Table 33).

Table 33.

Wilkinsburg Borough State Funding Assistance

Year Type of Assistance Amount Purpose

1988 Emergency Loan $387,000 Deficit/Operating Costs 1988 Long-Term Loan $568,820 Deficit/Operating Costs

1989 Grant $25,000 Legal Costs – Act 47 Challenge

1989 Grant $10,000 Comprehensive Plan Update

1991 Grant $125,000 Housing Rehabilitation Program

1991 Grant $8,250 Ordinance Codification

1996 Grant $82,500 Zoning Ordinance Update and Local

Government Academy Training

Total State Funding $1,206,570

Note: Pennsylvania Department of Community and Economic Development. (1998). Evaluation report on

Wilkinsburg Borough 1988-1998. Harrisburg: Author.

Expenditures

Expenditure trends (see Figure 19) for each municipality were created from the

data tables contained in Appendix P. The expenditure trend in East Pittsburgh Borough

has remained the flatest trend compared to the expenditure trends of the other three case

municipalities. Homestead’s and North Braddock’s expenditure trend remained flat and

relatively stable until 1998; both trends then increased and remained flat and stable again

for a number of years. In 2004-2006, Homestead’s expenditures trend began in increase

and North Braddock’s trend indicates a decrease. In 2006-2008, both trends again

parallel with increases and a decrease. In Wilkinsburg during the pre-distress period

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(1986-1987) and a few years into the distress period (1988-1989), the expenditures trend

indicates a decrease. In 1991, the trend indicates an increasse and remains relatively

stable until 1994 when the trend shows another small increase. Beginning in 1998 and

every year thereafter until 2001, Homestead’s expenditure trend indicates substantial

increases.

Figure 19.

Expenditures by Case Municipality Note: Figure created from data available from the Pennsylvania Department of Community and Economic



Expenditures by Governmental (Departmental) Function

The expenditures data associated to the various departments within each case

municipality were obtained from the PA Department of Community and Economic

Development for each of the study periods (pre-distress, distress, and post-distress). The

146

expenditure data (Appendix T) for Wilkinsburg Borough for the pre-distress period

(beginning in 1983) was not available for the years 1983-1985.

For each case municipality, the sum of expenses for each departmental function

was added for each study period and divided by the total departmental expenditures for

that study period. For example, (as shown in Table 34 based on the data contained in

Appendix Q), all expenditures under General Government Administration in East

Pittsburgh during the pre-distress study period (1987-1991) were added and divided by

the total expenditures (all departments) during the East Pittsburgh pre-distress study

period (1987-1991). This procedure was followed for each study period for each case

municipality (based upon the data contained in appendices Q-T) to derive at the percent

of expenditures by departmental function during each study period in each case

municipality. The purpose for this analysis was to examine the department expenditures

for each municipality to determine if patterns or trends exist across cases.

During the pre-distress period (Figure 20) and the distress period (Figure 21)

within each case municipality, the largest amount of public service operating funds were

expended for public safety services to include: police protection to include wages, fire

protection to include wages in Wilkinsburg, and other public health related services such

as wages for school crossing guards. During the post-distress period (Figure 22), three of

the four case municipalities (with the exception of North Braddock) continued to expend

the largest amount of public service operating funds on public safety services as

described. Also during the post-distress period (Figure 22), North Braddock’s public

safety expenditures declined to 12% over the previous two periods.

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Table 34.

East Pittsburgh Borough Departmental Function Expenditures (1987-1991)

General Government Administration:

Year Expenditures

1987 $108,895

1988 $119,929

1989 $121,197 1990 $167,707

1991 $106,213

Total: $623,941

Departments Expenditures

General Government Administration $623,941

Public Safety $955,335

Refuse Collection Disposal $311,201

Public Works Streets $509,334

Sanitary Sewer Treatment $17,299

Culture, Recreation, Library $8,396 Planning, Zoning, Codes $9,197

Total: $2,434,703

$623,941/$2,434,703 = 25.62% or 26%




During the pre-distress period (Figure 20), three of the four case municipalites

(with the exception of East Pittsburgh Borough), expended a large amount of public

service operating funds for public works services to include: the repair and maintenace of

streets and alleys, and associated wages. East Pittsburgh, as being the exception,

expended a greater amount of public service operating funds on General Government

Administration during all three study periods than did on Public Works (Figures 20, 21,

and 22).

http://www.newpa.com/local-government/municipal-statistics

http://www.newpa.com/local-government/municipal-statistics

148

Figure 20.

Percent of Departmental Expenditures Across Cases During the

Pre-distress Study Period Note: Figure created from data available from the Pennsylvania Department of Community and Economic



In comparing the Culture/Recreation/Library expenditures across cases and across

all three study periods, no monies were spent in any of the case municipalities during the

pre-distres period, between 1% and 5% were spent during the distress period (Figure 21),

and between 1% and 23% were spent during the post-distress period (Figure 22). During

all three study periods, East Pittsburgh did not expend any public service operating funds

for Culture/Recreation/Library functions (Figures 20, 21, and 22).

149

Figure 21.

Percent of Departmental Expenditures Across Cases During the Distress Study Period Note: Figure created from data available from the Pennsylvania Department of Community and Economic


Figure 22.

Percent of Departmental Expenditures Across Cases During the

Post-distress Study Period Note: Figure created from data available from the Pennsylvania Department of Community and Economic



150

Summary of Findings


The Boroughs of East Pittsburgh, Homestead, North Braddock and Wilkinsburg

are all governed and structured by the Pennsylvania Borough Code (Act of February 1,

1965, P.L. 1656, No. 581, as amended). The Borough Code outlines the authority and

structures of all municipalities classified as boroughs in Pennsylvania. All four case

municipalities, during their respective periods of pre-distress, distress, and post-distress

had a weak council-mayor form of government. The powers of Council are not vested in

individual board members but are vested in a committee structure of government. In all

case municipalities during their respective pre-distress periods, all four municipalities

were governed by a borough council consisting of nine members. In East Pittsburgh and

during the distress period, the composition of Borough Council was changed from nine

members to five members. Therefore, during the distress period and post-distress

periods, three case municipalities (Homestead, North Braddock, and Wilkinsburg) were

governed by a council consisting of nine members and East Pittsburgh was governed by a

council consisting of five members.

Compensation limits for borough council members for performing the duties of

members of Borough Council are also established by the Pennsylvania Borough Code

based upon population. Within each individual borough, the compensation of Council

must be established by ordinance. During the pre-distress, distress, and post-distress

periods, for East Pittsburgh and Homestead boroughs; members of Council could at no

time in any given year, receive in excess of $1,875 for performing their duties as

151

members of Borough Council. During pre-distress, distress, and post-distress periods for

North Braddock Borough, members of Council could at no time in any given year,

receive in excess of $2,500 for performing their duties as members of Borough Council.

During the pre-distress, distress, and post-distress years for Wilkinsburg Borough,

members of Council could at no time in any given year, receive in excess of $4,125 for

performing their duties as members of Borough Council.

The Committee structure of Borough Council is left to the discretion of each

Council and is typically so arranged according to the types of public services that a

municipality provides. During the years for East Pittsburgh and North Braddock, there

was an excessive number of Committees of Council. Both municipalities, during the

distress period, reduced the number of Committees of Council based upon

recommendations in their respective adopted Recovery Plans. During the post-distress

period, East Pittsburgh Borough maintained three committees of Council and North

Braddock Borough maintained five Committees of Council. This researcher was unable

to ascertain the number of committees of Council in Homestead and Wilkinsburg

boroughs during their respective periods of pre-distress, distress, and post-distress.

Borough Councils have the power and authority, per the Borough Code, to create

municipal departments; appoint officers; create commissions, boards, and authorities; and

to hire employees as deemed necessary for the conduct of business. Typically, such are

made based on the types of public services that a borough provides. Homestead

Borough, North Braddock Borough, and Wilkinsburg Borough all operated under a

council-manager form of government during their respective periods of pre-distress,

distress, and post-distress. East Pittsburgh Borough began operating under a council-

152

manager form of government during the distress period and has continued that form

through present. The departmental structure of East Pittsburgh, Homestead, and North

Braddock boroughs were nearly identical through all respective study periods.

Wilkinsburg Borough had the most extensive structure and has always employed the

largest number of department head and staff positions. In addition, although not a

mandatory provision of the Borough Code, three case municipalities (Homestead, North

Braddock and Wilkinsburg) operated under a Council-Manager form of government in all

study periods, with East Pittsburgh operating under such form during two study periods

(distress and post-distress to current).

In some areas, all municipal cases did not exhibit common patterns. For example,

although the structure of Borough Council and the number of Council members in

Wilkinsburg are common with Homestead and North Braddock during all three study

periods, the departmental structure of government in Wilkinsburg Borough is much more

extensive and complicated. As was demonstrated, Wilkinsburg Borough has numerous

defined departments that the other three case municipalities do not define. For example,

Wilkinsburg Borough has a defined Finance Department and through the study period

years, did employ a Finance Director and Assistant Finance Director with specific

responsibilities that were separate from the Borough Manager. In addition, the size and

structure of the Wilkinsburg Police Department was extensive compared to the other

three case municipalities and is due primarily to the size (population of Wilkinsburg).

Finally, Wilkinsburg maintained a professional Fire Department until 2010 (when it

merged with the City of Pittsburgh’s professional Fire Department) compared to the other

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three case municipalities that only minimally subsidized community Volunteer Fire

Departments.

As demonstrated, municipal financial distress in Pennsylvania is based on 11

criteria as established in Act 47. All 11 criteria relate to financial aspects or financial

conditions found to be present in a financially distressed municipality. In a 1999

Assessment of Act 47 by the Pennsylvania Economy League, it was recommended that

municipalities be identified and assisted as early as possible – specifically those

municipalities that are “sliding towards distress” and those that meet the Act 47 criterion

for financial distress (p. 24). Twenty-four years after enactment of Act 47, the Act

remains unaltered. In a study of 2508 Pennsylvania municipalities, the Pennsylvania

Economy League (PEL) (2007) categorized 304 Pennsylvania municipalities as

financially distressed due to significant losses in tax base (revenue generating abilities).

With regard to the PEL study (2007) and based upon the discussions in the literature, a

significant loss in tax base is considered an external causal factor of financial distress –

those outside of the control of the decision making of local government leadership such

as: a failing economy, losses in population, decreasing real estate values, and high

unemployment rates. At the opposite side are internal factors; which are those factors

that are within the control of the decision making of local government leadership such as:

the lack of financial accountability, the lack of accurate financial records, a lack of regard

to financial obligations, misappropriation of funds and lack of spending controls.

Extensive evidence that further substantiates administrative deficiencies was

found in the Meeting Minutes of Borough Council and the Public Hearing documents

prior to the financial distress designation in both North Braddock and Wilkinsburg

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boroughs. A detailed, historical perspective for this study for Homestead Borough in

regard to events leading to financial distress, and based upon minutes from the public

domain could not be compiled. During the data collection process for this research and

according to the Interim Borough Manager, all historical documents for Homestead

Borough are housed in the basement of the new Municipal Building. However, because

the Borough is undesirably understaffed, borough personnel are unable fulfill this

researcher’s request; therefore, a thorough review of the public record to include minutes

of Borough Council, financial reports, and official audit reports could not be completed.

In addition, a detailed, historical perspective for this study for East Pittsburgh Borough in

regard to events leading to financial distress, and based upon minutes from the public

domain could not be compiled. During the data collection process for this research and

according to the Borough Manager, all historical documents for East Pittsburgh Borough

could not be located.

With regard to PA Act 47 and the 11 criteria for establishing financial distress, all

11 criteria focus on the financial condition of a municipality; and the subsequent

Recovery Plans contain recommendations that focus on policies, procedures, and

practices that may be implemented so that the financial condition (financial distress

criterion) found to be present is alleviated. In this respect, then, financial distress

recovery plans focus on internal causal factors which are within the control of the

decision making of the local government leadership. Figure 23 shows the distribution of

plan recommendations by functional area within each case municipality and is useful in

determining those areas in wherein a deficiency is evident in each case municipality;

which can be used as a comparison across cases to determine whether common patterns

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and trends exist across cases. As can be ascertained from the data as graphed in Figure

23, Wilkinsburg Borough’s recovery plan concentrated heavily on General Government

Administration at 33% and Financial Administration at 55% of the total plan

recommendations. The majority of Homestead Borough’s plan recommendations – 30%

were directed at Public Services. The largest in number of recommendations found in the

East Pittsburgh Recovery Plan were directed at Financial Administration at 29% of all

recommendations. North Braddock’s Recovery Plan was nearly equal in the areas of

General Government Administration at 28% and Taxation at 27% of the total plan

recommendations.

Figure 23.

Recommendations by (Departmental) Functional Area by Case Municipality Note: Figure created from data available from: Pennsylvania Department of Community Affairs. (1988a).







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Not surprisingly, the functional areas of Community and Economic Development

and Capital Planning (across cases) contained the least number of recommendations. In

reviewing the recommendations in each of the case municipality recovery plans for these

two functional areas, it is easily discerned that it is within these two functional areas that

the least could possibly be recommended by the professional consultant. For instance,

Capital Planning is a function of Financial Administration whereby capital projects are

planned using revenues that are available to a municipality – after a municipality’s

operations are successfully budgeted. In the case of financially distressed municipalities,

such municipalities are operating at a deficit and do not have funds available to set aside

for capital projects. With regard to the functional area of Community and Economic

Development, it is within this category of recommendations that the external factors

associated to financial distress would be alleviated. However, as has been demonstrated,

the external factors of financial distress are those that are not within the decision making

control of the leadership; and are most often related to a failing economy. In addition,

most community and economic development initiatives are at a larger, regional level that

requires the cooperation and decision making of other governmental leaders. For

example, in Wilkinsburg Borough, the recovery plan made the following

recommendation: “A portion of Enterprise Zone grant funds should be dedicated to

enhancing the image of the community in order to stimulate economic development.”

This recommendation, although it would be a benefit to Wilkinsburg Borough to

stimulate economic development, is not a recommendation that can be implemented by

the governing body; as the governing body of Wilkinsburg Borough does not have

control of Enterprise Zone grant funds.

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An extensive evaluation of each case municipality was completed by a

professional consultant contracted by the Department of Community Affairs prior to each

of the case municipalities being declared as financially distressed. Therefore, it is

assumed by this researcher that the practices/procedures across cases prior to distress

within each case municipality meet satisfactory general operating procedures unless

addressed in the Recovery Plan. Based upon an examination of the 536

recommendations contained within the Recovery Plans for each case municipality, the

recommendations are divided nearly equally among four of the six emerging themes

established by this researcher: (General Government Administration – 22.57%, Financial

Administration – 21.64%, Taxation – 20.71% , Public Services – 24.44%, Community

and Economic Development – 10%, and Capital Planning – 2%). However, through a

more in-depth analysis of the recommendations across cases, it was found that each case

municipality differed. For example, Wilkinsburg’s and East Pittsburgh’s Recovery Plans

concentrated on improving the policies and procedures in financial administration; North

Braddock’s plan concentrated on policies and procedures in General Government

Administration; and Homestead’s plan concentrated on the provision of Public Services.

Further, an extensive review of public domain documents in North Braddock Borough

corroborates the findings of the Recovery Plan recommendations analysis in that

Borough Council was found to be willingly uncooperative with State Officials; and

Borough Council was unable to effectively manage the Borough’s operations. In

addition, the extensive review of public domain documents in Wilkinsburg Borough also

corroborated the findings of the Recovery Plan recommendations analysis in that the

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Borough of Wilkinsburg was found to be severely lacking in financial administration

capacities.

Finally, a review of public domain historical documents also revealed procedural

differences among the four case municipalities. In Wilkinsburg Borough, the (historical)

minutes of Borough Council meetings are kept in an organized manner in enumerated

bounded books in a large walk-in vault. The minutes themselves are extremely detailed

and voluminous. In North Braddock Borough, the (historical) minutes of Borough

Council are kept on a shelf in a room next to the Manager’s Office in enumerated

bounded books. The minutes themselves were written to adequately record the actions of

Council but do not represent detailed accounts of discussions of Council. In East

Pittsburgh Borough and Homestead Borough, the (historical) minutes of Borough

Council meetings could not be located by the Borough Managers for the purposes of this

research. With the adoption and implementation of the recommendations contained in the

respective Recovery Plans three of the four case municipalities (with the exception of

Homestead Borough) began to update their organizational policies and procedures

immediately. Homestead Borough went through a turbulent initial period of financial

distress when within three years after the financial distress designation and Recovery

Plan adoption, the financial administration recommendations were not implemented and

special legislative grant funds were inappropriately expended on uses other than as

intended by the grant contract. The end result was an investigation by the Auditor who

highly recommended that the financial administrative aspects of the Recovery Plan be

adopted immediately. At the point in time when the financial distress designations were

considered for rescission, all four case municipalities were granted a rescission based

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upon testimony and financial documentation that the financial condition of the

municipality had improved and that the conditions found to be present prior to the

financial distress designation had been mitigated. In the case of Wilkinsburg, the

Borough filed a Petition for a Stay of Financial Distress claiming that the Borough would

experience an $845,000 general fund balance deficit at year-end within the next year.

The Petition for Stay was denied by the Allegheny County Court of Common Pleas. A

review of the audited financial statements for the 1999 year-end fund balance indicates

that the Borough ended the year 1999 with a general fund balance of $952,032 and not a

deficit. Post-distress observations to current (2011) reveal that all four case

municipalities have continued to operate and be organized in accordance with the

Pennsylvania Borough Code. In addition, all four case municipalities have continued to

be managed by a professional Borough Manager and the financial aspects of each of the

four cases are audited on an annual basis by an appointed professional auditor.

The taxing structure for all municipalities in this study is uniform in that the

Pennsylvania Legislature outlines the taxes and tax limits authorized for Pennsylvania

boroughs. However, within that structure, a borough has the discretion to choose among

various tax revenue options; and has the authority to set the levy (not to exceed the

maximum as limited by the Pennsylvania Legislature) based upon annual budgetary

needs. The real estate tax collections were the single most important tax revenue source

in all four case municipalities. Using the tax year 1995 as an example, the real estate tax

collections consisted of nearly one third of all tax revenues and nearly one fourth of all

revenues in each of the case municipalities. Other common tax revenue sources across

case municipalities include earned income tax, non-residential earned income tax during

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respective financial distress periods, occupation privilege tax (until abolished),

emergency and municipal services tax (beginning when implemented and until

restructured), local services tax (beginning when implemented), and real estate transfer

tax. Three of the four case municipalities (East Pittsburgh, Homestead and North

Braddock) levied a mechanical device tax. Two of the four case municipalities

(Homestead and Wilkinsburg) levied a business/mercantile tax. Only Homestead levied a

per capita tax and only North Braddock levied an amusement tax. In addition, although

not accounted for as tax revenue, all four case municipalities joined the Allegheny

Regional Asset District and began to receive sales tax receipt revenues in 1994. In

summary, the tax structure of the four case municipalities is similar; but across cases is

not exactly the same in any of the four municipalities. The similarities exist due to the

mandated limits placed on borough government in Pennsylvania; wherein borough

government is permitted to levy only certain taxes with the actual amount of the levy also

being limited by set maximum rates. Differences exist across cases due to the authority

of each local government to be able to establish which taxes will be levied within each

municipal jurisdiction; and although each tax is limited by state mandates, each local

government has the authority to establish the tax levy or rate of tax that is less than the

stated mandated maximum limit.

Financial Condition

The financial analysis section began with an analysis of the financial distress

criteria found to be present by the Secretary of PA DCED in each case municipality. The

financial distress criteria analysis was included within the Financial Analysis due to the

relationship of distress criteria to specific financial aspects of a municipality. The

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financial distress criteria comparison across cases is then followed by a discussion on the

findings of financial indicators examined in the study to include assessed valuation and

revenues trends.

Four criteria were found to be present in Homestead, North Braddock, and

Wilkinsburg; and five criteria were found to be present in East Pittsburgh as follows: (a)

three of the four case municipalities (East Pittsburgh, Homestead and North Braddock)

qualified for financial distress based on Criterion 1, wherein the municipality had

maintained a deficit of 1% or more over a three year period; (b) three of the four case

municipalities (East Pittsburgh, Homestead, and North Braddock) qualified for financial

distress based on Criterion 2, wherein a municipality’s operating expenditures exceeds

the operating revenues and did so for a period of three or more years; (c) two of the four

case municipalities (East Pittsburgh and Wilkinsburg) qualified for financial distress

based on Criterion 3, wherein the municipality defaulted in payment of principle or

interest on any of its bonds or notes or in payment of rentals due any authority;( d) one of

the four case municipalities (Wilkinsburg) qualified for financial distress based on

Criterion 4, wherein the municipality was unable to make payroll in a 30 day period; (e)

one of the four case municipalities (East Pittsburgh) qualified for financial distress based

on Criterion 6, wherein the municipality had failed to forward taxes withheld on the

income of employees or had failed to transfer employer or employee contributions for

Social Security for a period in excess of 30 days; (f) all four case municipalities qualified

for financial distress based on Criterion 7, wherein the municipalities had accumulated

and had operated for each of two successive years at a deficit equal to 5% or more of its

revenues; (g) one of the four case municipalities (North Braddock) qualified for financial

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distress based on Criterion 8, wherein the municipality had failed to make the budgeted

municipal obligation payment to a pension fund during the financial year for which the

payment was budgeted, and had failed to take action within that time period (budget year)

to make required payments as required by Sections 302, 303, or 602 of the Act of

December 18,1984 (P.L. 1005, No. 205), known as the Municipal Pension Plan Funding

Standard and Recovery Act as amended December 19, 1988, P.L. 1272, No. 157); (h) two

of the four case municipalities (Homestead and Wilkinsburg) qualified for financial

distress based on Criterion 11, wherein the municipalities had experienced a decrease in a

quantified level of municipal service from the preceding financial year which resulted

from the municipality reaching its legal limit in levying real estate taxes for general

purposes.

As discussed, a decline in assessed valuation results in a decline in revenues

(specifically real estate tax revenues). Across cases, the assessed valuation of real estate

declined rapidly during the pre-distress period. As a result, real estate tax revenues also

declined across cases during the pre-distress period. During the respective periods of

distress across cases, East Pittsburgh’s and Wilkinsburg’s assessed valuation was

relatively stable; and therefore, real estate tax revenues were relatively stable. In North

Braddock and Homestead during their respective periods of distress, both had relatively

stable assessed value of real estate trends initially, but late in their distress periods and

prior to the rescission of distress, both experienced increases in assessed values of real

estate. As a result, two case municipalities (East Pittsburgh and Wilkinsburg)

experienced stable real estate tax revenues and two case municipalities (North Braddock

and Homestead) experienced increases in real estate tax revenues in the last few years of

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their respective financial distress periods. During the post-distress period across cases,

two municipalities (Homestead and North Braddock) experienced increases in assessed

values and real estate tax revenues; and two municipalities (East Pittsburgh and

Wilkinsburg) experienced relatively stable trends with signs of decline.

Based upon a review of the taxing structure of each case municipality, each case

municipality collects various and differing Act 511 taxes. However, all four case

municipalities exhibit a positive Act 511 tax revenue trend. Further, in all four case

municipalities, the earned income tax generated the largest amount in revenues compared

to the other Act 511 tax revenues received by each case municipality. Finally, in all cases

municipalities early on in the distress period, the earned income tax revenues increased

substantially as a result of court approved increases in the earned income tax levy and a

concerted effort to collect delinquent and outstanding earned income taxes due each

municipality from previous years.

Total tax revenues include revenues from General Purpose and Special Purpose

taxes. The total tax revenues trends for all four case municipalities in a positive trend.

Homestead’s total tax revenues trend increased more rapidly; and is the steepest trend of

the four case municipalities. The steep increases in tax revenues in Homestead are due to

the development of the commercial district shopping area. East Pittsburgh’s positive

trend increased slowly; and is the flattest trend of the four case municipalities.


Allegheny County Regional Asset District. In 1993, all four case municipalities joined

the Allegheny county Regional Asset District. In 1994, when each case municipality

began to receive RAD funds, three (East Pittsburgh, Homestead, and Wilkinsburg) of the

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four case municipalities had already been declared financially distressed. North Braddock

was declared financially distressed one year after RAD funding began. .

The Department of Community and Economic Development provided low

interest loans totaling $2,145,820 (collectively) to all four case municipalities during the

first year of financial distress. In addition, all four municipalities were recipients of

grants totaling $1,566,250 (collectively) that were used to assist in the implementation of

various Recovery Plan recommendations. Wilkinsburg Borough received the largest

amount in loan assistance ($955,820). East Pittsburgh received the least amount in loan

assistance ($179,000), but the greatest amount in grant assistance ($790,000).

Using revenues per capita as a factor for determining similar patterns or trends

across cases, all four case municipalities had an increasing revenue per capita trend (see

Appendices I and J) as a result of stable and increasing revenues coupled with losses in

population every 10 years based on U.S. Census data. Overall, across cases, revenue

trends indicate the following similar features: (a) revenues in the first year of the pre-

distress period were less than revenues in the final year of post-distress; (b) based on

averages, revenues during the five years of pre-distress were less than the revenues

during the distress years; and (c) based on averages, revenues during the distress period

were less than revenues during the post-distress period. Therefore, revenues trends

across cases show positive trends beginning in pre-distress and continuing through post-

distress.

Because the financial data shows a positive revenue trend, the following

assumptions can be made: (a) revenues increased across cases over time due to

improvements to earned income tax collections per the recommendations of the Recovery

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Plans; (b) revenues increased during the financial distress periods across cases due to

increased tax rates for the residential earned income tax and the ability of a financially

distressed municipality to also collect earned income tax from nonresidents; (c) revenues

increased due to changes made by the State Legislature pertaining to the elimination of

occupation privilege tax and its replacement with the emergency and municipal services

tax and the later local services tax; (d) revenues increased due to implementation of

Regional Asset District tax collections; and (e) revenues increased due to economic

development initiatives that increased the assessed valuation of real estate and provided

additional opportunities for the collection of earned income taxes that were lost prior to

financial distress. In addition, the effects of state funding assistance as one-time revenues

in the form of grants and loans could not be ascertained. Based on the method chosen by

the researcher for obtaining financial data for analysis, it is unknown by this researcher as

to whether or not the identified one-time revenue sources were included as part of the

total revenues reported by PA DCED.

The revenues less expenditures or surplus versus deficits was analyzed for each

case municipality. During the pre-distress period, all four case municipalities maintained

an average deficit ranging between 6% and 24%. During their respective distress

periods, three municipalities (East Pittsburgh, Homestead, and Wilkinsburg) maintained

an average surplus ranging between 6% and 24%; and North Braddock maintained an

average deficit of 1%. During the post-distress period, two case municipalities

maintained an average surplus (North Braddock at 7% and Homestead at 12%); and two

municipalities (East Pittsburgh at -6% and Wilkinsburg at -5%) maintained an average

deficit.

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An analysis of expenditures by departmental function was also completed.

During all three study periods (pre-distress, distress, and post-distress), all four case

municipalities expended the largest amount of monies for Public Safety; and during all

three study periods, three of the four case municipalities (with the exception of

Wilkinsburg), expended the least amount of monies for Culture/Recreation/Library (with

Wilkinsburg being the only one of the four to operate a municipal library).


This research examined the socioeconomic characteristics in each of the four case

municipalities to determine whether or not patterns or trends existed across cases during

the study periods of pre-distress, distress, and post-distress. For the purposes of this

research, the socioeconomic characteristics in a community were those as described by

the International City/County Management Association (2004) as those characteristics or

factors in a community that trigger financial distress cycles to include: a decline or rapid

increase in a community’s population, an increasing population density, changes in the

composition of a community’s population, and other community factors such as housing

characteristics (owner occupied versus renter occupied housing), housing occupancy, and

real estate property values.

During the financial distress and post-distress periods in East Pittsburgh,

Homestead and North Braddock, regional economic development efforts were initiated.

In East Pittsburgh and North Braddock, the former factory sites began to be redeveloped

to house other industrial businesses. North Braddock also embarked on a large

residential redevelopment initiative. In Homestead, a commercial shopping district

development initiative began on the former steel mill site. All four case municipalities

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experienced a serious decline in population between 1970 and 2010 (see Figure 24).

North Braddock’s population decline was the most serious with a loss of 80% of the

population over the 40-year period. Homestead lost 47% of its population, East

Pittsburgh lost 39%, and Wilkinsburg had a population loss 35% over the 50 year period.

Figure 24:

Population Trends by Case Municipality (1970-2010) Note: Figure created from data available from the U.S. Census Bureau. (2012). People. Retrieved from


Along with population declines, the population density in each of the four case

municipalities also declined. In 1970, the population density in North Braddock was

6,979 persons per square mile compared to a population density of 1,384 persons per

square mile. Homestead’s population density changed from 9,706 persons per square

mile to 5,075 persons per square mile. In East Pittsburgh, in 1970, the population density

per square mile was 7,515 persons and in 2010 was 4,555 persons. Wilkinsburg’s


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population density declined to 7,825 in 2010 from 11,850 in 1970. The racial

composition of three (East Pittsburgh, Homestead, and North Braddock) of the four case

municipalities was examined. In 1970, East Pittsburgh was a predominately White

community with only 4% of the total population consisting of minority races. In 2010,

the minority races in East Pittsburgh had increased to 22% of the population. In North

Braddock in 1970, 85% of the total population was White and 15% was nonwhite;

compared to 62% White and 38% minority races in 2010. In Homestead, in 1970, 72% of

the population was White and 28% was of other minority races; compared to 43% White

and 57% nonwhite in 2010. Housing as a socioeconomic factor in two case municipalities

(East Pittsburgh and Homestead) was examined using three characteristics of housing:

total housing units, vacancy rates, and occupancy (owner occupied versus renter occupied

housing). In Homestead, there were 2,631 housing units in 1970; compared to 2,071

units in the year 2000, a decline of 560 housing units over a 30 year period (1970-2000).

In East Pittsburgh, the total number of housing units in the 30 year period examined was

decreased by only 7 units (1,100 units in 1970 and 1,107 units in the year 2000). In

addition to the number of housing units available for occupancy having declined in the 30

year period of 1970-2000; the occupancy rate of housing also declined. In 1970, in East

Pittsburgh, the occupancy rate was 96% compared to an 85% occupancy rate in the year

2000. In Homestead, the occupancy rate in 1970 was 95% compared to 78% in the year

2000. Further, in the two municipalities examined, owner occupancy rates also declined

from 1970 when compared to the year 2000. In East Pittsburgh Borough, there were 525

owner occupied units, and in the year 2000, there were 402 owner occupied units. In

Homestead Borough in 1970, there were 989 owner occupied units and in the year 2000,

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there were 671 owner occupied units. Both East Pittsburgh and Homestead experienced a

decline in owner occupied housing at a rate of 21% and 32% respectively.

There is a common pattern or trend across case municipalities in regard to the

characteristics as examined in this research study as outlined by the ICMA (2004) as

triggers for financial distress. Across cases, all municipalities exhibited a declining

population, changes in the composition of population, a decline in housing units, a

decline in owner occupied housing units, an increase in renter occupied units, a decline in

housing occupancy rates, and an increase in housing vacancy rates. The patterns and

trends exhibited by the findings are, according to Sacks and Callahan (1970),

environmental factors that contribute to financial distress. Although the financial distress

declarations in each of the four case municipalities were rescinded by the Secretary of PA

DCED, the socioeconomic characteristics examined in this research indicate that the four

case municipalities did during the post-distress study period, continue to exhibit signs of

financial distress caused by economic factors.

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CHAPTER 5. DISCUSSION, LIMITATIONS, AND RECOMMENDATIONS

FOR FUTURE RESEARCH

The purpose of this qualitative research study was to examine four of six

municipalities that have had a financial distress declaration rescinded by the Secretary of

DCED (the Boroughs of East Pittsburgh, Homestead, North Braddock and Wilkinsburg)

using a mixed-method, multiple case study approach to determine whether patterns and

trends exist within and among the four municipalities over time in regard to

organizational structure, financial condition and socioeconomic characteristics during

their respective periods of pre-distress, distress, and post-distress.

A review of the literature provided a chronological perspective of municipal

financial distress in the United States that began with a discussion on municipal

bankruptcy and demonstrated how the focus on municipal insolvency evolved to focus on

unsound financial condition. In addition, the literature review identified causal factors

for financial distress as internal and environmental (ACIR 1973), internal and structural

(Cahill and James, 1991), administrative and structural (Bradbury, 1983), and cyclical

and structural (ACIR, 1985; Gasbarre and Hobbs, 1987); and identified various financial

monitoring systems that used financial and socioeconomic indicators to examine financial

distress.

According to Honadle (2003), the purpose or use of specific indicators (financial

and socioeconomic) is dependent on the focus or purpose for their use. Therefore, the

financial and socioeconomic indicators used in this research study were chosen and

selected specifically by this researcher for the purpose of looking across cases to identify

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whether or not patterns and trends existed among the four case municipalities in regard to

financial distress over time (pre-distress, distress, and post-distress). In addition, this

study examined the organizational structures of each of the four case municipalities for

commonalities and differences.

The population for this research study refers to Pennsylvania municipalities that

have been declared as financially distressed by the Secretary of the Pennsylvania

Department of Community and Economic Development. The sampling frame consisted

of six municipalities that were declared as financially distressed but had had the financial

distress declaration rescinded by the Secretary. The sampling frame was purposively

delimited based on geographic location to include only those municipalities located in

Allegheny County, Pennsylvania; which consisted of four municipalities: East Pittsburgh

Borough, Homestead Borough, North Braddock Borough, and Wilkinsburg Borough.

All data collected for this research study was in the form of secondary data and

was obtained from various entities such as the U.S. Census Bureau, the PA Department

of Community and Economic Development, the Pennsylvania Southwest Planning

Commission, and each of the four case municipalities. All data was extracted from

numerous agency and state reports; municipal financial reports, audits, ordinances,

resolutions, and meeting minutes; the PA Borough Code, and various Acts of

Pennsylvania law.

All data collected is classified as public domain or public information and was

made available to the researcher upon request. The researcher was prepared to submit

written Right-to-Know requests pursuant to the Right-to-Know/Open Records Law (Act

3 of 2008: 65 P.S. §66.1 et seq.) to obtain the necessary data; however each of the case

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municipalities and the PA Department of Community and Economic Development were

cooperative and the written requests for information was not necessary. Moreover, the

data collection process, and more specifically, the data in which the researcher was able

to obtain did not go without limitations and will be further discussed in detail within the

Limitations section of this chapter.

The use of a mixed methodology approach with case studies enabled the

researcher to become immersed within the settings (case municipalities) and maintain the

true meaning of qualitative data, specifically the data obtained to answer the organization

structure questions. The quantitative data was analyzed based on patterns and trends that

could be identified through what Miles and Huberman (1994) call matrix displays –

“visual formats that present information systematically” (p. 91).

The governing bodies of each of the four case municipalities were contacted in

writing and agreed to participate in the research. The data collected from each case

municipality consisted of qualitative data that was obtained by the researcher through an

analysis of content; specifically the analysis of public meeting minutes. In addition, the

researcher was permitted access to municipal files maintained by the Pittsburgh and

Harrisburg offices of the Pennsylvania Department of Community and Economic

Development (PA DCED). The data collected at the PA DCED offices was also

primarily qualitative data. The quantitative data used to conduct the financial analysis

portions of this research was obtained from the PA DCED website. A discussion of the

results as identified in Chapter 4, and conclusions for this research are presented below.

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Discussion of the Results

The presentation of the data in Chapter 4 provides a comprehensive analysis of

the organizational structure, financial condition, and the socioeconomic characteristics of

each of the four case municipalities during their respective periods of pre-distress,

distress, and post-distress. This section will provide an additional discussion on the

results of the analysis of the data relating to each general question.


Research question. Do common patterns and trends in organizational structure

exist in North Braddock, East Pittsburgh, Wilkinsburg, and Homestead Boroughs during


Ronca (1981) and Bradbury (1983) provide that a municipality’s financial

capacity is limited to only those aspects permitted in the municipal code under which it

operates; and the Pennsylvania Economy League (2007) contended there is a mismatch

between the organizational structure of local government in Pennsylvania as governed by

specific municipal codes and the ability of a local government to maintain sufficient

financial resources to provide services. These statements were found to be true across

cases in this research study to a limited extent. The Pennsylvania Borough Code outlines

the authority and structure of municipalities classified as boroughs in Pennsylvania;

therefore, all four case municipalities, being classified as boroughs are organized

according to the Borough Code. However, the Borough Code does provide for some

organizational latitude such as: (a) the number of members elected to the governing body

may vary between five and nine members, (b) compensation limits for members of the

governing body is based upon the population of the municipality, and (c) the types and

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number of committees of the governing body and the internal department structure of

each municipality is left to the discretion of each governing body. In addition, the taxing

structure for all municipalities in this study is uniform in that the Pennsylvania

Legislature outlines the types of taxes to be levied and tax levy limits authorized for

Pennsylvania boroughs. However, within that structure, a borough has the discretion to

choose among various tax revenue options; and has the authority to set the levy (not to

exceed the maximum as limited by the Pennsylvania Legislature) based upon annual

budgetary needs.

During the respective periods of pre-distress, distress, and post-distress, all four

case municipalities operated under the structure as outlined by the Pennsylvania Borough

Code with slight differences. During the pre-distress period, all four case municipalities

were governed by a borough council consisting of nine members; and during the distress

and post-distress periods, three case municipalities continued to operate under a nine-

member borough council and one case municipality (East Pittsburgh) reduced the size of

the governing body to five members. In addition, the committees of Council and the

internal departmental structures, based upon the types of public services offered also

differed. Important to note is the fact that once declared as financially distressed, three of

the four case municipalities (East Pittsburgh, Homestead, and North Braddock) began to

look at alternative methods for providing services thereby restructuring internally which

ultimately led to a reduction in expenditures.

Finally, the taxing structures of each case municipality differed only slightly in all

case municipalities during their respective periods of pre-distress, distress, and post-

distress did levy general purpose and special purpose real estate taxes, special purpose

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earned income taxes, special purpose occupation privilege taxes (until such time as Act

511 was amended effective 2004), and real property transfer taxes. In addition, once

declared as financially distressed, all four case municipalities levied an increase in earned

income tax (per Court approval) based upon budgetary needs. The differences in the

taxing structures across cases can be found in the levying of mechanical device taxes,

business/mercantile privilege taxes, and amusement taxes; and although a complete set of

data for the tax levy for all tax types for all study period years across cases was not

available to this researcher, the tax levy data that was analyzed by this researcher

indicated differences across cases in the actual tax levies.

Ronca, writing in 1981, found that a Pennsylvania municipality has no legal

recourse when it finds itself in a situation of financial distress. This research study, in

reviewing the events leading to distress in each of the case municipalities, found this to

be true. Also, according to Ronca in 1981, the structuring of Pennsylvania municipalities

(per the Pennsylvania Code under which a municipality is structured and operates), limits

a municipality’s taxing authority and debt structuring to a point where a municipality

does not have the power or authority to remedy a financial problem. This research study

also found that when each case municipality (per the Pennsylvania Borough Code)

realized that their budgetary needs could not be met based upon the taxing choices and

tax levy limits of the Pennsylvania Borough Code, turned to Act 47 and a financial

distress determination as a means of financial recourse. This was specifically found to be

evident in two case municipalities in this study (Homestead and Wilkinsburg) when,

pursuant to Act 47, both municipalities were designated as financially distressed (among

other qualifying criteria to be discussed below) had reached their legal limits (per the PA

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Borough Code) in levying real estate taxes for general purposes. Therefore, with the

adoption and implementation of Act 47 in 1987, the Pennsylvania Legislature provided

Pennsylvania municipalities with the means for legal recourse and once declared as

financially distressed, Act 47 provides limited recourse for increasing tax levies –

specifically the earned income tax; which as shown in the Tax Structure section of

Chapter 4, provided substantial increases in tax revenues across cases. In addition,

subsequent to Ronca’s writing in 1981, the Pennsylvania Legislature in 2004 provided

limited tax restructuring by eliminating the occupation privilege tax and replacing it with

the Emergency and Municipal Services Tax (EMST) (Act 22 of 2004); and then in 2007,

renamed and restructured the EMST with the Local Services Tax (Act 7 of 2007); which

as shown in the Tax Structure section of Chapter 4, provided substantial increases in tax

revenues across cases. In 1993, the Pennsylvania Legislature created the Allegheny

Regional Asset District (Act 77 of 1993) which provided tax relief through revenue

sharing (Jensen and Turner, 2000). This Act of the Pennsylvania Legislature provided

substantial increases in revenues in the case municipalities in this study as shown in the

Tax Structure section of Chapter 4.

Financial Condition

Research question. Do common patterns and trends in financial condition exist

in North Braddock, East Pittsburgh, Wilkinsburg, and Homestead Boroughs during their


The financial analysis in Chapter 4 begins with an examination of the financial

distress criterion (pursuant to Act 47) present in each of the four case municipalities. As

presented in Chapter 4, this simple analysis found that Criterion 7 of Act 47 was present

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in all four case municipalities – the municipalities had accumulated and operated for each

of two successive years at a deficit equal to 5% or more of its revenues prior to the

financial distress designation; and three (East Pittsburgh, Homestead, and North

Braddock) of the four case municipalities were found to qualify for financial distress

based upon Criterion 2 of Act 47 – a municipality’s operating expenditures exceeded the

operating revenues for a period of three or more consecutive years prior to the financial

distress designation; and two case municipalities (East Pittsburgh and Wilkinsburg) were

found to qualify for financial distress based upon Criterion 3 of Act 47 – the municipality

defaulted in payment of principle or interest on bonds or notes or rentals due; and two

case municipalities (Homestead and Wilkinsburg) were found to qualify for financial

distress based upon Criterion 11 of Act 47 – the municipalities experienced a decrease in

a quantified level of municipal service from the preceding financial year which resulted

from the municipality reaching its legal limit in levying real estate taxes for general

purposes.

Subtle differences existed across cases pertaining to the criterion found to be

present in each municipality pursuant to Act 47: (a) Wilkinsburg qualified for financial

distress based on Criterion 4 of Act 47 when it was unable to make payroll in a 30 day

period prior to the financial distress designation; (b) North Braddock qualified for

financial distress based on Criterion 8 of Act 47 when it failed to make the budgeted

municipal obligation payment to a pension fund during the financial year for which the

payment was budgeted; and (c) East Pittsburgh qualified for financial distress based on

Criterion 6 of Act 47 when it failed to forward taxes withheld on the income of

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employees or had failed to transfer employer or employee contributions for Social

Security for a period in excess of 30 days prior to the financial distress designation.

With regard to the Act 47 criterion for financial distress, many of the criteria can

be associated or referred to situational characteristics of a municipality. As such, a

distinction can be made or dissected as a characteristic resulting from an internal or

external causal factor. As discussed in the literature review, there are various

terminologies for classifying causal factors of municipal insolvency (financial distress) to

include internal and environmental (ACIR, 1973), internal and structural (Bradbury,

1983; Cahill and James, 1991), administrative and structural (Wolff, 2004), and cyclical

and structural (ACIR, 1985; Gasbarre and Hobbs, 1985). For the purposes of this

research, the terminology used, for the classification of causal factors are referred to as

internal and external. Internal factors are those conditions or variables associated to

municipal financial distress that can be controlled or are under the control of the

governing body; and whereas, external factors are those conditions or variables

associated to municipal financial distress that cannot be controlled or are outside of the

control of the governing body.

Upon examining the 11 criterion of financial distress pursuant to Act 47, all

criterion could be classified as internal factors that resulted from external factors. In

taking this stance, there is no clear-cut distinction between internal and external causal

factors of municipal financial distress. Using the case municipalities as examples, the

decision making authority or governing body had control prior to the financial distress

designation as to which criterion they would perhaps qualify under for financial distress

pursuant to Act 47. For examples: (a) North Braddock may have chosen to continue to

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make principle and interest payments on its bonds or notes rather than make budgeted

municipal obligation payments to the pension fund due to a lack of funds for both

obligations; or (b) East Pittsburgh may have chosen to continue to meet payroll

obligations and not choose, due to a lack of funds, to forward the taxes withheld on the

income of employees to proper authorities; or (c) Wilkinsburg chose to reach it maximum

tax levy limits for general real estate taxes in order to continue to provide services at

status quo rather than find ways to reduce expenditures or provide services using

alternative methods.

In looking at the qualifying financial distress criterion pursuant to Act 47 in this

manner, substantiates the statement of Groves and Valente (1994) that “changes in

community needs and resources are interrelated in a continuous cycle of cause and

effect” (p. 112) and that causal factors of financial distress are more complicated than can

be categorized as suggested in the literature as either internal or external.

In answering the question: Do common patterns and trends in financial condition

exist in North Braddock, East Pittsburgh, Wilkinsburg, and Homestead Boroughs during

their respective periods of pre-distress, distress, and post-distress? This study used a

measurement plan that looked at specific financial factors that were grounded within the

techniques used by the five financial monitoring systems examined in the literature

review. The data collection process for the financial review began with the intent to

analyze the nine of the ten themes that emerged from the five financial monitoring

systems. However, early in the financial data collection process, it was discovered that

not all indicators as proposed for analysis were available to the researcher for each of the

four case municipalities – these limitations are furthered discussed in the Limitations of

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the Study in this chapter. As a result, the financial indicators for this research study were

limited to the following four financial indicators: revenues, expenditures, tax collections,

and assessed valuation. After a comprehensive analysis of the four financial indicators,

the data exhibits similar financial patterns and trends across all four case municipalities

during all study periods.

The most interesting finding in this research study relative to financial condition

is the impacts of economic development on financial distress. In three of the four case

municipalities (East Pittsburgh, North Braddock, and Homestead), economic

development initiatives were implemented. In East Pittsburgh, efforts were focused on

industrial redevelopment at the former factory site along the Monongahela River now

known as Keystone Commons. Redevelopment of this brownfield site provided

substantial increases in the assessed value of the site and increased the real estate tax

revenue collections. In North Braddock, the focus of economic development was on

residential development at the Braddock’s Field housing development; which not only

increased the assessed value of the borough but also provided increases in real estate,

realty transfer and earned income tax revenues. Homestead had the most significant

economic development initiative of the three case municipalities, with the redevelopment

of the former steel site into a major regional shopping district at The Waterfront; which

significantly increased the assessed value of the borough and also provided significant

increases in real estate, realty transfer, and various Act 511 tax revenues. For example, in

Homestead Borough, the Act 511 tax revenues increased by more than 13 times during

the period beginning 1988 (first year of pre-distress) and 2008 (first year of post-distress).

In addition and specific to Homestead Borough, regional local government entities

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implemented a Tax Increment Financing Plan (TIF) which substantially increased

Homestead’s revenue stream. For example, in 2000, the Borough received approximately

$78,000 in TIF Program revenues; by 2003, the Borough received $160,000 in additional

revenues from TIF monies; and by 2005, the Borough received in excess of $527,000 in

additional revenues from TIF monies (PA DCED, 2006, p. 13).


Research question. Do common patterns and trends in socioeconomic

characteristics exist in North Braddock, East Pittsburgh, Wilkinsburg, and Homestead

Boroughs during their respective periods of pre-distress, distress, and post-distress?

According to the International City/County Management Association (2004),

community factors that trigger distress cycles are specifically related to the characteristics

of community population, housing characteristics, crime rates, and economic activities.

Sacks and Callahan (1970) and the Pennsylvania Economy League (PEL), in a study

conducted in 2007 on the financial health of Pennsylvania’s municipalities concluded that

socioeconomic characteristics contribute to a cycle of municipal financial distress. For

example, according to PEL (2007), losses in population results in an insufficient taxing

base with subsequent losses in tax revenues to support core services provided by a

municipality.

Across cases in this research study during all study periods, all municipalities

exhibited a declining population, changes in the composition of population, a decline in

housing units, a decline in owner occupied housing units, an increase in renter occupied

units, a decline in housing occupancy rates, and an increase in housing vacancy rates.

The patterns and trends exhibited by the findings are, according to Sacks and Callahan

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(1970), environmental factors that contribute to financial distress. Although the financial

distress declarations in each of the four case municipalities were rescinded by the

Secretary of PA DCED, the socioeconomic characteristics examined in this research

indicate that the four case municipalities did during the post-distress study period,

continue to exhibit signs of financial distress caused by socioeconomic characteristics.

Conclusions

This research study was based upon two of four theoretical gaps in the literature

on financial and financial crises as identified by Carmeli (2003): (a) “What are the effects

of political, sociological, and economic structures and processes?” and (b) “How can

financially poor local mechanisms break through the vicious cycle of this phenomenon?”

(p. 1428). As a result, this qualitative study resulted in a clearer understanding of

whether patterns and trends exist across cases (municipalities) during the study periods of

pre-distress, distress and post-distress as defined by this research within the areas of

socioeconomics, organization structure, and financial condition.

Groves and Valente (1994) suggest that community needs and resources are

interrelated in a continuous and cumulative cycle of cause and effect (p. 112). For

example, the findings of this research study indicate that three of the four case

municipalities (East Pittsburgh, Homestead, and North Braddock Borough) experienced

serious economic declines just prior to being declared as financially distressed pursuant

to PA Act 47. Cahill and James (1991) while studying six southwest Pennsylvania

financially distressed municipalities that experienced economic declines also found

various internal shortcomings related to administrative inefficiency and mismanagement

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that contributed to the distress designation to include: the lack of financial accountability

(annual audits, budgeting, and reporting), the lack of accurate financial records, the lack

of regard to financial obligations and misappropriation of funds, and the lack of spending

controls. Specific to this research, findings indicate that all four case municipalities

exhibited various internal shortcomings related to administrative inefficiencies and

mismanagement. This finding was particularly evident in the case of Wilkinsburg

Borough (Commonwealth of Pennsylvania, Department of the Auditor General, New

Conference Statement, Don Bailey, Auditor General, December 4, 1987). Although

Wilkinsburg Borough did not experience a drastic economic decline as did the other three

case municipalities, the internal administrative inefficiencies in Wilkinsburg Borough had

the same effects on the financial resources of the borough.

In conclusion, all four case municipalities exhibited similar patterns and trends in

organizational structure, financial condition, and socioeconomic characteristics during

their respective periods of pre-distress, distress, and post-distress. The most interesting

finding of this research study was based on the financial analysis during the distress and

post-distress period across cases when economic development initiatives began to be

implemented and changed for the positive, the revenue streams in three (East Pittsburgh,

Homestead, and North Braddock) of the four case municipalities. In Wilkinsburg

Borough, revenues also increased during the post-distress period but the increases were

not due to economic development initiatives. In Wilkinsburg, the increases were largely

attributed to increases in real estate tax levies (millage rates).

184

Limitations


The organizational structure analysis as proposed was limited by the availability

of specific data in East Pittsburgh and Homestead boroughs. For examples, in

Wilkinsburg and North Braddock boroughs, the researcher had complete access to the

historical minutes of Council meetings. This information allowed the researcher to tell a

chronological story of pre-distress for both municipalities and allowed the researcher to

gain a true understanding of the events leading to financial distress, the actions and or

inactions of Council, the reactions of the citizenry; and in the case of Wilkinsburg, the

overall chaos within the structure of government during the pre-distress period. On the

other hand, in East Pittsburgh and Homestead boroughs, the researcher did not have

access to the historical minutes of Council meetings. In both communities, the historical

minutes of Council meetings could not be located by management; and in both

communities, management was not aware of the missing historical documents until they

were requested for review for this research study. The unavailability of historical

minutes of Council meetings limited the researcher’s ability to obtain a true

understanding of the structure of government during the pre-distress and distress periods

in both communities.

Financial Condition

The financial analysis as proposed was limited by the availability of various

financial reports as identified in Chapter 3 to include: annual audits reports, adopted

budgets, DCED-CL-GS/30 reports, and DCED-CLGS-69 reports. More specifically, all

185

financial reports as identified were unavailable to the researcher for the pre-distress and

early distress years in Homestead Borough; and adopted budgets, annual audits, and

DCED reports for the pre-distress and distress study periods in East Pittsburgh and North

Braddock boroughs were unavailable to the researcher; and annual audits and DCED

reports for the pre-distress study period was unavailable for Wilkinsburg Borough.

Therefore, the researcher was left with the option of piecing together the financial data

for all study periods in all four case municipalities, knowing that much of the data (entire

years) for analysis would be missing; or with the option of using the financial data

(municipal statistics) provided on the PA Department of Community and Economic

Development (PA DCED) website. Further, in regard to the municipal statistics page of

the PA DCED website, the availability of data is limited as follows. First, annual data is

available beginning in 1986; therefore, only three years of the pre-distress study period

for Wilkinsburg Borough could be analyzed. Second, the data is limited compared to

annual audit reports. Annual audit reports are comprehensive financial reports that

contain specific financial information relating to all governmental funds. Whereas, the

financial data provided on the municipal statistics page of the PA DCED website totals

all governmental funds and does not provide the detail that an annual audit would

provide. In addition, the PA DCED website data does not address financial information

such as pension obligations, pension assets, liabilities, unfunded liabilities, post-

employment benefits, capital funds, employee wages, and employee fringe benefits.

Finally, throughout the years that PA DCED has made financial data available, PA

DCED has not consistently tracked financial data in the same manner. For example, in

186

the late 1980s, the PA DCED website provides specific financial data pertaining to debt

and in later years does not provide debt information in detail.

In conducting the financial analysis, the researcher chose to use the financial data

provided on the PA DCED website. In making this decision, the researcher felt that a

more consistent financial analysis could be completed using the PA DCED statistics than

could be completed by piecing together financial data available in the municipal audit

reports available to the researcher. In addition, the effects of state funding assistance as

one-time revenues in the form of grants and loans could not be ascertained. Based on the

method chosen by the researcher for obtaining financial data for analysis, it is unknown

by this researcher as to whether or not the identified one-time revenue sources were

included as part of the total revenues reported by PA DCED.


This research initially proposed to examine various socioeconomic characteristics

as identified in Chapter 2 as Socioeconomic Characteristics Indicators. During the data

collection process, the socioeconomic characteristics as proposed for examination were

limited by the availability of data provided by the U.S. Census Bureau. First, in speaking

with representatives from the Pennsylvania State Data Center in Harrisburg, it was found

that only limited U.S. Census Bureau Data sets are available in digital formats on-line

and the purchase of data would be necessary to obtain all socioeconomic characteristic

indicators as proposed. Second, during the course of the data collection process, the data

was also found to be limited across cases based on population. For example, data

available for the Borough of Wilkinsburg is more abundant due to the population size of

the municipality as the U.S. Census Bureau categorizes reports local government data

187

based on population as follows (specific to this research): (a) for Places of 10,000-

50,000; (b) for Places 2,500-10,000; and (c) for Places 2,499 or less. In addition, looking

across a period of decennial reports, the U.S. Census Bureau has frequently changed the

characteristics that it reports. For example, specific characteristics as reported in the

1970 U.S. Census may have been discontinued in the 1980 U.S. Census and vice versa.

Finally, it was also found that the manner in which data sets that are available in all

decennial census reports may have been changed from one decennial census to another.

For example, the 1970 Census may have reported the number of persons in a

municipality based on specific age categories; but, the 1980 Census may have reported

the number of persons in a municipality based on differing age categories. All of the

above limitations to the data caused the researcher to limit the data to be examined and

only include in the analysis for socioeconomic characteristics the data that was available

and consistent across cases.

Research Method

This research study did not include an examination of events based upon

interviews with political figures present in each of the case municipalities during the

three study periods. Interviews or discussions with participants during the course of

predistress, distress, and post-distress in each of the case municipalities may have

contributed to the discussion of events; and may have been useful in clarifying specific

questionable matters. For example, as stated in the limitations above, this researcher was

not able to examine financial data in Homestead prior to the distress designation (pre-

distress period) because the financial data could not be located in the historical

documents files. However, interviews with key participants who were actively involved

188

in local government in Homestead during that time period may have provided insight as

to the structure and processes of Homestead during that time period that would have

provided useful information for further analysis and discussion; such as, through an

interview process, the researcher may be able to discern that the internal organizational

processes in Homestead prior to distress were in such disarray that recording keeping of

financial data was of no significant importance. Additionally, this study did not include

an examination of events based upon interviews with key figures from the PA

Department of Community and Economic Development that were present in the case

municipalities during the pre-distress, distress, and post-distress years. Interviews or

discussions with key figures may have been useful in clarifying specific questionable

matters; however, this researcher elected not to conduct an interview process with key

figures so as to draw conclusions based upon secondary data only.

Recommendations for Future Research

This mixed method multi-case study provides a contribution to the body of

knowledge relating to municipal financial distress in Pennsylvania by being the first

study to examine municipal financial distress over time– moving from a pre-distress time

period to a distress designation time period and ending with a post-distress rescission

time period.

The results and insights gained from this study suggest the following

recommendations for future research:

• An in-depth study of Recovery Plan recommendations to determine validity and

worth of recommendations and how each recommendation relates to the criteria

189

established by Act 47. Since four of the six municipalities in Pennsylvania with

a financial distress rescission were examined in this study, an in-depth study of

Recovery Plan recommendations should include current financially distressed

municipalities;

• Additional attention should be given to economic development initiatives.

Specifically, the impacts of economic development initiatives (including

industrial, commercial, and residential housing) in financially distressed

municipalities.

• An in-depth study on the financial viability of municipalities that employ

professional municipal managers versus the financial viability of municipalities

that do not employ professional municipal managers.

190

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197

APPENDIX A. EAST PITTSBURGH RECOVERY PLAN

RECOMMENDATIONS

Analysis Category RECOMMENDATIONS

Financial Distress Recovery Plan (September 2, 1993)

GENERAL

GOVERNMENT

Administration

The size of the borough council shall be reduced from its present nine members to

five members.

The borough shall designate certain hours for the borough offices to be open and

staffed by the borough secretary.

A shared administrator/finance director shall be pursued with Act 47 funding (in

the amount of $45,00) for the long-term.

The borough shall utilize, to the fullest extent possible, the complete menu of

services provided by the Turtle Creek Valley Council of Governments Computer

Services Bureau.

GENERAL

GOVERNMENT

Insurance

The borough should examine the feasibility and cost effectiveness of adjusting

these liability coverage(s) to meet the limitations on liability conferred by the

Pennsylvania Subdivision Tort Claims Law.

The borough should retain the services of an individual or a firm to oversee its

risk management program and to maintain its effectiveness.

The borough should consider effecting savings by either increasing the deductible

or eliminating entirely the coverage for comprehensive and collision insurance.

The borough should obtain workers compensation risk management and

monitoring services to eliminate risks, oversee claims, and minimize the impact

of claims upon the borough.

The borough should explore whether premium savings (for public officials

liability insurance) may result from an increase in the deductible amount to

$5,000 or $10,000.

The borough shall obtain from these tenants (who lease borough properties),

evidence of insurance coverage, with minimum acceptable limits, naming the

borough and its offices as additional insured entities.

The Borough shall explore the cost and availability of comprehensive medical

coverage having deductibles and co-payments for all services. The borough should consider requiring covered employees to make contributions to the cost of

(medical insurance) coverage.

GENERAL

GOVERNMENT

Legal

The borough should upgrade and codify all ordinances.

Generally, all of the borough’s ordinances should be revised to include all of the most recent amendments to the Municipalities Planning Code.

The borough’s solid waste collection ordinance should be revised to allow fees to be set by resolution of council rather than my amending the ordinance which is

more costly.

The borough should adopt the most recent BOCA building, property maintenance

and fire codes.

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The borough’s zoning ordinance should be revised to include all of the most

recent amendments to the Municipalities Planning Code.

All fee schedules required by an ordinance of the borough should be provided for

in the ordinance and allowed to be revised by resolution, which is a less

expensive procedure for the borough.

The borough should pass an ordinance under the new state legislation Act 98 of

1992 allowing it to collect insurance monies from burned out structures.

GENERAL

GOVERNMENT

Personnel

No new benefits or expansion of existing benefits which have unknown or

uncapped future costs shall be permitted.

Base wage and salary increases during the recovery period shall be limited to the

average increase in the consumer price index (CPI-W urban wage earners and

clerical works) for the most recent three years.

FINANCIAL

MANAGEMENT

Administration

The borough shall centralize all purchasing through the borough secretary.

The borough shall prepare and review monthly variance reports of actual vs.

budget for all revenues and expenditures.

The borough shall initiate an investment and cash management system.

The borough shall request proposals for banking services from all area banks.

The Parking Authority shall be dissolved and receipts deposited directly into the

general fund.

The borough shall adopt a process which clearly indentifies the expectations and

scope of work of the independent auditor and annual audits should be secured

through a Request for Proposal process.

A repayment schedule shall be structured and adhered to until all past due (social

security – F.I.C.A.) withholdings have been satisfied.

Money from the user fee (for garbage and sanitation) shall be deposited on a daily

basis to maximize investment potential. The sanitation fund shall be an interest

bearing account.

FINANCIAL

MANAGEMENT

Revenue

Enhancements

The borough shall identify all reports which need to be filed with various state

and local entities on a schedule basis in order to avoid the potential loss of

revenue.

A 25% surcharge shall be added to sewage charges for administrative and

maintenance activities.

The borough shall petition the Allegheny County Court of Common Pleas for an

increase in the earned income tax (rates) from the present 1% to 1.6% for

residents in 1994 and 1.5% in 1995.

The borough shall petition the Allegheny County Court of Common Pleas for an

increase in the earned income tax (rates) from the present of 1% to 1.4% in 1994

and 1.4% in 1995.

The borough should lien delinquent garbage (and sanitation) fees.

FINANCIAL

MANAGEMENT

Debt Management

The borough should make its final payment as scheduled to Bank One.

Because the loan is at a 2% interest rate, the borough should continue to make

monthly payments to the Pennsylvania Volunteer Fire Companies Loan Fund

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until such time that the note is retired.

The proceeds of the sale of the old fire truck should be used by the borough to

meet its obligations to the Pennsylvania Fire Companies Loan Fund.

The borough should continue to make monthly payments to Northwest Financial

leading, Inc. until the lease is retired.

The borough should pursue refinancing the outstanding balance of the AIM loan

at the current 4% rate available through the Authority for Improvements to

Municipalities (AIM) for an additional five years.

The borough should contact Mellon Bank to obtain a final payment figure on the

police vehicle. Due to the interest rate of 10.75% the borough should retire this

debt immediately.

The borough should continue to make quarterly payments on their police vehicle

through Ford Motor Credit.

The $179,000 the Department of Community Affairs no interest loan shall be

budgeted and paid back in six installments, five of $30,000 commencing in

October 1994 with the final payment of $29,000 to be made in October 1999.

FINANCIAL

MANAGEMENT

Pension Fund

The borough shall appoint a chief administrative officer and administer plans in

compliance with Act 205.

The borough should negotiate the terms of the prior repayment agreement for the

improper payment of pension benefits.

The borough should make every effort to reconstruct those records (pension

benefits) to avoid a repayment of those monies that may have to be returned to

the police pension fund.

The borough shall remit $4,029 to the police pension fund to remove all other

audit findings.

(The borough shall) apply for an Act 47 grant to develop an independent analysis

and assessment of the borough’s pension administration and investment.

The borough shall not withdraw pension fund assets until assurance is given that

a withdrawal will not result in any penalty.

The borough shall remit $2,312 to the service employee’s pension fund to resolve

findings.

TAXATION

Real Estate Tax

Collections

Borough council should consider whether property which is now tax exempt,

could be taxed.

The borough shall enter into a cooperation agreement with the county and school

district to proportionately share in the cost of appraisals for property tax appeals

as provided under Act 8 of 1992.

Prior to the end of the current tax year, efforts shall be made to send final notices to alert the property owners (of unpaid real estate tax invoices) of the

(borough’s) intent to lien the property.

Borough council shall place emphasis on collection of outstanding (real estate

tax) monies.

The borough should appoint a delinquent (real estate) tax collector and place

emphasis on filing legal action in an effort to collect the (real estate) taxes due.

The borough should appropriate funds to ensure liens are filed every two years

(on delinquent real estate tax parcels).

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(Real estate tax) deposits shall be made daily and recorded with the (borough)

secretary.

TAXATION

Earned Income Tax

Collections

The borough should review rules and regulations relative to earned income tax

ordinances and update the ordinance, if necessary.

An allocation of all costs attributable to the earned income tax office should be

completed and these expenses shall be billed to the school district.

All (earned income tax) deposits shall be made to an interest bearing account

daily.

The borough share of the earned income tax shall at a minimum be remitted

twice a month.

New residents of the borough shall be sent registration forms and required to

make immediate payment of all taxes due.

All residents shall be required by ordinance, to file a final (tax) return with the final fourth quarter earned income tax payment.

The (earned income tax) collector shall compare wages reported to the state with

those wages reported to the borough.

All individuals claiming to have lived in the borough, but not registered to pay

(earned income) taxes shall be required to register immediately and pay any past

due (earned income) taxes.

Individuals claiming to have resided in the borough for only part of the year

shall be required to provide evidence to the (earned income) collector that the

(earned income) taxes were paid to the former municipality.

TAXATION

Occupation Privilege

Tax Collections

The borough shall continue to maintain an up-to-date list of businesses and

follow up quickly on those businesses not remitting the tax.

It shall be the responsibility of the building inspector/code enforcement officer to

ensure that occupation privilege taxes of contractors are remitted and paid.

The (occupation privilege) tax collector shall on a quarterly basis, request from

Regional Industrial Development Corporation (RIDC), a written report of

businesses operating in the East Pittsburgh portion of the Keystone Commons

facility.

PUBLIC SERVICES Public Safety

The borough shall, at a minimum, request proposals from the Boroughs of Turtle Creek and North Braddock for the provision of dispatch services to begin no

later than September 30, 1993. Additionally, the borough may wish to pursue

proposals from the adjacent municipalities of Forest Hills, Braddock, and North

Versailles.

The borough shall take a lead role with neighboring municipalities in initiating

discussions concerning the establishment of a regional police department and

shall actively participate in these discussions.

The borough shall meet with Allegheny County Housing Authority officials to

negotiate a payment in lieu of taxes (PILOT) payment for police and other

municipal services provided to Prospect Terrace.

The borough shall discontinue the practice of making an annual contribution to

Rescue 2.

The borough (for school crossing guard services) shall invoice the school district

at a minimum on a quarterly basis, and preferably on a monthly basis, for wage,

social security, and workmen’s compensation costs.

PUBLIC SERVICES Public Works

The borough shall begin negotiating with the Turtle Creek Valley Council of Governments to participate in the Shared Public Works Program with a target

date of January 1994.

The borough shall request an annual grant of at least $75,000 for 1994 and 1995

from the Department of Community Affairs to support East Pittsburgh’s

participation in the Turtle Creek Valley Council of Government’s Shared Public

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Works Program.

The Department of Community Affairs should evaluate the current operation of

the Joint Public Works Program to suggest operational changes that need to be

implemented to provide the most cost effective service to the four municipalities

prior to East Pittsburgh participating.

A study should be undertaken to examine the operational costs and location of

all existing street lights. The borough should also discuss with Duquesne Light,

through the Department of Community Affairs, a “distressed municipality rate”

while a municipality is under Act 47 status.

PUBLIC SERVICES Solid Waste

Collections

The borough should adopt an ordinance changing their garbage/refuse fee to a “health and sanitation fee”.

A unit shall be considered vacant (with respect to garbage and sanitation) only

when all utilities have been disconnected.

The borough shall contract with a service bureau to mail and post quarterly

garbage and sanitation bills.

Residential units shall utilize the property lot and block number as an account

number.

The borough should consider the option of mailing (garbage and sanitation) bills

annually on a perforated card and offer a discount for payment of the entire

annual bill in advance.

All (garbage and sanitation) bills shall be sent directly to the property owner

utilizing the address noted in the county tax duplicate.

All property owners shall be required by ordinance to register tenants residing in

their units on a form designated by the borough.

One of the following procedures should be implemented by the borough to

collect delinquent (garbage and sanitation) amounts due:

- Contract with a designated service bureau to carry out the collection of

the delinquent user fee. - Pursue the delinquents through its currents in-house staff.

- Filing of assumpsit actions against the property owner

PUBLIC SERVICES

Planning, Zoning and

Codes

The borough should seek funding assistance from the Act 47 Program to prepare

a comprehensive plan. After completion of the comprehensive plan, the borough

should seek assistance from Department of Community Affairs State Planning

Assistance Grant (SPAG) to prepare a new zoning ordinance and map, and a

new subdivision and land development ordinance.

COMMUNITY AND

ECONOMIC

DEVELOPMENT

Housing

The borough shall request that the Department of Community Affairs pursue an

intergovernmental approach for a comprehensive housing, technical assistance

and coordination program for all Act 47 municipalities with Allegheny County.

This action plan should be funded through the Act 47 grant.

The borough shall upgrade housing conditions through a cooperative

comprehensive code enforcement program.

The borough should regularly meet with the Allegheny County Housing

Authority concerning the Prospect Terrace housing community and the Section 8 Program.

COMMUNITY AND

ECONOMIC

DEVELOPMENT

Community

Revitalization

The borough and other agencies and officials should continue to support

Regional Industrial Development Corporation (RIDC) in seeking maximum

funding for the redevelopment of Keystone Commons.

The borough should withdraw its assessment appeal and should agree to a three

year extension of the current municipal service fee.

The borough, in conjunction with the school district and county, should examine

the feasibility of a Tax Increment Financing (TIF) District for the Keystone

Commons site and request an Act 47 grant to initiate this effort.

The borough should request that Allegheny County consider the East Pittsburgh

Plaza area and the entrance to the Keystone Commons facility for inclusion g in

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the county’s Commercial Revitalization Program.

The borough should pursue a real estate appraisal of the borough owned

properties, particularly those parcels in the redevelopment plan, and upon

completion of these appraisals actively pursue the disposition of these parcels.

The borough should pursue discussion with the East Pittsburgh Economic

Development Corporation relative to the implementation of a commercial

revitalization program.

The borough should pursue the East Pittsburgh Economic Development

Corporation taking over the Bessemer Avenue Gymnasium as a targeted project.

CAPITAL

PLANNING

As an Act 47 municipality, the borough should request special consideration for

Community Development Block Grant funding from Allegheny County, for state housing and redevelopment assistance.

The borough needs to conduct an in-depth analysis of the municipal facility

complex to determine an accurate cost estimate for repairs. In addition, the

borough needs to develop a strategy for the future utilization of the facility. The

coordinator recommends that East Pittsburgh develop an RFP for such a study to

be funded by a Department of Community Affairs grant not to exceed $5,000.

The borough should initiate discussions with the East Pittsburgh Economic

Development Corporation relative to the EPEDC owning and operating the

gymnasium facility.

Note: Pennsylvania Department of Community Affairs. (1993a). Financial recovery plan for East

Pittsburgh Borough, Allegheny County, Pennsylvania. Harrisburg: Author.

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APPENDIX B. HOMESTEAD RECOVERY PLAN RECOMMENDTIONS


Financial Distress Recovery Plan (December 17, 1993)

GENERAL

GOVERNMENT

Administration

The borough shall pursue through the Steel Valley Council of Governments, a

detailed examination of functional or structural consolidation with neighboring

municipalities.

The borough should obtain additional clerical support for the administrative

functions of the borough.

A system design consultant shall be retained to analyze the existing operation

through interviews, observation and research of existing documentation. An Act

47 grant in an amount not to exceed $15,000 shall be used for this study, as well

as for the purchase of hardware and software necessary.

The borough shall follow the Reports Management Schedule as outlined in the

Recovery Plan.

The borough shall submit all required reports for liquid fuels to the Department of

Transportation by the January 15 deadline.

The borough shall include in the next RFP for the annual audit, a requirement that

the auditing firm complete the annual Department of Community Affairs liquid

fuels report by March 15.

The borough shall combine the occupation privilege tax, business license fee, and

non-residential earned income tax into one data base.

GENERAL

GOVERNMENT

Insurance

The borough should pursue bidding their complete insurance package.

The borough should inquire about the availability and cost of general aggregate

limits of $1,500,000 or $2,000,000.

The borough should explore the feasibility of obtaining all-risk coverage.

GENERAL

GOVERNMENT

Legal

The borough should upgrade and codify all ordinances through an Act 47 grant

not to exceed $10,000.

Generally, all of the borough’s ordinance penalty provisions should be revised to

reflect the maximum fines permitted under the borough code.

The borough shall adopt the most recent BOCA building property maintenance

and fire codes.

All fee schedule required by an ordinance of the borough shall be provided for in

the ordinance and allowed to be revised by resolution.

The borough shall amend its existing ordinance to require that any individual

residing in the borough having earned income shall file a final return attaching all

relevant tax documentation.

The borough shall pass an ordinance under the new state legislation Act 98 of

1992 allowing it to collect insurance monies from burned out structures to said

monies being dispersed to the property owner.

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GENERAL

GOVERNMENT

Personnel

The borough shall consider changes to the current refuse (collection) ordinance

which places limits on the amount of garbage removed weekly at each residential

unit. In addition, the borough should consider adopting a separate fee for larger

items such as furniture and household appliances.

As allowed under current worker’s compensation law, the borough will constitute

procedures in an effort to control escalating costs.

The borough shall examine prior years’ losses to determine the extent of reserves

for existing claimants.

The borough should obtain minimal worker’s compensation risk management and

monitoring services to eliminate risks, oversee claims, and minimize the impact

of claims against the borough.

The borough should explore the cost and availability of comprehensive medical

coverage having deductibles and co-payments for all services.

The borough should consider requiring covered employees to make contributions

to the cost of coverage.

The borough should contract out the functions performed by the street department

employees.

In the event the borough elects to retain the current street department bargaining

unit, a number of provisions of the collective bargaining agreement should be

examined.

The borough should explore the possibility of contracting out police dispatching

from neighboring communities.

The borough should strictly monitor and control overtime usage in the police

department.

No new benefits or expansion of existing benefits shall be permitted.

As called for in the current agreement, limit base wage and salary increases

during their recovery period to the average increase in the consumer price index

for the most recent three year period for the police employees.

All wages under new contracts and for non-bargaining unit employee shall be

frozen for 1994 and 1995.

New fringe benefits shall only be pursued if the employees pay the cost.

The borough shall work with the Three Rivers Labor Management Council to

establish a working labor-management committee.

The borough should obtain additional clerical support for the finance and

administrative functions of the borough.

The borough should seek an Act 47 grant to provide a full-time ordinance

enforcement officer.

The borough shall, in all collective bargaining agreements, have the option of

opting to replace Blue Cross/Blue Shield health insurance with other comparable

insurance through HMO’s.

FINANCIAL

MANAGEMENT Administration

A shared finance officer through the Steel Valley Council of Governments shall

be utilized and be given the responsibility of overseeing the borough’s accounting and financial reporting system. The responsiveness of this position should be

205

monitored and evaluated on a regular basis by the Department of Community

Affairs and the Act 47 Coordinator.

The borough should obtain additional clerical support for the finance functions of

the borough.

The borough should contact with the Steel Valley Council of Governments for the

services of the shared finance officer.

The borough shall discuss with the Steel Valley Council of Governments, the

availability of account payable and general ledger services to address the internal

control issue, along with any other services that may assist the borough in its

financial reporting requirements.

The borough shall pursue an Act 47 grant through the Department of Community

Affairs in an amount not to exceed $12,000 per year to defray the cost of shared

finance services for the next two years.

The borough shall establish a billing and collection staff headed by the borough

manager which will concentrate on all billing and collection efforts.

The borough shall adopt a process which clearly identifies the expectations and

scope of work of the independent auditor. Annual audits should b procured

through a Request For Proposals process at three year intervals.

A shared finance officer through the Steel Valley Council of Governments shall

be utilized and be given the responsibility of overseeing the borough’s accounting

and financial reporting system. The responsiveness of this position should be monitored and evaluated on a regular basis by the Department of Community

Affairs and the Act 47 Coordinator.

The chief administrative officer shall complete the calculation for the pension

contribution for the required minimum municipal obligation for each of the plans

and submit this calculation to the governing body by September 30.

FINANCIAL

MANAGEMENT

Revenue

Enhancements

The borough shall initiate an investment and cash management system.

The borough shall deposit all (real estate transfer tax) monies in a timely manner

and post to the appropriate revenue line item.

The borough shall complete a survey through the parking authority and list all

private lots assessing a fee for parking. The borough will compile a data base of

all such lots and require such operator to pay the tax on a monthly basis.

The borough shall conduct an independent audit of the cable company to ensure

the company is remitting the franchise fee on all services, premium channels,

installations and equipment charges.

The borough shall include all applicable tax revenues, both current and

delinquent, on the Public Utility Realty Tax Act application to ensure the borough

receives the correct allocation for the tax.

The borough shall begin to asses a minimum charge of $2 for copies of borough

ordinances.

The fee for a copy of police reports shall be raised from $5 to $15 as permitted by

recent legislation.

The borough shall meet with Allegheny County officials to negotiate an increased

payment in lieu of taxes for police and other municipal services.

206

The borough shall increase the fee for no lien letters.

The no- lien letters will not be issued unless the seller provides proof that all

borough taxes and fees of the seller have been paid.

The borough shall include the cost of FICA and worker’s compensation in all

Task Force reimbursement requests - in addition to benefits

FINANCIAL

MANAGEMENT

Debt Management

The borough should continue making payments to PNC Bank as agreed through

the remainder of the five year term.

The borough shall make the final payment to AIM as agreed because only one

year remains on the note at an interest rate of 5%.

The borough shall evaluate the condition of the police vehicles and make an

estimate of its remaining useful life. If they are expected to last longer than the

term of the loan through Tri-Boro Credit Union, the borough shall continue to pay

the note as agreed. If not, then the debt shall be defeased.

The borough shall do everything in its power to retire the TAN through PNC

Bank at year-end.

The borough shall request that the Department of Community Affairs convert the

emergency loan into a long-term loan to be paid over ten years at 0% interest.

Quarterly payments of $14,195 shall be due to the Department of Community

Affairs on March 31 and thereafter on June 30, September 30 and December 31

beginning March 31, 1995 for nine successive years.

The borough shall budget receipt of the tax anticipation note as a liability on the

balance sheet.

FINANCIAL

MANAGEMENT

Pension Fund

The borough shall appoint the borough manager as chief administrative officer of

the non-uniformed pension fund.

The borough shall contact the Auditor General regarding the submission of the

AG-490 for future years.

The borough shall set-up a specific purpose reserve fund for future deposits of

monies due from the fire pension fund.

This special fund shall be interest bearing with the interest received being utilized

for operating expenses of the general fund.

The borough shall by resolution appoint the borough manager as chief

administrative officer of the pension plan.

The chief administrative officer shall discuss with the actuary the split between

interest rate and salary projections for future actuarial valuations.

The chief administrative officer shall discuss with the actuary and solicitors those

findings noted in the current audit that do not meet with Act 600.

The borough shall investigate both the termination options available through the

current contract and any options available for restructuring retirement benefits for

active employees through its actuary.

Borough council shall formalize the agreement for deposit of monies due to the

borough manager retroactive to the date of hire.

The payment of pension monies due to the borough manager shall be included as

207

part of gross W-2 earnings and not as a separate deposit into the deferred

compensation fund. Subsequent payments under this agreement should not be

budgeted as both a revenue and expenditure because payment if made from the

general fund.

The borough shall estimate the amount of pension state aid it will receive based

on the prior year’s employment numbers and unit values.

The borough shall budget each minimum municipal pension obligation and make

said payment by December 31.

TAXATION

Real Estate Tax

Collections

Borough council should consider whether property which is now tax exempt

could be taxed. A letter detailing the financial plight of the borough should be

sent to all tax exempt properties requesting a voluntary contribution to help

defray municipal services. Tax exempt properties shall be reviewed on an annual

basis to determine continued eligibility for tax exempt status.

The borough shall enter into a cooperating agreement with the school district to proportionately share in the cost of appraisals for property tax appeals.

The borough should develop a more centralized system for tracking delinquent

property taxes and develop the ability to track accounts individually.

The borough shall develop a policy to lien taxes above a minimum dollar amount

every two years.

The borough shall coordinate with the garbage fee collector to lien these fees

with the property taxes.

The borough shall develop a policy in conjunction with the service bureau to

mail the taxes to property owners in February; which will provide the borough

with additional cash flow at the beginning of the year.

The borough shall make daily real estate tax collection deposits into the general

fund; which will improve cash flow and maximize investment potential.

The borough shall develop the list of delinquent properties by February of the

following year and forward this list to the delinquent collector. Prior to the end

of the current tax year, efforts shall be made to send final notices to alert the

property owners of the intent to lien the property and forward and delinquent

taxes to an agency for collection.

The borough shall request proposal for the collection of delinquent property taxes by the end of the first quarter of 1994.

The borough shall place an additional charge on the delinquent account for the

commission paid to the delinquent collector.

The borough shall, through its delinquent collector, begin to file assumpsit

actions at the district justice in an effort to collect delinquent property taxes.

Upon filing of the judgment with the prothonotary the borough shall attach the

rents and personal assets of the property owners.

The borough shall complete a cost allocation of the borough tax office and

negotiate with the school district on sharing these costs.

TAXATION

Earned Income Tax

Collections

The borough shall on an annual basis petition the Allegheny Court of Common

Pleas pursuant to section 141 of Act 47 to increase the rate of earned income

taxation for both residents and non-residents.

The borough shall request proposals to provide for delinquent tax collections

services. The borough will use this service only as an adjunct to recommended

in-house collection efforts.

The borough should pursue a one-time earned income tax and fee amnesty

program to allow for payment of all delinquent earned income tax and fees owed to the borough as of December 31, 1993. This program should be in effect for 60

days beginning March 1, 1994 through April 30, 1993 and should exonerate all

penalty and interest assessed through December 31, 1993.

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The borough shall review rules and regulations relevant to the earned income tax

ordinance and update the ordinance, if necessary.

The borough shall require that PA Municipal Services Company provide a list of

all individuals registered to pay the tax; a list of all individuals remitting the tax

through their employer and a list of all individuals not having filed or paid the

tax and the years which are not considered delinquent.

The borough shall utilize tenant registration forms and information obtained

from the occupancy permits to locate new residence.

The borough shall adopt a policy for delinquent earned income tax collection.

The borough shall request from the school district, the 1991 state income list.

The borough shall begin discussions with the Steel Valley School District and its

member municipalities as to the feasibility of establishing a joint effort for the collection of earned income tax and sharing equally in the cost of collection. A

joint effort with other municipalities through the Steel Valley Council of

Governments should be examined during 1994.

If the school district is in opposition to a joint collector, then the borough shall

request proposals for the collection of earned income taxes and weigh the costs

against the cost of in-house collections.

Upon completion of appointing a collector for earned income tax, the borough

shall:

- Compare state wages reports for the 1991 tax year with those wages

reported to the borough.

- Any individuals reporting to have been domiciled in the borough for the

1991 tax year will be required to register, file a final return, and pay all

taxes due from the date residence was established. - Individuals claiming to have resided in another municipality for a

portion of the year shall provide evidence to the collector that taxes

were paid to the former municipality in which they resided. TAXATION

Occupation Privilege

Tax Collections

The borough tax collector shall provide PA Municipal Services Company with a

complete list of businesses registered to pay the mercantile and business

privilege registration fee.

The borough shall utilize records of the non-resident earned income tax to ensure

all employees have paid the tax.

On site audits should be conducted to ensure employers are remitting the correct

amount of tax.

The tax collector shall notify PA Municipal Services Company of any new

businesses registering with the borough office.

TAXATION

Mechanical Device

Fee

The borough shall amend the fee structure to increase the fee from $150 to $200.

The borough shall adopt by ordinance, a 10% penalty charge for failure to pay

the mechanical device fee by the due date.

TAXATION

Mercantile Tax

(license) Collections

For the initial mailing (of the mercantile business license fee registration) to all businesses, the tax collector shall compile the (mailing) list utilizing the Coles

Directory along with the records of those individuals registered for occupation

(privilege) taxes.

The borough shall review the current account record (mercantile license) in June

of each year and issue citations to those businesses who have failed to remit the

fee.

The borough shall review the records of the business license fee since adoption

in 1990. Any business not paying the tax will be issued a citation.

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The borough shall expend the mercantile license fee ordinance to include all businesses operating within its limits, not only those in retail and wholesale.

TAXATION

Per Capita Tax

Collections

The borough shall compare the cost of collection vs. the revenues generated

through the $10 per capita tax. If all costs associated with this tax collection

effort exceed 20% of the revenues generated the tax should be repealed.

The borough shall request a list from PA Municipal Services of all individuals

registered to pay earned income tax in the borough. This list will be used as an

adjunct to information compiled through the informational mailing currently

underway.

The borough shall mail bills to all individuals over the age of 18 establishing payment due dates prior to the end of 1993.

The borough shall request at a minimum a proposal from PA Municipal Services

Company for a cost estimate of compiling the mailing list, collecting the

revenues, and posting all records.

When an employer is known, the borough shall garnish the wages for delinquent

per capita tax and relevant collection costs for any individual who has refused to

pay the tax or the earned income tax.

PUBLIC SERVICES Public Safety

Police

The borough shall take a lead role with neighboring municipalities in initiating

discussions concerning the establishment of a regional police department and

shall actively participate in those discussions. If adjacent municipalities are

interested in pursuing a regional approach, the borough should request the

Department of Community Services to conduct a feasibility study on the establishment of a regional department.

The borough shall pursue providing police services to the Borough of Whitaker

during 1994.

The borough shall begin discussions with the new administration in the City of

Pittsburgh relative to the city’s receptivity to providing police services under

contract to the borough beginning in 1996.

The borough shall not exceed 51 shifts per week for 1994 and 1995.

The borough should pursue a public service grant from Allegheny County through the Community Development Block Grant Program for additional beat

patrol officers in the commercial district.

The borough should seek additional police department funding through the

Federal Bureau of Justice under the Police Hiring Supplement Program.

The borough shall request proposals from neighboring municipalities, i.e., West

Homestead, Munhall, West Mifflin, for the provision of dispatch services and

record keeping to the borough. These services should begin no later than

February 15, 1994.

For those municipalities that submit for dispatch services, the borough shall also

request proposals for holding services.

If the borough receives favorable proposals for dispatch (services) that do not

include holding, the borough shall utilize Pennsylvania constables for

transporting prisoners and no longer operate a holding facility.

PUBLIC SERVICES

Ambulance

The Ambulance Authority should aggressively market the sale of the 1981 ALS

vehicle and apply the funds to their outstanding debt.

The Ambulance Authority should retain the services of a delinquent collector to

actively pursue collection of all eligible outstanding bills.

The Ambulance Authority should continue cooperative efforts with the volunteer fire department and explore other cooperative ventures, such as in joint fund

raising.

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The Ambulance Authority should pursue leasing space in the existing building to

increase operating revenue.

The borough should support the Authority’s efforts in pursuing non-emergency

services to local hospitals and nursing homes.

The Authority should encourage volunteer service from residents.

PUBLIC SERVICES

Public Safety

Fire

The VFD should continue to develop an increased working relationship with the

ambulance authority in such areas as administrative support and fund raising. If

any consideration is given towards relocating the fire company, it should be done

in cooperation with the Ambulance Authority.

The borough, on behalf of the VFD, should request a Peer-to-Peer study through

the Department of Community Affairs to review operations for the fire department.

PUBLIC SERVICES

Public Safety

School Crossing

Guards

The borough shall, at a minimum, seek reimbursement of 50% of the cost of

school crossing guards on a quarterly basis.

The borough shall begin to calculate all costs associated with employing the

guards, including FICA and worker’s compensation and seek reimbursement of

these costs on a quarterly basis.

The borough shall recalculate worker’s compensation and FICA costs from

January 1992 and bill the school district accordingly.

PUBLIC SERVICES

Public Works

(Streets)

The borough shall request participation in the Shared Public Works Program of

the Turtle Creek Valley Council of Governments beginning April 1, 1994.

The borough shall request a cumulative grant not to exceed $125,000 for 1994

and 1995 from the Department of Community Affairs through Act 47 to support

the Turtle Creek Valley Council of Governments program in order to maintain a

reasonable cost/benefit to the participating municipalities.

If the borough is unable to participate in the Turtle Creek Valley Council of

Governments program, the borough shall entertain Requests for Proposals from

surrounding municipalities, Allegheny County and private firms for the provision of public works services.

If the above two recommendations are not feasible, the borough shall reduce its

public works staffing by one full-time position.

The borough shall review data provided by Duquesne Light Company as to the

location of all street lights over 150 watts.

Upon completion of this review, the borough should identify those street lights

that are candidates for downsizing or elimination.

The borough shall request as Act 47 grant from the Department of Community

Affairs in an amount not to exceed $12,000 to cover the cost of this downsizing.

PUBLIC SERVICES

Public Works

(Parking)

The borough shall enter into an agreement with the authority which requires the

authority to transfer all net income plus depreciation expense for capital

improvements in excess of $7,500 as of December 1st of each financial year to

the Borough of Homestead. If an agreement cannot be reached it is

recommended the borough dissolve the authority.

The authority, or in its absence, the borough shall implement a policy for the

collection of past due (parking) fines. This policy shall require the towing or

booting of vehicles with past due fines in excess of $100. The collection of all other past due fines will become the responsibility of the billing and collection

unit established by the borough.

The monthly lease rates for vehicles paring in the 9th Avenue and 8th Avenue lots

shall be increased from $15 to $25 per month. Parking lots where the monthly

lease rate is currently $12 per month will be increase to $20 per month.

All coin operated meters on 8th Avenue, and in the 7th Avenue and 9th Avenue

lots shall be changed to 30 minutes for a quarter.

The borough shall apply for an Act 47 rant in an amount not to exceed $10,000

to implement this meter change-out process.

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PUBLIC SERVICES

Solid Waste

Collection

The borough shall revise its current fee structure to cover the entire cost of

refuse collection and billing services.

The borough shall increase the discount amount to $5 in an attempt to encourage

annual payments (for refuse collection); which in turn will reduce billing errors.

Notification of the discount period (for annual payment of refuse collection)

shall be enclosed with the annual property tax bill and the discount period shall

coincide with that of the property tax. The payment of the annual fee shall cover

the period from April 1 through March 31 of the following year.

The borough shall pursue refuse collection and sewage on the same bill.

The borough shall request proposals from service bureaus to determine if this

annual mailing (refuse collection bill) could be made at a cost less than currently being incurred in-house.

The borough shall request proposals for collection of delinquent (refuse

collection) user fee accounts.

The borough shall change its due date for billing refuse collection to the 1st day

of the quarter rather than 30 days after the end of the quarter.

The borough shall contact the current billing software vender and begin to add

1% interest charges on any balances (for refuse collection) aged in excess of 30

days.

The borough shall pursue refuse collection and sewage on the same bill.

The borough shall strictly adhere to the ordinance as written and bill property

owners directly for (refuse collection) user fee charges.

The borough shall investigate the cost of refuse removal from the Allegheny

County Housing Authority and begin billing the Authority for this service on a

per unit basis.

The borough shall revise its vacancy form to include a policy which states that a

unit will only be considered vacant when all utilities have been temporarily

suspended.

The borough should apply for the Department of Community Affairs Peer-to-

Peer Program to assess the feasibility of implementing a recycling program.

The refuse collection clerk shall do a cross check for refuse collection records against sewage records and current Coles Directory. Property owners claiming

vacancies for occupied units will be cited and the borough shall seek all fines,

penalties, and interest charges permitted under the ordinance.

The borough shall adopt an ordinance changing their garbage/refuse fee to a

“health and sanitation fee” to enable financing of refuse collection, sewer

maintenance, street cleaning, and general health related activities.

The borough shall lien delinquent refuse collection user fees every two years.

PUBLIC SERVICES

SANITARY

SEWERS

The borough shall request proposals for delinquent sewage collection services.

The borough shall weigh all proposals against collecting with current in-house

staff.

The borough ordinance officer should be charged with the responsibility of

posting properties for water service termination.

The borough shall adopt a delinquent sewage collection policy and adhere to

said policy throughout the collection process.

The borough shall contact the software vendor to provide upgrades that will add

interest charges monthly to delinquent accounts. In addition, the borough shall

request readings to be forwarded on disk with appropriate adjustments made on the system software to accommodate said change.

The borough shall increase its minimum (sewage) usage charge to 6,000 gallons

of water per quarter.

For 1994, the borough shall increase its rate per 1,000 gallons (for sewage

collection) to coincide with the increases in ALCOSAN’s (Allegheny County

Sanitary Authority) sewage and customer service charges.

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PUBLIC SERVICES

Public Safety

Planning, Zoning and

Codes

The borough should monitor the zoning ordinance and subdivision and land

development ordinance as redevelopment occurs particularly in the Pittsburgh

Economic Redevelopment District area and undertake any modifications as

necessary.

The borough shall create an ordinance officer position. This individual shall be

responsible for not only enforcing ordinances, but shall also be responsible for

writing citations as they relate to tax collection ordinances.

All landlords will be required to register tenants and remit the $10 occupancy

fee. All landlords must submit to the borough manager, a list of names and addressed of all tenants on or before January 31, 1994. The term landlord shall

be defined to include owners of property, real estate brokers handling rentals,

and the Allegheny County Housing Authority. Any changes shall be reported to

the Borough Manager and must be made within 30 days along with the $10 fee.

The term landlord shall be defined to include owners of property, real estate

brokers handling rentals, and the Allegheny County Housing Authority.

All information in regard to occupancy and tenant registration submitted to the

borough manager shall be utilized as an adjunct to expand the tax rosters.

The borough shall include in the occupancy permit ordinance, a fine of $300 for

failure to comply with citations to be issued by the code enforcement officer.

The borough shall seek continued assistance from the Department of Community

Affairs for participation in the Steel Valley Council of Governments building

inspection program.

The borough should monitor the zoning ordinance and subdivision and land

development ordinance as redevelopment occurs particularly in the Pittsburgh Economic Redevelopment District area and undertake any modifications as

necessary.

The borough shall fully cooperate with and participate in the comprehensive

planning process being undertaken for Homestead ad adjoining communities

through the Redevelopment Authority of Allegheny County.

PUBLIC SERVICES

Recreation

The borough shall petition the Steel Valley Council of Governments to examine

the feasibility of a multi-municipal recreation commission to operate and

maintain municipal recreation facilities in the Steel Valley.

The borough, with the assistance of the Council of Governments, should apply

for a RIRA grant from the Commonwealth of Pennsylvania to match the

Coleman Portis Estate grant for the development of a recreation center.

The borough should examine the opportunities of such a facility and also look at

the possibilities of having such a facility meet the needs of all borough entities.

Perhaps a multi-purpose municipal facility could be examined.

COMMUNITY AND

ECONOMIC

DEVELOPMENT Housing

Homestead Borough shall request that the Department of Community Affairs

pursue an intergovernmental approach for a comprehensive housing, technical

assistance and coordination program for all Act 47 municipalities within Allegheny County. This action should be funded through an Act 47 grant. The

participants in this effort should include: Commonwealth of Pennsylvania,

county government, Act 47 municipalities, lenders, realtors, local development

corporations, program funders and providers. The strategy should draw upon the

existing programs and resources that are available and look to new initiatives

with the new resources that are becoming available. The comprehensive housing,

technical assistance and coordination program should be initiated by July 1,

1994.

The housing strategy, being developed by the Housing Development Partnership,

should be considered by Homestead Borough.

The housing strategy includes a component for “conservation” including code

enforcement as an essential component – immediate steps should be undertaken

to implement these activities.

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The housing strategy includes components for “stabilization”, “intervention” and

“new development” – steps to encourage reinvestment should be undertaken.

Initiatives toward the rehabilitation of existing rental housing units should be

examined.

Efforts to eliminate abandoned and substandard housing units should be

examined.

The borough shall work closely with the Redevelopment Authority of Allegheny

County in implementing the Vacant Property Review Committee Program to

complement community development activities.

The borough shall upgrade housing conditions through a comprehensive code

enforcement program with the Department of Community Affairs providing Act 47 funding to establish a shared response for building inspection and code

enforcement with other municipalities through the Steel Valley Council of

Governments.

The borough should request Allegheny County to target Community

Development Block Grant and HOMES Program funds to address the housing

needs of Homestead as identified in the housing strategy. Too often, attention is

paid to the development of the vacant mill property at the expense of the

neighborhoods. The Coordinator feels strongly that much more can be gained in

the short term by placing emphasis on the general upgrading of the housing

infrastructure and the neighborhoods.

The borough shall request that the Department of Community Affairs pursue an

intergovernmental approach for a comprehensive housing, technical assistance

and coordination program, for all Act 47 municipalities within Allegheny County, This action should be funded through an Act 47 grant.

The housing strategy, being developed by the Housing Development Partnership,

should be adopted by the borough.

The borough shall take immediate steps to implement the “conservation”

component of the housing strategy, including code enforcement as an essential

component.

The housing strategy includes components for “stabilization”, “intervention” and

“new development” – steps to encourage reinvestment should be undertaken by

the borough.

The borough shall examine initiatives toward the rehabilitation of existing rental

housing units.

The borough shall examine efforts to eliminate abandoned and substandard

housing units.

The borough shall work closely with the Redevelopment Authority of Allegheny

County in establishing a Vacant Property Review Committee Program to

complement community development activities. A target of ten cleared titles per

year should be pursued.

The borough shall upgrade housing conditions through a comprehensive code enforcement program with the Department of Community Affairs providing Act

47 funding to establish a shared response for building inspection and code

enforcement with other municipalities through the Steel Valley Council of

Governments.

The borough shall seek an Act 47 grant to provide a full-time ordinance

enforcement officer.

The borough shall seek continued assistance from the Department of Community

Affairs for participation in the Steel Valley Council of Governments inspector

program.

The borough should request Allegheny County to target Community

Development Block Grant and Homes Program funds to address the housing

needs of Homestead as identified in the housing strategy.

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COMMUNITY AND

ECONOMIC

DEVELOPMENT

Community

Revitalization

The borough should request its’ legislator and senator to pursue an amendment

to the state borough code to allow boroughs the ability to tax both land and

structure as third class cities are entitled. An Act 47 amendment may suffice in

the short-term.

The borough and other agencies and officials should support maximum funding

for the redevelopment of the former Homestead Works site and should move

forward with the infrastructure improvements with the provision that a

preliminary site plan should be submitted and approved.

The borough, in conjunction with the school district, Munhall, West Homestead, and Allegheny County, should examine the feasibility of Tax Increment

Financing for the former Homestead Works site. The borough should request

assistance in developing an educational effort on the concept of tax increment

financing with member municipalities and the school district. The Steel Valley

Enterprise Zone Corporation should coordinate this effort.

The borough and other agencies and officials should seek cooperative ventures

with Park Corporation to improve the 6th and 7th Avenue corridors utilizing the

state’s Neighborhood assistance Program.

The borough shall support the implementation of the Steel valley Enterprise

Zone Program and continue as an active participant.

The borough shall act to formally support the Homestead Area Economic

Development Corporation, the 8th Avenue Partnership and the Main Street

Program.

The borough shall support the historic designation for the borough and the area

and efforts to promote development through these initiatives.

The borough should continue participation in the Southwestern Pennsylvania Earning Warning Network through the Steel Valley Authority.

The borough shall seek cooperative relationships with the private sector to

promote development of the borough and the area.

The borough, in conjunction with the Boroughs of West Homestead and

Munhall, and other development groups, should examine the feasibility of

establishing a special assessment district for the 8th Avenue central business

district under the state’s Business District Authorities Act.

CAPITAL

PLANNING

In the long term, a comprehensive engineering investigation should be conducted

to determine the condition of the sewer system and establish a corrective plan of

action and the cost of improvements.

The borough shall utilize the “road assessment” data base in pursuing capital

funding for road improvements.

The borough should request special consideration for Community Development

Block Grant funding from Allegheny County, or state assistance, for a

comprehensive engineering investigation to determine the condition of the sewer

system and funding for repairs.

The borough should develop a capital improvement program as an integral part of the budget process.

Note: Pennsylvania Department of Community Affairs. (1993b). Financial recovery plan for Homestead


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APPENDIX C. NORTH BRADDOCK RECOVERY PLAN

RECOMMENDATIONS


Financial Distress Recovery Plan (January 29, 1996)

GENERAL

GOVERNMENT Administration

Borough Council should review and reduce the number of Committees of Council

to consolidate roles and functions to reduce the number of meetings the elected borough council members attend.

The size of Borough Council should be reduced from nine council members to seven council members.

The borough should annually devote time to arrive at a common set of borough goals and objectives.

Council’s objectives should be long range and create a vision for the municipality to work toward.

The borough should immediately adopt the PA Records Retention and Disposal schedule.

The borough shall apply for special funding through the Local Government Academy for an intern to assist in the organization of municipal records during

the summer of 1996.

The borough shall have each department designate one person to maintain

detailed records of all repairs and maintenance performed on municipal vehicles.

GENERAL

GOVERNMENT

Personnel

The borough shall prepare a file for each borough employee that contains

essential information to include full name, date of birth, current address, current

position, date of hire, dates and types of all promotion or demotions, driver’s

license number, type of driver’s license, job description record of training, federal

I-9 form, right-to-know training documentation, and any awards, citations or

recognitions received.

The borough shall have all department heads or the borough manager review all

job descriptions with all employees.

The borough shall obtain a graduate school intern from a local university to

prepare a personnel manual for the municipality. Procedures for hiring,

disciplines, termination, promotion, vacation, holidays, and other leave shall be

included in the manual; which shall be adopted by Council.

In the event that the borough participates in the Turtle Creek Valley Council of

Government’s Joint Public Works Program, every effort will be made to secure

employment of the current street department employees.

The borough shall eliminate the part-time position in the Streets Department, but

maintain the current number of full-time employees to address the infrastructure

needs of the community.

There shall be no wage increases granted for the current public works department

employees for the years 1996-1997.

The borough shall revise the scheduling practices currently used for winter

216

maintenance to eliminate the lay-off of employees in the summer months to avoid

the excessive unemployment compensation costs.

The borough shall continue to schedule police in the same manner currently in

place.

The borough shall continue to utilize part-time officers with new full-time

positions.

The borough shall not replace the recently retired officers with new full-time

positions.

The borough shall expand the pool of available dispatchers to ensure that

sufficient numbers are available to cover call-offs to eliminate the need for the

use of police to staff the operation.

Wage increases in the Police Department beyond 1997 during the recovery period

shall be tied to the average increase in the consumer price index for the most

recent 3-year period for public works employees. Wage increases shall not be tied

to police arbitration awards since a third party arbitration award can be very

unpredictable – this practice should not be continued.

The borough shall consider a four-day work week of for all public works

personnel and office personnel (particularly in the winter months) – provided the

borough fails to make significant progress in meeting the forecasts of the

Recovery Plan.

The borough, at the completion of the current contract, shall cap the maximum amount of vacation by an employee at three weeks per year.

The borough shall reduce the number of sick days per year to 10 for each employee, but shall retain the provision to sell back unused days at a rate of $80

per day. The employee shall be entitled to sell back to the borough up to 10 sick

days per year.

The borough shall cease the practice of providing 15 hospital days per year at the

completion of the current contract. No buy-back provision shall be inserted, but

the employee may retain up to the established maximum number of 90 days if

such days are currently recorded.

The practice of regularly furloughing employees for two months each summer

shall be discontinued.

The borough shall offer an alternative medical plan similar to Keystone Health

Plan West or Select Blue. The cost of the plan shall be of a lesser premium

charge. If the employee elects to maintain the current level of coverage, then that

employee must bear the additional cost of this coverage through a payroll

deduction.

The borough shall cease the practice of providing fully paid health benefits to

employees retiring at the completion of the current contract.

The borough shall cease the practice of paying the major medical deduction for

the employee at the completion of the current contract.

The borough shall review premiums paid for short term disability insurance and

evaluate the feasibility of self-insuring this benefit based on prior experience.

The borough shall require a physical exam for employees who are off sick three

or more days.

217

The borough should form a Labor Management Review Committee with the

assistance from the Three Rivers Labor Management Committee.

The borough shall not grant wages increases in the Police Department for the

years 1996 and 1997.

The borough shall limit wage and salary increases in the Police Department

during the remainder of the Recovery period to equal the average increase in the

consumer price index over the most recent 3 year period.

The borough shall cap vacations at the current level for active employees in the

Police Department.

The borough shall limit sick leave to 10 (new) days per year and shall change the

retirement buy-back provision for sick-days to 75% of the then effective daily

rate of pay.

The borough shall require that police officers participate in an HMO.

The borough shall cap medical insurance premiums at current levels for future

retirees and search for lower cost alternatives for health care benefits.

The borough shall cease the practice of providing 100% of the cost of health care

benefits for the retiree and spouse until death of the pensioner.

The borough shall convert longevity to a specific dollar amount that shall not be

included in base pay.

The borough shall establish payment for court appearances for police officers to

the actual hours worked with a two hour minimum.

The borough shall and Police Union shall select a neutral grievance party.

GENERAL

GOVERNMENT

Insurance

The borough shall request competitive proposals for their overall insurance

packages.

The borough shall inquire about the validity and cost of general aggregate limits

of $1,500,000 or $2,000,000.

The borough shall review property values prior to bidding their property

insurance. A specific schedule of borough equipment with serial numbers and

values should be completed.

The borough should pursue an “All Systems Go” policy that protects all phone

systems, facsimiles, photocopies, and air conditioning and heating systems.

A risk survey with a property agent should be conducted prior to a quote. This

survey should include an audit of all property, potential liability and review of

bonds.

The borough shall increase its coverage so that certain liability limits equal the

liability limits of $500,000.

GENERAL

GOVERNMENT

Legal

The borough shall adopt the PA Records Retention and Disposition Schedule.

The borough shall request an Act 47 grant in the amount of $15,000 to upgrade

and codify all ordinances.

All of the borough’s ordinance penalty provisions should be revised to reflect the

maximum fines permitted under state law.

The borough’s zoning ordinance shall be updated to include all of the most recent

218

amendments to the Municipalities Planning Code.

The borough’s solid waste collection ordinance should be revised to allow fees to

be set by resolution of council rather than by amending the ordinance.

The borough shall adopt the most recent BOCA building and property

maintenance and fire codes.

The borough shall adopt a strict street opening ordinance and street opening fee

schedule which covers the cost of inspection and established a street degradation

fee for the planned replacement of utility lines.

The borough shall adopt by ordinance, all fees and allow to revision of fees by

resolution.

The borough shall adopt an ordinance under the new state legislation Act 98 of

1992 allowing it to collect insurance monies from burned out structures for

payment of delinquent municipal taxes.

FINANCIAL

MANAGEMENT

Administration

The borough shall utilize the Turtle Creek Valley Council of Government’s

financial management and utility billing services to the fullest extent possible.

Invoices received for payment (accounts payable) shall be processed upon receipt and forwarded to the Turtle Creek Valley Council of Government for payment

and no checks shall be cut until adequate funds are available.

The borough shall request that the Turtle Creek Valley Council of Government

forward as part of the monthly reporting, a balance sheet that details accounts

payable balances along with reconciled cash balances in all accounts.

The borough shall change their accounting method from cash to modified accrual,

recognizing expenses when they are incurred.

The borough shall complete and update a cash flow (report) on at least a quarterly

basis in an attempt to maximize investment opportunities.

The borough shall change the current practice of posting net payrolls to salary

line items to one that allocates gross pay by department.

The borough shall begin to allocate employer related taxes by department, such as

FICA and unemployment.

The borough shall take full advantage of vendor documents and group payables

by due date. The borough shall at a minimum review payable list on a weekly

basis to take full advantage of vendor discounts and avoidance of vendor interest

charges.

The borough council shall adopt legislation that would allow the manager to pay

invoices with discounts that may arise between council meetings. In addition, this

process shall include provisions that would allow invoices to be paid if the due

date is prior to a regularly scheduled council meeting.

The borough shall seek funding for a shared finance manager by March 31, 1996,

and the new position of delinquent collections coordinator shall be filled by June 1, 1996.

The borough shall utilize money from the liquid fuels account to pay cost relating to street lighting on eligible liquid fuels streets.

219

The borough shall not budget the tax revenue anticipation note (as revenue) and

carry the amount of the loan on the balance sheet so as not to artificially inflate

the overall budget.

The borough shall utilize the expenditure format detailed in the Recovery Plan in

future monthly budget reports.

The borough shall begin to post gross salary amounts to specific line items of the

revised budget format.

The borough shall allocate fringe benefits, FICA and worker’s compensation

costs by individual departments.

The borough shall allocate all benefit costs of active employee to the appropriate

department in which they are employed.

FINANCIAL

MANAGEMENT

Revenue

Enhancements

The borough shall require that all collections, with the exception of the real estate

tax collector, remit collections at a minimum of two times per month.

The borough shall discuss with Integra Bank, the options available to change the

cumbersome system currently in place for transferring idle funds into interest

bearing accounts.

The borough shall purse a one-time earned income tax and fee amnesty program

to allow for payment of all delinquent earned income taxes and fees (such as

garbage, sanitation, etc.) owed to the borough as of December 31, 1995. This

program should be in effect for 60 days beginning April 1, 1996 through May 31,

1996 and should exonerate all penalty and interest assessed through December 31, 1995.

The borough should pursue an increased Payment in Lieu of Taxes (PILOT) from the Allegheny County Housing Authority that is more representative of the

services provided.

The borough shall require that the current cable company franchised by the

borough provide a report that justifies the franchise fee as remitted over the last

few years.

The borough shall notify Time Warner Cable in writing before January 26, 1996

of its intent to renegotiate specific sections of its franchise agreement.

The borough shall renegotiate its franchise fee from 3% to 5%.

The borough shall renegotiate the franchise agreement to provide for not less than

two semi-annual payments of the franchise fee to the borough instead of the

current single annual payment in late December or early January.

The borough shall take appropriate action to sell both the dump and garbage

trucks from the public works department. Revenues generated from the sale shall

be deposited into a capital improvement fund or a capital equipment fund.

FINANCIAL

MANAGEMENT

Debt Management

The borough shall properly budget and pay the final payment on the judgment in

1996.

The borough shall properly budget and pay the 1993 bond issue on a timely basis

in 1996 and subsequent years.

Upon adoption of the Recovery Plan, the borough shall request that the

Department of Community Affairs convert the emergency loan into a long-term

loan to be paid over 10 years at a 0% interest rate.

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The borough shall make quarterly payments on the note in the amount of $17,500

commencing September 30, 1998.

In the event that the operating revenues needed from the emergency load are less

than $700,000, the borough shall request that the balance be converted into a

capital loan payable over the same terms and interest rate as the emergency loan

(10 years and 0% interest).

FINANCIAL

MANAGEMENT

Pension Fund

The borough should review and evaluate the new fee structure for both pension

plans after the merger of trustees.

TAXATION

Real Estate Tax

Collections

The borough shall seek funding through the Act 47 grant (program) for the

purpose of adding a position of delinquent tax coordinator through the Turtle

Creek Valley Council of Governments.

The borough shall conduct a reconciliation and settlement of all uncollected real estate taxes at year-end with the elected tax collector.

At least 30 days prior to forwarding a list of unpaid taxes to the borough

manager, the tax collector shall notify delinquent property owners of the

borough’s intent to both lien the property and commence legal action against the

owner of all unpaid property taxes.

The borough shall evaluate the charge for a tax certification, and if actual costs

warrant, increase the fee accordingly.

The tax collector shall make deposits on a daily basis of any collections in

excess of $100.

The borough shall take immediate action to lien delinquent property taxes in

excess of $50 for 1995 and the prior three years.

The borough shall take action to request proposals for collection of delinquent

property taxes.

The borough shall within 60 days of the adoption of the recovery plan, appoint a

delinquent property tax collector.

The delinquent collector shall within 90 days after receiving the formal

appointment, send impending suit letters and begin to file assumpsit actions at

the local magistrate.

The borough shall discuss with the solicitor, the feasibility of adopting an ordinance that would allow the collector to pass all fees relating to collection of

outstanding taxes on the individual taxpayer as a cost of collection.

The borough shall evaluate all delinquent parcels and designate those with

significant market value for sheriff sale.

The borough shall begin discussions with the school district relative to parcels

designated for sheriff sale with the intent of entering into an agreement to share

the costs associated with the sale.

The borough shall review the list of delinquent properties and designate those

parcels that may be eligible to be acquired through the Allegheny County

Redevelopment Authority Vacant Property Review Program.

The borough shall begin discussions of a cooperative approach toward

delinquent collection with the Woodland Hills School District and Allegheny

County.

The borough shall continue to maintain the current millage rate, and change the

millage allocation to reflect changes in debt service and street lighting costs for

the years, 1996, 1997, and 1998.

TAXATION Earned Income Tax

Collections

The borough will review the recommendations of the Recovery Plan specific to the collection of the earned income tax with the current and delinquent collector

and establish a time table to implement the recommendations of the plan.

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The borough shall discuss with the Turtle Creek Valley Council of

Governments, the collection of current and delinquent earned income taxes or

request proposals for both current and delinquent collection of earned income

taxes competitively.

The borough should become more active in monitoring the efforts of the earned

income tax collector to ensure increased collection rates and improved cash

flow,

The borough shall meet with the school district to discuss problems associated

with collections of earned income taxes in prior years and weigh alternatives of increasing overall collections.

The borough shall continue to mail all three quarterly reporting cards at the

beginning of the tax year.

The borough shall require all individuals having earned income to file a final tax

return and establish the due date of this return as February 15, thereby

eliminating the need for a fourth quarter estimated tax payment.

The borough shall require that W-2s or other proper documentation be included

with the final returns that support the claim made of earned income.

The borough shall review all ordinances, rules and regulations relative to earned

income tax in order to update and become current with existing federal and state

statues and court decisions.

The borough shall require that all individuals on the delinquent roster not filing a

tax return be notified of the borough’s intent to file a criminal complaint at the

local magistrate.

The borough shall adopt a policy for the collection of delinquent earned income

tax that at minimum will include the following:

- One the individual has filed the tax return and total tax owed is calculated, the individual will be given 30 days to pay the balance.

- If an individual cannot pay the tax and the employer is known, the

borough shall require the wages of the individual to be garnished.

- If the employer is not known, the borough shall file assumpsit action at

the magistrate or garnish the wages of the working spouse if the

employer is known. The borough shall utilize tenant registration forms and occupancy permits to

ensure that all residents having earned income are registered to pay the tax.

Upon completion of final determination of the appointed collector, the borough

shall require the collector to:

- Compare the wages from the state list for the two most current years

and if taxes are due, invoice the resident immediately.

- If the resident fails to respond to the delinquent notice, the borough

shall follow the delinquent collection procedure detailed above. - If there is a discrepancy between the collector and taxpayer relative to

taxes due to the borough because of two different domiciles, the

collector shall require proof of the taxes paid to the other community

prior to granting any credit from another taxing jurisdiction. The borough shall share information relating to the business survey completed

for occupation privilege tax (O.P.T.) collection and require all businesses

operating in the borough to withhold earned income tax from the residents they

employ.

For 1996, the borough shall adopt an amendment to the current earned income

tax ordinance and seek court approval to increase the current rate to 1.5% on

residents and 1.4% on non-residents.

The borough may request that the Plan Coordinator review the budget for 1997

as to the feasibility of reducing the rate to a level that will coincide with revised

projections for the year 1997.

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The borough shall reduce the earned income resident tax to 1.4% in 1997 and

1998 provided the borough adheres to the recommendations detailed in the

earned income tax section of the Recovery Plan, and projections for both earned

income tax collections and year-end fund equity positions hold true.

The borough shall adopt by ordinance, a non-resident earned income tax and

seek court approval for an effective date of January 1, 1996.

The borough shall establish a tax rate of 1.4% (net rate .4%) on the earned

income of non-residents. Reductions in future years will be tied to residents in

the earned income tax of residents and will maintain the same ratio.

The borough shall mandate that all businesses located in the borough withhold and remit the tax for all non-residents on a quarterly basis, adopting the same

due dates as established for residential earned income tax.

The borough shall make the business survey completed through the

recommendations of the Recovery Plan available to the collector to expand the

base of businesses mandated to withhold and collect tax.

The borough shall annually petition the Allegheny Court of Common Pleas

pursuant to section 141 of Act 47 to increase the rate of earned income taxation

on non-resident beyond the current maximum rate of 1% imposed by Act 511.

The borough shall annually review the revenues generated by the increased levy

and should collection exceed budget expectations, the borough shall decrease the

rate correspondingly to that which is in effect for residents.

TAXATION

Occupational

Privilege Tax

Collections

The borough shall discuss with the Turtle Creek Valley Council of

Governments, the feasibility of conducting a survey of businesses located and

operating within the borough.

The borough shall discuss with the Council of Governments, the idea that the

Council of Governments will collect the occupational privilege tax after completion of the business survey.

Should the Council of Governments be unwilling to conduct this task, the

borough shall complete the survey and share the information with the current

collector.

The borough shall arrange to meet with officials from USX in an attempt to

explain the dramatic decline in overall employment specific to these operations

located in the borough.

At the conclusion of this meeting with USX officials, the borough should

schedule to meet with the three communities encompassing the USX Edgar

Thomson Works in an attempt to formalize an agreement detailing the

parameters that define what specifically constitutes employment within a

particular community.

It shall be borough policy that the building inspector or zoning officer notify the

tax office of any new business locating in the borough.

On-site audits should be arranged as a way to verify and/or audit current tax

submissions.

TAXATION Mechanical Device

License Fees

Collections

The borough shall establish a due date of June 1 of each year to pay the mechanical device license tax.

The borough shall amend the ordinance to provide for a 10% penalty assessment

for payments made after the established due date.

The borough shall complete notification forms and mailing by March 1 of each

year allowing approximately three months to pay the tax.

The borough shall schedule one follow-up visit to each establishment toward the

end of the year to check machines for proper licensing.

The borough shall forward a list of currently registered establishments to the

Pennsylvania Municipal Services Company for the purpose of cross referencing

earned income and occupation privilege tax accounts.

The borough shall check the current list of businesses registered for the

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occupation privilege tax to ensure that the current list of establishments is

accurate.

TAXATION

Amusement Tax

Collections

The borough shall adopt by ordinance an amusement tax.

The borough shall include in the amusement tax ordinance, provisions for

payment of the fee on a quarterly basis and adopt due dates of the tax as those

dates covering quarterly periods detailed in the earned income tax ordinance.

The borough shall require in the ordinance that the fees paid at the end of the

year be reconciled and supporting documentation to adequately justify gross

receipts claimed be attached.

PUBLIC SAFETY

Police Department

The borough should continue to computerize the police department record

keeping functions.

The borough shall explore the establishment of incorporating police forces of adjacent municipalities with that of North Braddock.

The borough shall begin conversations with neighboring municipalities and the

Turtle Creek Valley Council of Governments for the purpose of marketing joint

dispatch services.

The borough shall actively pursue all funding that may be available through the

Allegheny County 911 system, specifically designated for Act 47 distressed

municipalities and take those actions to comply with the approved 911 plan,

The borough shall review holding cell policies with the borough’s insurer to help

discover areas to minimize risk.

The borough shall review its holding cell costs and establish a fee for other

departments using the cells.

The borough shall begin conversations with neighboring municipalities and the

Turtle Creek Valley Council of Governments for the purpose of marketing joint

dispatch and holding cell services.

The borough shall request a $10,000 Act 47 grant to cover the cost of camera

installation.

The borough shall utilize capital money allocated for the purchase of a new

police car in the general fund budget.

PUBLIC SERVICES School Crossing

Guards

In the reimbursement request to the School District, the borough shall include the cost of the worker’s compensation experience modification factor.

The borough shall check current police professional liability insurance policies

and review rates to insure the school crossing guards.

The borough shall request reimbursement for 50% of all costs associated with

equipment or uniforms purchased for the specific use by the school crossing

guard.

PUBLIC SERVICES

Sanitary Sewers

Collections

The borough shall notify the Allegheny County Sanitary Authority of its intent

to complete its own sewer billing by April 1, 1996, and begin to make

arrangements to subcontract the billing operation to the Council of Governments.

The borough shall continue to utilize the PA Municipal Services Company for

the collection of delinquent accounts and shall request that the service bureau

coordinate with the Wilkinsburg-Penn Joint Water Authority to begin shut-off

procedures immediately on those accounts that are currently delinquent.

The borough shall adopt by ordinance, a sewage fee equal to 25% of the gross

billing charges to commence upon the initial billing by the Council of

Governments.

The borough shall budget expenditures to be paid at a rate of 120% of anticipated gross billing per the policy of the Allegheny County Sewage

Authority.

PUBLIC SERVICES

Solid Waste

Collections and

Recycling

The borough shall centralize all billing and maintenance of records with the

Turtle Creek Valley Council of Governments.

The borough shall request proposals for the collection of delinquent fees and

within three months after adoption of the Plan, appoint a firm to work with the

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Council of Governments to collect the past due fees.

The borough shall adopt an ordinance that shall pass onto the delinquent

account, all fees and commissions as a cost of collection.

The borough shall adopt an administrative policy that sets forth to the collector,

terms and condition of payment plans.

The borough shall continue to invoice residents on an annual basis for the fee

and continue to offer residents a five dollar discount if the fee is paid prior to the

due date.

The borough shall weigh the advantages of including the invoicing of the fee

with the quarterly sewage bills.

The borough shall standardize the solid waste collections/recycling ordinance

through an amendment.

The borough shall bill all landlords or property owners directly for the fee and any action taken for the collection of past due fees shall be first taken against the

property owners.

The borough shall strictly adhere to the ordinance currently in place that requires

vacancies meet specific criterion for waiver of the fee.

The borough shall request that the Council of Governments assist the newly

added delinquent collection coordinator in a borough-wide survey to review

those accounts currently listed as vacant or noted to be multiple units exempt

from the fee.

The borough, upon completion of a centralized data base, shall lien delinquent

fees with the property taxes.

PUBLIC WORKS

Streets

Borough council shall review its street department priorities and the methods

used to address them.

The borough should study the option of participating in the Turtle Creek Valley

Council of Governments Joint Public Works Program; and if feasible, begin

participating at the earliest possible opportunity.

The borough should enter into an intergovernmental mutual aid agreement with

the Turtle Creek Valley Council of Governments to maximize resources, both personnel and equipment that can be utilized in the public works function.

The borough shall adopt a snow emergency ordinance and plan which identifies

key highways which will receive priority winter maintenance and limit parking

on these streets.

The street department personnel should be equipped with portable radios capable

of communicating with each other and with the Turtle Creek Valley Joint Public

Works operation.

The borough shall review the recently completed survey made by the police

department by April 30, 1996; and make recommendations for the renewal of

125-200 street lights.

The borough shall notify Duquesne Light as to the results of the survey and

make formal application for removal of those street lights specified in the report.

The borough shall request abatement of penalty charges for street light utilities

assessed during the past 12 months. Upon agreement of an acceptable payment

to clear arrears, the borough shall pay such arrears immediately.

The borough shall pay all future monthly invoices for street lighting utilities in a

timely manner to avoid additional interest charges.

The borough shall request an Act 47 grant in an amount not to exceed $20,000 for the purpose of covering the additional cost for the removal of excess street

lights over the recommended number of existing street lights.

The borough shall request a listing of all street lights currently being billed by

Duquesne Light Company and compare this list with actual lights in service to

insure the accuracy of the billing records.

PUBLIC SERVICES Borough council shall prepare a request for proposal for development of a new

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Planning/Zoning and

Code Enforcement

comprehensive plan and subsequently related land development ordinance.

The borough shall request an Act 47 grant and/or a State Planning Assistance

Grant (SPAG) in the amount of $40,000 to complete a comprehensive plan and

development of new zoning, and subdivision and land development ordinances

and coordinate these planning efforts with adjacent municipalities.

The zoning and subdivision and land development ordinances shall be update to

reflect the Commonwealth’s revised Municipalities Planning Code (MPC)

current zoning law and as a tool to encourage development and redevelopment

of the borough.

The borough shall develop a comprehensive housing strategy as the first step to providing a mix of housing opportunities that can serve as an incentive to

maintain existing residents as well as attracting new residents.

The borough should request that the Department of Community Affairs include

the borough in the intergovernmental approach for a comprehensive housing,

technical assistance and coordination program with other Act 47 communities.

The borough should increase the fees associated to code services (i.e. building

permits, etc.) to cover the costs of services provided or to at least significantly

offset the cost to the borough.

The borough shall continue to enforce the BOCA series of building codes and

adopt the recent editions of these codes.

The borough shall assess the current fees for building inspection services and

revise said fees to include flat fees assessed on each $1,000 of construction.

The borough shall forward all information garnered through the application

process of occupancy permits to all tax collectors so that proper registration can

be for various taxes and fees.

The borough needs to develop a program to control the growth of weed and

grass on an annual basis either through in-house staff or by contracting out for chemical application.

COMMUNITY AND

ECONOMIC

DEVELOPMENT

Housing

Rehabilitation

Strategies

The borough should prepare a five year plan for the demolition of properties.

The borough should begin discussions with the Turtle Creek Valley Council of

Governments as to the possibility of the COG performing demolition services

throughout its areas as part of its overall Joint Public Works Program.

The total borough costs associated with demolition (i.e. wages, indirect costs,

direct costs, etc) should be liened against the property and attempt to be

recovered.

The borough shall request a Department of Community Affairs grant to assist in

developing a housing strategy in the amount of $40,000.

The borough should begin discussions with the Allegheny County Department of

Development relative to the allocation of Community Development Block Grant

funds, and in particular to the impact of the recent HUD Consent Agreement

relative to housing issues.

COMMUNITY AND

ECONOMIC

DEVELOPMENT Community

Revitalization

The borough should seek Act 47 assistance in the amount of $12,500 to meet the

borough’s match requirement for the Allegheny County Redevelopment Area

Plan and proposal for the Bell Avenue area.

The borough should evaluate their need for administrative funding under the Enterprise Zone Program and meet with the Department of Community Affairs

officials to determine the best way to meet this need.

CAPITAL

PLANNING

The borough shall adopt a multi-year capital improvement plan for all of its

physical assets.

An Act 47 loan in the amount of at least $100,000 should be requested to initiate

the implementation of a capital improvement program.

The borough should complete a comprehensive engineering investigation to

determine the condition of the sewer system and establish a corrective plan of

action and the cost of improvements as a basis for a capital budget for the

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borough sewer system.

The borough should request special consideration for Community Development

Block Grant funding from Allegheny County through the Turtle Creek Valley

Council of Governments; or funding through the state for a comprehensive

engineering investigation to determine the condition of the sewer system and

funding for repairs.

The borough shall utilize the “road assessment” data base in pursuing capital

funding for road improvements.

Note: Pennsylvania Department of Community Affairs. (1996). Financial recovery plan for North

Braddock Borough, Allegheny County, Pennsylvania. Harrisburg: Author.

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APPENDIX D. WILKINSBURG RECOVERY PLAN RECOMMENDATIONS


Financial Distress Recovery Plan (May 23, 1988)

GENERAL

GOVERNMENT

Administration

The Borough should become an active leader in the Turtle Creek Valley Council

of Governments.

The Borough should recommit itself to the manager plan and abide by the

ordinance creating the Office of Manager.

The Borough should adopt an ethics ordinance and create an Ethics Board.

GENERAL

GOVERNMENT

Personnel

The Borough should adopt a personnel ordinance in accord with principles

specified in the Plan, to include a full merit system.

Management rights should be exerted under the present union contract with the

Police Association and protected and expanded in future contract negotiations.

The detective unit of the Police Department should be discontinued – eliminating

two positions.

The number of uniformed police should be reduced by two positions.

The non-uniformed support staff in the Police Department should be increased by

five personnel.

The Fire Department should be converted to a combined paid and volunteer force

commencing January 1990.

A firehouse (that is currently not being used) should be retained to house

volunteer fire companies subject to structural clearances for anticipated floor

loads.

Future contract provisions with the union representing firemen should not be

inconsistent with a combined paid-volunteer force relative to mandatory minimum manning levels.

FINANCIAL MANAGEMENT

Administration

Council should instruct the Manager and Finance Director to develop a plan of organization for the Finance Department within sixty days, applying criteria

suggest in the Plan.

Improvements in the accounting system should continue so that, within the next

three years, or before, the system:

- Meets generally accepted accounting and reporting standards

- Is approved by the external auditor

- Is eligible for the Certificate of Conformance of the Government

Finance Officers Association

The Borough should adopt the purchasing ordinance (within thirty days of Plan

adoption) as recommended in the Plan which centralizes purchasing in the

Manager’s office.

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The amount of $100,000 in the 1989 and $159,590 in the 1990 operating budgets

should be allocated to implement the Recovery Plan and provide for

contingencies.

The Borough should complete the transfer of elements of its accounting system to

the Turtle Creek Valley Council of Governments.

The Borough should adopt an ordinance, recommended in the (Recovery Plan),

concerning the development of a capital plan – that amends the operating budget;

which will encourage strong citizen participation and the creation of a

Community Financial Resource Board to assist in carrying out processes

established in the proposed ordinance.

The Borough should adopt an ordinance, recommended by the (Recovery) Plan,

designed to monitor the implementation of the budget and to assist the audit

process through the creation of a non-partisan Audit Committee.

FINANCIAL

MANAGEMENT

Revenue Enhancements

The Borough should sell the Senior Citizens Center (when it becomes vacant) and

the Pennsylvania Railroad Station (as soon as possible) and apply receipts to the

capital budget.

The Borough should adjust its municipal service fee to cover the actual cost of

refuse collection and disposal when these costs increase.

The Borough, through the (Act 47) Coordinator, should undertake special studies

to determine if the revenue base can be improved and to identify other possible cost savings.

FINANCIAL

MANAGEMENT

Debt Management

(Based upon the intent of the Recovery Plan and the recommendations contained

therein), all legitimate financial claims against the Borough will be paid in full

during each financial year.

The Borough should make its special funds whole by repaying the bond fund

(project fund) in two years with payments being $150,000 and $133,000,

respectively.

The Borough should seek approval of the Commonwealth to repay the remainder

of the emergency loan and the $235,000 loan over a five-year period. The debt

retirement schedule is $70,500 in 1989 and $108, 525 in the years 1990 through

1993.

The Borough should make its special funds whole by repaying the debt service

fund in nine annual installments of $50,000, beginning in 1990, with the final

payment being the balance owed.

The Borough should apply, under Act 47, for a loan of $235,000 to balance that

portion of the 1988 budget not covered by the emergency loan.

The Borough should repay $117,000 of the $387,000 emergency loan in 1988.

FINANCIAL

MANAGEMENT

Pension Fund

Borough Council should withdraw its support of a consent order expanding

pension benefits of police officers.

The Borough should make its special funds whole by repaying the pension fund

over two years in the amount of $46,000 and $39,000 respectively.

TAXATION

Earned Income Tax

Collections

The Borough, under provisions of Act 47, should see court approval to increase

the earned income tax by one quarter of 1% in 1989 and again in 1990.

COMMUNITY AND The Borough should contract with a regional agency for community

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ECONOMIC

DEVELOPMENT

Community

Revitalization

development services.

A portion of Enterprise Zone grant funds should be dedicated to enhancing the

image of the community in order to stimulate economic development.

CAPITAL

PLANNING

The Borough should adopt a capital planning process and allot $250,000 in each

of the next two years for capital purposes, to be funded by both the bond fund

and current revenues.

Note: Pennsylvania Department of Community Affairs. (1988a). Financial recovery plan for Wilkinsburg


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APPENDIX E. FINANCIAL DISTRESS IN WILKINSBURG

According to the Department of Community and Economic Development,

Wilkinsburg Borough underwent a financial crisis that began in 1985 that culminated in

1988 (Department of Community Affairs, Consultative Report for Wilkinsburg Borough,

1988). However, a thorough examination of public documents does not support this

claim. In fact, the Borough of Wilkinsburg was struggling financially as far back as 1978,

wherein the public record revealed that the Borough ended the year with a $53,403

deficit; and deficits in subsequent years as follows: $283,803 in 1979, $112,341 in 1980,

and $394,738 in 1981 (Wilkinsburg Borough, Borough Council Public Meeting Minutes,

October, 1983).

In October 1982, Council passed a resolution to carry-over in 1983, the year end

deficits from 1981 and 1982 (Wilkinsburg Borough, Borough Council Public Meeting

Minutes, October, 1982). In November 1982, because the real estate tax levy was at its

legal limit per the Borough Code, Council held a Public Hearing to discuss alternative

forms of tax revenues for 1983 (Wilkinsburg Borough, Borough Council Public Meeting

Minutes, November, 1982). In December 1982, at a Public Meeting, concerned citizens

addressed personnel issue by comparing the Borough’s costs for hospitalization and

fringe benefits with that of private industry and further stated that they believed the

Borough to have too many employees (Wilkinsburg Borough, Borough Council Public

Meeting Minutes, December, 1982). In early December 1982, Council passed a

resolution to adopt an unbalanced budget (Wilkinsburg Borough, Borough Council

Public Meeting Minutes, December 13, 1982); which was later balanced on December

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27th with the enactment of an ordinance that established business privilege and business

license fees (Wilkinsburg Borough, Borough Council Public Meeting Minutes, December

27, 1982).

In March 1983, the Borough’s long-time manager submitted his resignation

(Wilkinsburg Borough, Borough Council Public Meeting Minutes, March 3, 1983); and

in April 1983, in an attempt to increase revenues, Council enacted ordinances

establishing an increased municipal service fee, a mercantile tax, and an occupation

privilege tax (Wilkinsburg Borough, Borough Council Public Meeting Minutes, April 11,

1983).

In August 1983, a financial consultant/certified public accountant approached

Council and proposed to provide the Borough with professional financial services; and is

quoted as saying “it is unusual for an organization of Wilkinsburg’s size not to know

where information is; not to have an organized manner of recording information; and not

to have a system of reporting financial information” (Wilkinsburg Borough, Borough

Council Public Meeting Minutes, August 18, 1983).

In September 1983, the President of Council read a statement that rejected the

rumors about the Borough being bankrupt and said “the Borough is having financial

problems due to decades of inadequate financial record keeping and controls.” The

President of Council further announced that lay-offs and budget cuts during the last few

months of 1983 may be necessary (Wilkinsburg Borough, Borough Council Public

Meeting Minutes, September 26, 1983).

In October 1983, the Borough’s Solicitor presented a public statement that

explained that the current financial deficit is due to excessive police over-time, carry-over

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deficits from prior years, and poor financial practices; and recommended that Council

reduce the hours and days of operation and make drastic reductions in expenditures.

Council, acting on the Solicitor’s advice, passed a motion to lay-off one third of the

current employees until the end of the year (Wilkinsburg Borough, Borough Council

Public Meeting Minutes, October 6, 1983). At a subsequent public meeting in mid

October, a crowd (estimated between 200 and 300 people) was in attendance to protest

Borough lay-offs in the police and fire departments. The crowd of protestors was so large

that the meeting had to be relocated to the public high school auditorium. After listening

to hours of testimonies from concerned citizens, Council passed a motion to reinstate all

Borough employees and pursue a reasonable agreement; which would make the then

current lay-offs unnecessary (Wilkinsburg Borough, Borough Council Public Meeting

Minutes, October 10, 1983). At another public meeting later in October, a prominent

citizen, after doing some research, addressed Council and informed the public present

that the financial audit for the Borough for 1982 was incomplete and the Borough’s

solicitor was in possession of the financial records needed to complete the audit; and

further stated that the solicitor was refusing to release the financial records to the auditor

despite the Court Order for the Borough to complete the 1982 audit (Wilkinsburg

Borough, Minutes of Council Meeting on October 18, 1983). Council then moved to

vacate the position of the Borough solicitor and the majority of Council requested a

resignation from the Council President who ultimately refused to resign (Wilkinsburg

Borough, Borough Council Public Meeting Minutes, October 20, 1983). Subsequently,

the majority of Council accused the Council President and the Borough Solicitor of

running the borough and the majority of Council elected a new Council President

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(Wilkinsburg Borough, Borough Council Public Meeting Minutes, October 20, 1983) and

appointed a new Borough Solicitor (Wilkinsburg Borough, Borough Council Public

Meeting Minutes, October 24, 1983].

In December 1983, Council presented the 1984 budget and the Borough was able

to maintain services and meet financial obligations through year end by purposefully

using the Police and Fire pension monies in the general fund for operating expenditures;

which were ultimately repaid in early 1984 using monies from a tax anticipation loan

(Wilkinsburg Borough, Borough Council Public Meeting Minutes, January 19, 1984).

In May 1984, the Borough Manager of nine months resigned and Council

appointed an Acting Borough Manager (Wilkinsburg Borough, Borough Council Public

Meeting Minutes, May 18, 1984). One month later (June 1984), Council appointed a

Borough Manager, an Assistant Borough Manager, and a Finance Director (Wilkinsburg

Borough, Borough Council Public Meeting Minutes, June, 1984).

In October 1984, although there is no mention of the Finance Director’s

resignation, Council appointed a new Finance Director. At that same meeting, one

Councilman, still lamenting over the Manager’s appointment in May, took offense to the

rapid turnover is management positions in the Borough and submitted a statement into

the minutes that conveyed his feelings and was quoted as saying “We (Wilkinsburg

Borough) are still paying for a manager with no financial training” (Wilkinsburg

Borough, Borough Council Public Meeting Minutes, October 8, 1984).

In November 1984, the previous Manager, whom resigned earlier that year in

May, approached Council to request that the submitted resignation be acted upon, along

with final payment as outlined in the resignation letter; or that she be permitted to resume

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her responsibilities as Borough Manager. Council having a working Borough Manager,

acted upon the resignation (Wilkinsburg Borough, Borough Council Public Meeting

Minutes, November 12, 1984).

In December 1984, although there is no mention of resignation, Council vacated,

once again, the position of Borough Solicitor (Wilkinsburg Borough, Borough Council

Public Meeting Minutes, December 1, 1984).

During 1985, actions of Council were mainly recorded as actions of regular

business, except in November and December. In November, Council sold the bonds and

approved a bond purchase agreement with a local bank for new bonds; and applied for a

Tax Anticipation Note in the amount of $1,700,000 (Wilkinsburg Borough, Borough

Council Public Meeting Minutes, November, 1985); and in December, Council once

again vacated the Borough Solicitor’s position (Wilkinsburg Borough, Borough Council

Public Meeting Minutes, December 23, 1985).

In March 1986, Council approved the investment of the remaining tax anticipation

monies and the investment of the bond monies (Wilkinsburg Borough, Borough Council

Public Meeting Minutes, March 10, 1986). Also in March, a new Borough Solicitor

appears in the official record (Wilkinsburg Borough, Borough Council Public Meeting

Minutes, March 10, 1986); and then again in May, Council appointed another Borough

Solicitor (Wilkinsburg Borough, Borough Council Public Meeting Minutes, May 1986).

Although there was no mention of any type of financial crises during 1986, in December,

Council applied for a tax anticipation note in the amount of $1,750,000 to be used to

carry the Borough’s expenditures through the first four months of 1987 (Wilkinsburg

Borough, Borough Council Public Meeting Minutes, December, 1986).

235

In 1987, the reason for no mention of financial crises and the apparent financial

stability was realized. In April 1987, it was discovered that the bond monies were never

deposited into the bond fund, but were deposited into the general fund; and the bond

monies were used for general operating expenditures as opposed to the designated

purposes as described in the bond indenture (Wilkinsburg Borough, Borough Council

Public Meeting Minutes, April 13, 1987). By May 1987, it was realized that only four to

five hundred thousand of the bond monies were remaining (Wilkinsburg Borough,

Borough Council Public Meeting Minutes, May 26, 1987).

During that same period of time, (spring of 1987), a long-time Councilman came

forward and admitted to being a heroin addict and in order to support his addiction,

admitted to theft (Wilkinsburg Borough, Borough Council Public Meeting Minutes, April

13, 1987). Although the record is not clear whether the admission of theft pertained to

Borough funds, over the next few months, the minutes do allude to missing funds; and

further, the minutes do speak of the public’s perception of missing funds as being related

to the Councilman’s drug problem. In April 1987, when the Councilman came forth,

other members of Council requested his resignation; however, the Councilman refused to

resign and reportedly went into rehabilitation (Wilkinsburg Borough, Borough Council

Public Meeting Minutes, April 13, 1987). Also in April 1987, the effects of the financial

crises were imminent enough that Council vacated two full-time positions in the

Recreation Department (Wilkinsburg Borough, Borough Council Public Meeting

Minutes, April 13, 1987).

The following month (May 1987), Council announced that a draft of the 1985

audit was available for public viewing. The citizenry took offense because the 1985 audit

236

was to be completed no later than March 31, 1986. Discussion also ensued with regard to

the bond monies and Council announced that the bond monies were spent for operating

expenditures in 1986 and only four to five hundred thousand dollars of the bond monies

remained. At that point in time, Council President created an Investigative Committee to

establish exactly how the bond monies were spent and appointed the Councilman who

had just returned from drug rehabilitation as the Committee Chair (Wilkinsburg Borough,

Borough Council Public Meeting Minutes, May 26, 1987).

In June 1987, the citizenry was once again attending public meetings and coming

forward to speak about the financial condition of the Borough. The citizenry called for a

hold on spending (other than payroll) (Wilkinsburg Borough, Borough Council Public

Meeting Minutes, June 8, 1987). In response, Council appointed a high-priced attorney

from the City and authorized the newly appointed attorney to investigate the

circumstances under which creditors of the Borough were contacted by unauthorized

persons and to refer the results of the (solicitor’s) investigation to the Office of the

Allegheny County District Attorney. At that same meeting, the Borough Manager

resigned and two seats on Council became vacant due to resignations (Wilkinsburg

Borough, Borough Council Public Meeting Minutes, June 22, 1987). In addition, the

Office of the Pennsylvania District Attorney was conducting their own investigation of

the financial matters in Wilkinsburg Borough (there in no mention in the public record as

to how or when the State Attorney General was called to Wilkinsburg) (Wilkinsburg

Borough, Borough Council Public Meeting Minutes, July 13, 1987); and at some point in

time during the summer months of 1987, the Pittsburgh Press, who was also carrying-out

237

their own investigation for a news story, filed suit against the Borough for the Borough’s

refusal to release financial records.

In September (1987) another member of Council resigned and the Councilman in

charge of the Investigative Committee requested a leave of absence until there was a

ruling from the Courts on the charges filed against him by the Allegheny District

Attorney (Wilkinsburg Borough, Borough Council Public Meeting Minutes, September

28, 1987). Although the record is not clear as to when the Office of the Auditor General

concluded its investigation and referred matters to the Office of the Allegheny District

Attorney, the findings reported by the Auditor General, in a letter dated December 4,

1987, consisted of numerous accounts of intentional financial mismanagement and

possible criminal misconduct on behalf of more than one individual to include staff

and/or persons acting in an official capacity (Office of the Auditor General of the

Commonwealth of Pennsylvania, written correspondence, December 4, 1987).

In November, (1987) when the financial crises was coming to a head, the

Borough’s Finance Director resigned (Wilkinsburg Borough, Borough Council Public

Meeting Minutes, November 9, 1987). The citizenry, at a public meeting in November,

wanted answers from the Finance Director to specific questions who (having resigned the

afternoon of the day of the evening public meeting) was not available for comment.

However, in a letter to Council, the Finance Director claimed that the financial records

were missing due to fulfilling the numerous requests from the Citizen’s Committee. A

member of the Citizen’s Committee then publicly stated that the Committee never

received original documents and for the most part, the Committee’s requests for

information were not fulfilled by the Finance Director. In addition, as a result of the

238

Finance Director’s refusal to provide financial records to complete the 1985 audit and the

timely complete of the 1986 audit that was yet to be completed, the Borough lost the

1986 liquid fuels allocation of $200,000 (due to the inability to provide a 1985 financial

audit), and the governing bodies’ Errors and Omissions insurance was due to expire in a

matter of days (Wilkinsburg Borough, Borough Council Public Meeting Minutes,

November 9, 1987). During the course of business in November, Council once again

discussed the possibility of lay-offs when the Acting Manager (whom was the same

person that resigned in June) reported an estimated year-end projected deficit of $582,000

(Wilkinsburg Borough, Borough Council Public Meeting Minutes, November 9, 1987).

In December 1987, and based upon: (a) the resignation of the Finance Director,

(b) findings of the Citizen’s Committee, and (c) the Acting Manager’s projected year-end

deficit, Council made motion to request assistance from the Pennsylvania Department of

Community Affairs (Wilkinsburg Borough, Borough Council Public Meeting Minutes,

December, 1987). On January 19, 1988, Wilkinsburg Borough was officially declared as

financially distressed by the Secretary of the Pennsylvania Department of Community

Affairs.

239

APPENDIX F. FINANCIAL DISTRESS IN NORTH BRADDOCK

Although North Braddock Borough was officially declared financially distressed

by the Commonwealth of Pennsylvania Department of Community of Community and

Economic Development (formerly the Department of Community Affairs) on May 22,

1995, there was a keen sense of awareness among the citizenry of North Braddock

Borough that something was amiss in their community for many years prior to the official

financial distress declaration. In 1987, eight years prior to financial distress, a review of

the public record reveals complaints from citizens in regard to the governing bodies

spending habits and that the monthly reports of council committee representatives lacked

substance (North Braddock Borough, Borough Council Public Meeting Minutes, October

20, 1987, Vol. X, p 67); one year later in 1988, the citizenry stated that Council never

discusses the financial condition of the Borough in public (North Braddock Borough,

Borough Council Public Meeting Minutes, February 16, 1988, Vol. X, pg. 102).

In 1993, when the financial crises was coming to a peak, the citizenry was

concerned about the general decline in their community (North Braddock Borough,

Borough Council Public Meeting Minutes, October 19, 1993, Vol. X, pg. 501) and

questioned the governing body’s decision to incur additional debt, to defer unpaid bills at

year-end to the subsequent year; and demanded that Council operate the borough more

efficiently (North Braddock Borough, Borough Council Public Meeting Minutes,

December 30, 1993, Vol. X, pg. 511).

Although no discussion on behalf of Council can be found in the public record

with regard to the financial condition of the Borough, a review of the public record

240

indicates that the governing body was aware of the financial condition and was taking

incremental steps to try to alleviate the financial strain. This awareness is evidenced by

Council’s actions in the years prior to financial distress. For examples:

- (1988) a garbage service fee was adopted borough-wide to assist in recovering the

costs associated to garbage collection (North Braddock Borough, Borough

Council Public Meeting Minutes, February 16, 1988, Vol. X, pg. 102);

- (1990) the garbage service fee was increased to cover the actual costs of the

service (North Braddock Borough, Borough Council Public Meeting Minutes,

January 16, 1990, Vol. X, pg. 102);

- (1990) Council reviewed and increased fines associated to municipal code

violations (North Braddock Borough, Borough Council Public Meeting Minutes,

May 17, 1990, pg. 263);

- (1990) Council entered into an intergovernmental cooperation agreement for

police services (North Braddock Borough, Borough Council Public Meeting

Minutes, July 17, 1990, Vol. X, pg. 274);

- (1990) Council began to lien delinquent real estate tax parcels (North Braddock

Borough, Borough Council Public Meeting Minutes, November 20, 1990, Vol. X,

pg. 296);

- (1991) Council established the Vacant Property Review Committee to assist the

Turtle Creek Valley Council of Governments with prioritizing community

revitalization projects (North Braddock Borough, Borough Council Public

Meeting Minutes, March 19, 1991, Vol. X, pg 319); and

241

- (1991) Council began to research shared zoning and code enforcement services

with the adjacent borough of Forrest Hills (North Braddock Borough, Borough

Council Public Meeting Minutes, June 18, 1991, Vol. X, pg. 337); (1991) Council

contracted with the Pennsylvania Economy League to have a study completed on

joint municipal police dispatching (North Braddock Borough, Borough Council

Public Meeting Minutes, August 20, 1991, Vol. X. pg 348).

By year end, 1991, the Borough was operating with a deficit. The public record

indicates that a formal motion was passed to carry-over the deficit from 1991 into 1992

(North Braddock Borough, Borough Council Public Meeting Minutes, February 18, 1992,

Vol. X, pg 384). In March of 1992, Council requested technical assistance through the

Peer-to-Peer Program from the Commonwealth of Pennsylvania Department of

Community and Economic Development and Peer Consultants were contracted to review

and assess the financial and management activities of the Borough and to provide

recommendations for improvement (North Braddock Borough, Borough Council Public

Meeting Minutes, March 17, 1992, Vol. X, pg. 391). As a result, the peer report as

presented to Council in November 1992, provided six basic recommendations that were

to be incorporated into the 1993 budget that would provide a cost savings of

approximately $100,000: shared services in financial administration and police and

emergency dispatching; improved earned income tax collections; in-house sewage

services billing with added fee to be charged to customers; third-party refuse/recycling

collection services; and the removal of excess street lights in an effort to reduce electric

use/charges (Pennsylvania Department of Community and Economic Development, Peer

Consultant Report for North Braddock Borough, November 1992, p. 14). In addition, the

242

peer report also recommended that the Borough make improvements in financial

management and internal control practices to include budgeting, purchasing, tax

collection, payroll and accounts payable (p. 6); reorganize the committee system of

Council to have fewer standing committees with clearly defined responsibilities and

duties (p. 9); review and evaluate the school crossing-guard program (p. 13); and

eliminate paid fire truck drivers (p. 13) (Pennsylvania Department of Community and

Economic Development, Consultative Report for North Braddock Borough, November

1992).

At 1992 year-end, the deficit was in excess of $120,000 (North Braddock

Borough, Borough Council Public Meeting Minutes, February 16, 1993, Vol. X, pg. 453).

In 1993, the Borough ended the year with a deficit of $129,934 in addition to liabilities of

$270,000; and in 1994, a year-end deficit of $400,000.

In early 1995, concerned citizens gathered over their concerns for the financial

well being and stability of North Braddock Borough and passed a petition that was signed

by 10 percent of electors of North Braddock that participated in the preceding municipal

election. The petition along with the required documentary evidence was submitted to the

Department of Community Affairs as a request for technical assistance as a financially

distressed community under the Pennsylvania Financial Recovery Act (Act 47). The

representative electorate alleged that five criteria (as follows), as established by Act 47,

were believed to be present in North Braddock Borough: the borough maintained a deficit

over a three-year period; the borough’s expenditures exceeded the borough’s revenues for

a period of three or more years; the borough failed to forward earned income taxes or

failed to transfer employer/employee contributions for social security; the borough

243

accumulated and operated for each of the two successive years at a deficit equal to 5% or

more of its revenues; and as a result of reaching the legal real estate tax levy limits for

general operating purposes (per the PA Borough Code), the borough’s capacity to

provide municipal services (police, highway and other) were being affected (PA

Department of Community and Economic Development, Request (Application) For A

Determination of Municipal Financial Distress, February 20, 1995).

The Borough was notified of the petitioner’s request for a financial distress

determination and the Department of Community and Economic Development thereafter

initiated a consultative review process and scheduled a Public Hearing on the matter for

April 20, 1995 (PA DCA, 1995a). The Consultative Evaluation Report as submitted into

evidence at the Act 47 Public Hearing on April 20, 1995, provided evidence that North

Braddock Borough had operated with a deficit in 1991-1994 that ranged from

approximately 20% to 34% of the Borough’s average annual operating revenues, and that

the Borough’s ability to deliver basic services was significantly strained as a result of the

operating deficit (p.4) which was brought on by a significant tax base erosion between

1970 through the mid 1980s as a result in the decline of the steel industry in the Mon

Valley (p.8) (PA DCA, 1995a). The consultative report of findings, released on April 20,

1995, reported that four of the eleven criteria identified in Section 201 of Act 47 were

found to be present in North Braddock Borough (PA DCA, 1995a).

The subsequent public record (Meeting Minutes of Borough Council) is silent on

any further discussions of council on this regard; however, it is evident based upon the

hearing officer’s report that Council was divided on how to proceed and did not fully

cooperate with the Department. Prior to the public hearing, the Director of the PA

244

Department of Community and Economic Development, in a written correspondence

dated April 13, 1992, asked for the full cooperation from the borough’s council and

mayor at the public hearing, and requested that certain issues be addressed by borough

officials at the hearing to include the presence and presentation of testimony from the

mayor, borough council, and the borough’s manager and other administrative personnel,

solicitor, auditor, engineer, and department heads (to include police chief, fire chief, and

public works director).

As presented in the report of the Hearing Officer, only two members of borough

council were present at the hearing and testified; the borough manager was present but

did not provide testimony; the municipal solicitor, although present to answer questions,

refused to testify; and the appointed auditor did not attend and did not submit written

testimony (PA DCED, Report of the Hearing Officer, Borough of North Braddock,

Allegheny County, May 19, 1995, p. 3-5). Other than the two members of council and the

two citizens that initiated the filing of the petition to the Department, the only other

testimony heard at the public hearing was that from the Fire Chief who presented

information on fire services and future capital needs of the volunteer fire department (PA

DCED, Report of the Hearing Officer, Borough of North Braddock, Allegheny County,

May 19, 1995, p. 3-4).

In addition, according to the report of the Hearing Officer, prior to the public

hearing, the borough’s officials were asked to respond to a series of 10 written questions

that were provided to them by the Department, either in writing to be submitted into

evidence at the public hearing, or by way of verbal testimony at the public hearing. The

answers to the 10 questions were not prepared by any of the borough’s public officials for

245

submission into evidence at the public hearing; therefore, during the course of the public

hearing, the Hearing Officer read aloud, the 10 questions to be answered and then

presented the questions in written format to council’s president in request that the

questions be answered within 10 days for submission into the hearing document record

(PA DCED, Report of the Hearing Officer, Borough of North Braddock, Allegheny

County, May 19, 1995).

The report of the Hearing Officer as written within less than 30 days from the

public hearing stated that borough officials did not respond to the questions for which

they were asked to prepare answers (p. 5); and as a finding within the report, the Hearing

Officer contended that one of the major symptoms of the borough’s financial distress was

“a continuing pattern of unwillingness to face up to and deal with North Braddock’s

financial difficulties” (p.6) (PA DCED, Report of the Hearing Officer, Borough of North

Braddock, Allegheny County, May 19, 1995).

246

APPENDIX G. PUBLIC SERVICE DEPARTMENTS

AND APPOINTED OFFICIALS

Public Service Departments

and Appointed Officials

East

Pittsburgh

Homestead North

Braddock

Wilkinsburg

General Government Admin. Borough Manager/Secretary

Administrative Assist. to

Manager Solicitor

Professional Engineer

Appointed Auditor

-

-

-

Finance Department Finance Director

Assistant to Finance Director

Manager

-

-

Manager

-

Public Safety Police Department

Fire Department

Code Enforcement Department

volunteer

volunteer

volunteer

¹

Public Works Department Streets Department

Solid Waste Collection

Water Plant

contracted³ -

contracted³ Pre-distress⁴

² contracted³

-

- -

Public/Community Library - - -

Parks and Recreation Department - - -

Commissions and Boards Planning Commission

Zoning Hearing Board

Parks & Rec. Advisory Board Art and Civic Design Comm.

Civil Service Commission

-

-

-

-

-

-

X

X

X X

X

Municipal Authorities

Water Authority (multi-

municipal)

Sewer Authority (multi- municipal)

-

-

-

Intergovernmental Cooperation

Shared Services Regional Econ. Dev. Initiatives

Council of Governments

TCV COG

-

SV COG

TCV COG

-

TCV COG

Notes: Table created from data available from: Pennsylvania Department of Community Affairs. (1988a).

Financial recovery plan for Wilkinsburg Borough, Allegheny County, Pennsylvania. Harrisburg: Author.; Pennsylvania Department of Community Affairs. (1988b). Wilkinsburg Borough consultative evaluation

report. Harrisburg: Author.; Pennsylvania Department of Community Affairs. (1992). East Pittsburgh

Borough consultative evaluation report. Harrisburg: Author.; Pennsylvania Department of Community

Affairs. (1993a). Financial recovery plan for East Pittsburgh Borough, Allegheny County, Pennsylvania. Harrisburg: Author.; Pennsylvania Department of Community Affairs. (1993b). Financial recovery plan

for Homestead Borough, Allegheny County, Pennsylvania. Harrisburg: Author.; Pennsylvania Department

247

of Community Affairs. (1993c). Homestead Borough consultative evaluation Report. Harrisburg: Author.

Pennsylvania Department of Community Affairs. (1995). North Braddock Borough consultative evaluation

report. Harrisburg: Author.; Pennsylvania Department of Community Affairs. (1996). Financial recovery

plan for North Braddock Borough, Allegheny County, Pennsylvania.

¹ The Wilkinsburg Fire Department in 2010, merged with the City of Pittsburgh.

² During the distress period, the Borough contracted with the Turtle Creek Valley Council of Governments

for street services.

³ During the distress period, the Borough began to contract garbage collection services.

⁴ In 1987, the Homestead Borough water system was sold for $850,000.

TCV COG: Turtle Creek Valley Council of Governments

SV COG: Steel Valley COG

248

APPENDIX H. TAXES LEVIED BY CASE MUNICIPALITY

Tax Type E. Pittsburgh Homestead N. Braddock Wilkinsburg

General Purpose Real

Estate Tax

Pre

Dis

Post

Special Purpose Real Estate Tax

Pre

Dis

Post E No

Earned Income Tax (Residential)

Pre

Dis

Post

Earned Income Tax

(Nonresidential)

Pre NA NA NA NA

Dis

Post NA NA NA NA

Occupation Privilege Tax

Pre

Dis

Post NA NA NA NA

*Emergency and Municipal Services

Tax of 2004

Pre NA NA NA NA

Dis NA NA NA NA

Post NA NA

**Local Services

Tax of 2007

Pre NA NA NA NA

Dis NA NA NA NA

Post NA

Per Capita Tax Pre E No E No E No

Dis E No E No E No

Post E No E No E No

Mechanical Device

Tax

Pre

Dis

Post

Business/Mercantile

Privilege Tax

Pre E No E No

Dis E No E No

Post E No E No

Amusement Tax Pre E No

E No

E No

E No

E No

E No

E No

E No

E No Dis

Post

Real Property

Transfer Tax

Pre

Dis

Post

249

Tax Type E. Pittsburgh Homestead N. Braddock Wilkinsburg

Act 77 of 1993

Regional Asset

District Tax

Pre

NA

NA

NA

NA

Dis

Post Notes: Table created from data available from: Pennsylvania Department of Community Affairs. (1988a).

Financial recovery plan for Wilkinsburg Borough, Allegheny County, Pennsylvania. Harrisburg: Author.; Pennsylvania Department of Community Affairs. (1988b). Wilkinsburg Borough consultative evaluation

report. Harrisburg: Author.; Pennsylvania Department of Community Affairs. (1992). East Pittsburgh

Borough consultative evaluation Report. Harrisburg: Author.; Pennsylvania Department of Community

Affairs. (1993a). Financial recovery plan for East Pittsburgh Borough, Allegheny County, Pennsylvania.

Harrisburg: Author.; Pennsylvania Department of Community Affairs. (1993b). Financial recovery Plan

for Homestead Borough, Allegheny County, Pennsylvania. Harrisburg: Author.; Pennsylvania Department

of Community Affairs. (1993c). Homestead Borough consultative evaluation Report. Harrisburg: Author.;

Pennsylvania Department of Community Affairs. (1995). North Braddock Borough consultative evaluation

report. Harrisburg: Author; Pennsylvania Department of Community Affairs. (1996). Financial recovery

plan for North Braddock Borough, Allegheny County, Pennsylvania.

Pre Pre-distress D Distress

Post Post-distress

tax levied and collected

E elected no levy

NA Not applicable to time period

* Emergency and Municipal Services Tax (EMST): Act 222 of 2004, amended the Local Tax Enabling Act (Act 511 of 1965) to permit municipalities and school districts whose taxing authority derives from Act 511, to impose on persons employed within the jurisdiction a combined Emergency and Municipal Services Tax (EMST) of up to $52 a year beginning on and after January 1, 2005. The EMST replaces the occupational privilege tax. (PA DCED, Taxation Manual, 2004) ** Local Services Tax (LST): Act 7 of 2007, amended the Local Tax Enabling Act (Act 511 of 1965), by

changing the name of the Emergency and Municipal Services Tax to the Local Services Tax. Act 7 of 2007

also altered the way in which the LST was to be collected and provided exemptions for individuals whose

earned income from all sources is less than $12,000 annually. (PA DCED, Taxation Manual, 2004)

250

APPENDIX I. EAST PITTSBURGH AND

HOMESTEAD REVENUES PER CAPITA

Year

East

Pittsburgh

Population

Average

Revenues

Revenues

Per Capita

Homestead

Population

Average

Revenues

Revenues

Per Capita

1983

2,493 $489,154 $196 5,092 $15,427,500 $3,030

1984

1985

1986

1987

1988

1989

1990

2,160 $746,474 $346 4,179 $7,229,333 $1,730

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2,017 1,016,870 $504 3,569 $119,858,876 $33,583

2001

2002

2003

2004

2005

2006

2007

2008

Note: Pennsylvania Department of Community and Economic Development. (2012). Municipal statistics.

Retrieved from http://www.newpa.com/local-government/municipal-statistics

251

APPENDIX J. NORTH BRADDOCK AND WILKINSBURG

REVENUES PER CAPITA

Year North

Braddock

Population

Average

Revenues

Revenues

Per Capita

Wilkinsburg

Population

Average

Revenues

Revenues

Per Capita

1983

Not

Applicable

Not

Applicable

Not

Applicable 23,669

1983-1989

Not Applicable

Not

Applicable 1984

1985

1986

$5,537,032 $234 1987

1988

1989

1990

7,036 $1,727,526 $246 21,080 $8,627,052 $409

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

6,410 $2,497,567 $390

19,196

$11,411,177

$594 2001

2002

2003

2004

2004-2008

Not

Applicable

Not

Applicable

2005

2006

2007

2008



252

APPENDIX K. EAST PITTSBURGH TAX REVENUES

Tax

Year

Real

Estate

Tax

Earned

Income

Real

Property

Transfer

Occupati

onal

Privilege

Mechanical

Devices

Total

Taxes

1987 $368,902 $35,572 $2,384 $7,040 $6,025 $419,923

1988 $220,325 $44,778 $3,356 $6,718 $6,325 $281,502

1989 $207,186 $40,361 $4,832 $3,520 $2,475 $258,374

1990 $265,227 $40,576 $2,125 $2,598 $4,550 $315,076

1991 $250,233 $44,140 $3,272 $3,315 $1,350 $302,310

1992 $249,836 $45,556 $1,676 $4,170 $2,850 $304,088

1993 $242,268 $43,287 $5,592 $4,815 $6,525 $302,487

1994 $254,323 $71,149 $5,282 $4,180 $5,825 $340,759

1995 $263,182 $123,851 $6,708 $6,010 $4,650 $404,401

1996 $257,833 $96,276 $3,926 $9,541 $3,675 $371,251

1997 $243,486 $66,630 $8,349 $12,032 $9,450 $339,947

1998 $233,682 $75,734 $4,050 $5,941 $12,550 $331,957

1999 $261,714 $65,721 $8,782 $6,209 $19,650 $362,076

2000 $246,487 $68,234 $6,732 $8,268 $14,175 $343,896

2001 $244,135 $67,027 $10,894 $7,830 $11,300 $341,186

2002 $249,799 $67,042 $5,864 $7,926 $10,350 $340,981

2003 $342,979 $90,212 $4,966 $6,535 $13,050 $457,742

2004 $396,961 $67,508 $10,118 $7,477 $18,700 $500,764 Note: Pennsylvania Department of Community and Economic Development. (2012). Municipal statistics.


253

APPENDIX L. HOMESTEAD TAX REVENUES

Tax

Year

Real

Estate Tax

Earned

Income

Per

Capita

Real

Property

Transfer

1988 $615,692 $51,438 $0 $9,385

1989 $448,409 $73,503 $0 $5,116

1990 $458,244 $72,269 $0 $7,074

1991 $445,807 $76,206 $0 $6,089

1992 $442,755 $76,635 $0 $6,213

1993 $403,579 $71,332 $9,635 $4,856

1994 $326,017 $158,533 $14,261 $5,695

1995 $354,779 $232,245 $6,002 $8,621

1996 $340,310 $226,048 $6,025 $4,760

1997 $421,345 $211,750 $0 $27,112

1998 $387,046 $196,706 $0 $52,938

1999 $400,982 $215,786 $0 $61,297

2000 $527,940 $242,162 $0 $19,668

2001 $558,851 $260,042 $0 $50,890

2002 $663,398 $303,728 $0 $35,602

2003 $982,130 $358,638 $0 $465,649

2004 $920,196 $425,624 $0 $104,901

2005 $1,125,483 $218,628 $0 $46,261

2006 $1,120,279 $94,411 $0 $56,292

2007 $1,134,960 $142,104 $0 $509,963

2008 $1,052,451 $143,540 $0 $20,231

2009 NA NA NA NA

2010 NA NA NA NA Note: Pennsylvania Department of Community and Economic Development. (2012). Municipal statistics.


254

Tax

Year

Occup.

Privilege/

EMST/

Local

Services

Mercantile Business

Privilege

Mech.

Devices

Year End

Total

Taxes

1988 $8,162 $0 $18,400 $0 $703,077

1989 $8,270 $0 $15,100 $0 $550,398

1990 $7,304 $0 $10,850 $0 $555,741

1991 $9,144 $0 $14,450 $0 $551,696

1992 $7,881 $0 $14,825 $0 $548,309

1993 $8,276 $0 $19,450 $0 $517,128

1994 $6,565 $6,500 $30,305 $0 $547,876

1995 $6,637 $0 $0 $28,160 $636,444

1996 $6,663 $0 $3,025 $24,075 $610,906

1997 $6,455 $0 $0 $46,175 $712,837

1998 $6,270 $0 $0 $33,900 $676,860

1999 $8,558 $0 $14,746 $38,400 $739,769

2000 $7,956 $0 $18,099 $61,700 $877,525

2001 $19,466 $0 $20,320 $33,875 $943,444

2002 $40,292 $0 $21,117 $44,375 $1,108,512

2003 $35,839 $0 $22,866 $38,700 $1,903,822

2004 $32,628 $0 $25,150 $63,700 $1,572,199

2005 $173,406 $0 $24,966 $61,425 $1,650,169

2006 $174,430 $0 $25,611 $57,075 $1,649,368

2007 $192,562 $0 $23,074 $56,400 $2,146,252

2008 $114,896 $0 $19,775 $51,300 $1,592,239

2009 NA NA NA NA NA

2010 NA NA NA NA NA Note: Pennsylvania Department of Community and Economic Development. (2012). Municipal statistics.


255

APPENDIX M. NORTH BRADDOCK TAX REVENUES

Tax

Year

Real

Estate

Tax

Earned

Income

Real

Property

Trans

511

Occup.

Priv.

/EMS/

Local

Services

Amuse-

ment

Tax

Mechanical

Devices

Total

Taxes

1990 $579,140 $152,856 $9,113 $3,892 $0 $6,015 $751,016

1991 $596,262 $152,034 $7,298 $13,820 $0 $4,400 $773,814

1992 $597,856 $160,818 $7,784 $14,319 $0 $3,700 $784,477

1993 $602,948 $170,051 $7,260 $11,355 $0 $4,600 $796,214

1994 $558,379 $169,088 $9,378 $11,204 $0 $13,250 $761,299

1995 $494,971 $180,938 $11,331 $3,590 $0 $14,200 $705,030

1996 $494,100 $301,572 $9,265 $11,777 $3,661 $11,950 $832,325

1997 $531,843 $684,304 $10,619 $11,979 $10,409 $10,150 $1,259,304

1998 $496,113 $344,932 $8,664 $11,192 $27,782 $9,400 $898,083

1999 $500,146 $208,745 $12,564 $9,541 $10,201 $10,050 $751,247

2000 $528,017 $209,172 $13,502 $10,473 $21,345 $10,100 $792,609

2001 $593,687 $206,121 $8,800 $19,461 $5,406 $9,300 $842,775

2002 $588,342 $196,704 $12,099 $11,054 $6,840 $7,400 $822,439

2003 $610,063 $230,669 $15,879 $8,696 $0 $5,650 $870,957

2004 $590,238 $217,213 $13,931 $8,212 $0 $13,400 $842,994

2005 $552,538 $195,291 $13,187 $42,093 $5,824 $11,100 $820,033

2006 $638,706 $212,651 $17,992 $46,799 $8,789 $20,600 $1,133,855

2007 $654,234 $211,172 $10,826 $44,722 $17,000 $25,000 $1,151,551

2008 $630,573 $211,282 $10,632 $31,956 $8,767 $22,500 $1,122,697 Note: Pennsylvania Department of Community and Economic Development. (2012). Municipal statistics.


256

APPENDIX N. WILKINSBURG TAX REVENUES

Tax

Year

Real

Estate Mill

Rate

Real Estate

Tax

Earned

Income

Real

Property Transfer

Occup.

Priv. / EMST/

Local

Services

Business /

Mercantile

Total

Taxes

1986 44.7 $2,917,535 $615,000 $79,393 $28,000 $223,084 $3,863,012

1987 44.7 $2,914,678 $628,200 $79,105 $34,000 $226,159 $3,882,142

1988 47.1 $3,115,495 $628,000 $47,571 $30,500 $221,667 $4,043,233

1989 45.9 $3,045,849 $813,156 $63,578 $27,960 $221,760 $4,172,303

1990 45.1 $3,060,464 $1,176,698 $88,221 $28,906 $279,046 $4,633,335

1991 47 $3,212,386 $1,121,657 $66,743 $25,625 $211,693 $4,638,104

1992 47 $3,151,025 $1,218,393 $81,988 $24,028 $211,467 $4,686,901

1993 49 $3,299,924 $1,162,204 $68,026 $24,192 $217,609 $4,771,955

1994 49 $3,294,623 $1,175,249 $66,746 $22,577 $193,260 $4,752,455

1995 46.5 $3,063,280 $1,142,063 $56,920 $23,345 $182,889 $4,468,497

1996 46.5 $3,168,139 $1,055,925 $73,171 $22,914 $239,259 $4,559,408

1997 46.5 $3,118,402 $1,093,229 $67,628 $27,693 $257,445 $4,564,397

1998 46.5 $3,018,353 $896,774 $75,284 $23,454 $247,809 $4,261,674

1999 46.5 $2,920,562 $884,470 $95,669 $19,937 $213,578 $4,134,216

2000 8.913 $2,899,643 $856,809 $94,524 $20,288 $200,134 $4,071,398

2001 9.913 $3,011,099 $871,440 $88,167 $21,713 $231,591 $4,224,010

2002 10 $3,143,497 $912,319 $94,591 $20,253 $216,502 $4,387,162

2003 14 $3,338,960 $775,169 $94,163 $20,794 $223,652 $4,452,738



257

APPENDIX O. REAL ESTATE TAX REVENUES BY CASE MUNICIPALITY

Tax Year East Pittsburgh Homestead North Braddock Wilkinsburg




1986 Not Applicable Not Applicable Not Applicable $2,917,535

1987 $368,902 Not Applicable Not Applicable $2,914,678

1988 $220,325 $615,692 Not Applicable $3,115,495

1989 $207,186 $448,409 Not Applicable $3,045,849

1990 $265,227 $458,244 $579,140 $3,060,464

1991 $250,233 $445,807 $596,262 $3,212,386

1992 $249,836 $442,755 $597,856 $3,151,025

1993 $242,268 $403,579 $602,948 $3,299,924

1994 $254,323 $326,017 $558,379 $3,294,623

1995 $263,182 $354,779 $494,971 $3,063,280

1996 $257,833 $340,310 $494,100 $3,168,139

1997 $243,486 $421,345 $531,843 $3,118,402

1998 $233,682 $387,046 $496,113 $3,018,353

1999 $261,714 $400,982 $500,146 $2,920,562

2000 $246,487 $527,940 $528,017 $2,899,643

2001 $244,135 $558,851 $593,687 $3,011,099

2002 $249,799 $663,398 $588,342 $3,143,497

2003 $342,979 $982,130 $610,063 $3,338,960

2004 $396,961 $920,196 $590,238 Not Applicable

2005 Not Applicable $1,125,483 $552,538 Not Applicable









258

APPENDIX P. TOTAL EXPENDITURES BY CASE MUNICIPALITY

East Pittsburgh Homestead North Braddock Wilkinsburg

Year Total

Expends.

Year Total

Expends.

Year Total

Expends.

Year Total

Expends.

Pre

-dis

tres

s

1987 $593,221

Pre

-dis

tres

s

1988 $1,273,975

Pre

-dis

tres

s

1990 $1,167,950

Pre

-dis

tres

s

Na Na

1988 $585,303 1989 $1,327,879 1991 $1,284,322 Na Na

1989 $721,889 1990 $1,491,708 1992 $1,225,330 Na Na

1990 $676,179 1991 $1,486,102 1993 $1,506,514 1986 $6,472,712

1991 $495,022 1992 $1,452,172 1994 $1,445,300 1987 $6,000,671

Dis

tres

s

1992 $550,379

Dis

tres

s

1993 $1,404,153

Dis

tres

s

1995 $1,496,476

Dis

tres

s

1988 $5,602,248

1993 $602,647 1994 $1,528,441 1996 $1,376,659 1989 $5,338,905

1994 $705,123 1995 $1,738,408 1997 $1,899,730 1990 $6,005,549

1995 $672,632 1996 $1,500,752 1998 $2,987,604 1991 $7,141,708

1996 $874,420 1997 $1,491,226 1999 $2,606,197 1992 $7,262,488

1997 $796,214 1998 $2,043,805 2000 $2,908,001 1993 $7,403,673

1998 $918,736 1999 $2,259,353 2001 $2,607,571 1994 $7,345,677

1999 $901,228 2000 $2,961,763 2002 $2,685,200 1995 $8,270,362

Po

st-d

istr

ess

2000 $957,985 2001 $2,462,535 2003 $2,948,366 1996 $8,448,366

2001 $1,151,058 2002 $2,768,528

Po

st-d

istr

ess

2004 $3,062,900 1997 $8,026,584

2002 $1,160,546 2003 $3,336,615 2005 $2,719,830 1998 $9,310,989

2003 $1,104,696 2004 $3,760,320 2006 $2,093,635

Po

st-d

istr

ess

1999 $10,938,974

2004 $1,018,136 2005 $4,015,279 2007 $2,497,585 2000 $12,298,473

2006 $3,005,024 2008 $2,366,741 2001 $14,016,506

2007 $3,433,540

2002 $11,732,563

Post

-dis

tress

2008 $3,304,791

2003 $13,359,596

2009 Na

2010 Na



Na: Data not available

259

APPENDIX Q. EAST PITTSBURGH DEPARTMENTAL EXPENDITURES

Year General

Govern. Admin.

Public

Safety

Refuse

Collect.

Public

Works

Sanitary

Sewers

Culture,

Recreat. Library

Planning

Zoning Codes

Total

1987 $108,895 $195,463 $39,106 $125,959 $2,615 $1,178 $2,386 $475,602

1988 $119,929 $187,237 $50,846 $76,273 $1,258 $2,409 $1,920 $439,872

1989 $121,197 $263,104 $76,249 $103,894 $6,441 $2,971 $1,944 $575,800

1990 $167,707 $182,163 $73,404 $144,449 $5,639 $1,188 $2,947 $577,497

1991 $106,213 $127,368 $71,596 $58,759 $1,346 $650 $0 $365,932

1992 $99,524 $116,077 $77,350 $78,638 $742 $140 $2,007 $374,478

1993 $125,531 $183,422 $58,547 $90,410 $0 $468 $2,026 $460,404

1994 $160,753 $188,186 $59,323 $151,036 $3,832 $577 $5,084 $568,791

1995 $146,859 $180,048 $48,171 $99,089 $90,652 $400 $3,899 $569,118

1996 $190,551 $209,907 $47,218 $173,605 $91,643 $3,500 $5,821 $722,245

1997 $159,012 $209,668 $43,519 $100,709 $111,353 $3,500 $5,900 $633,661

1998 $153,654 $224,131 $46,460 $120,639 $125,833 $9,000 $3,524 $683,241

1999 $205,854 $283,848 $47,751 $102,133 $134,463 $4,000 $4,633 $782,682

2000 $138,139 $296,725 $49,143 $123,377 $192,345 $2,000 $23,173 $824,902

2001 $155,764 $323,903 $60,334 $112,442 $253,369 $844 $314 $906,970

2002 $179,148 $355,236 $60,295 $133,548 $197,628 $1,720 $0 $927,575

2003 $150,981 $408,314 $62,031 $129,320 $146,413 $1,732 $5,060 $903,851

2004 $150,981 $356,599 $77,084 $123,766 $160,871 $1,286 $16,293 $886,880



260

APPENDIX R. HOMESTEAD DEPARTMENTAL EXPENDITURES

Year General

Govern. Admin.

Public

Safety

Refuse

Collect.

Public

Works

Sanitary

Sewers

Culture,

Recreat. Library

Planning

Zoning Codes

Total

1988 $144,664 $504,165 83,738 $183,653 $59,261 $500 $475 $976,456

1989 $185,557 $431,672 $88,948 $206,160 $100,197 $7,750 $1,747 $1,022,031

1990 $152,603 $589,236 $100,422 $229,811 $100,566 $0 $300 $1,172,938

1991 $147,033 $490,908 $122,232 $236,371 $140,569 $1,300 $10,006 $1,148,419

1992 $196,272 $525,277 $113,400 $247,330 $110,859 $494 $3,980 $1,197,612

1993 $236,632 $392,095 $97,180 $175,145 $136,182 $932 $528 $1,038,694

1994 $229,646 $585,660 $92,926 $342,161 $136,009 $3,558 $300 $1,390,260

1995 $280,920 $577,079 $97,075 $326,780 $237,639 $0 $9,630 $1,529,123

1996 $258,657 $521,000 $90,906 $258,413 $142,429 $300 $2,738 $1,274,443

1997 $250,147 $514,611 $125,913 $217,162 $175,335 $4,012 $913 $1,288,093

1998 $200,890 $537,101 $114,873 $207,156 $157,496 $485 $0 $1,218,001

1999 $269,448 $678,608 $68,588 $382,188 $225,435 $2,875 $29,136 $1,656,278

2000 $330,017 $832,335 $132,925 $332,913 $319,844 $3,710 $94,883 $2,046,627

2001 $330,622 $944,704 $118,613 $262,111 $206,846 $500 $56,692 $1,920,088

2002 $220,723 $1,021,929 $98,988 $281,300 $387,131 $1,572 $122,303 $2,133,946

2003 $343,644 $1,222,056 $102,510 $319,440 $471,235 $3,819 $109,268 $2,571,972

2004 $373,159 $1,328,358 $113,773 $330,676 $461,006 $31,302 $58,296 $2,696,570

2005 $317,969 $1,173,826 $129,384 $386,327 $432,103 $62,358 $29,240 $2,531,207

2006 $298,157 $1,350,722 $133,575 $199,551 $421,640 $8,684 $87,997 $2,571,530

2007 $300,378 $1,291,959 $144,525 $173,281 $471,164 $25,850 $0 $2,788,638

2008 $386,351 $1,279,954 $159,424 $186,950 $503,056 $26,554 $9,080 $2,719,928



261

APPENDIX S. NORTH BRADDOCK DEPARTMENTAL EXPENDITURES

Year General

Govern. Admin.

Public

Safety

Refuse

Collect.

Public

Works

Sanitary

Sewers

Culture,

Recreat. Library

Planning

Zoning Codes

Total

1990 $185,371 $346,136 $167,701 $262,631 $11,942 $0 $0 $973,781

1991 $167,082 $333,248 $226,902 $298,982 $10,269 $0 $0 $1,036,483

1992 $151,793 $343,245 $198,254 $289,767 $15,887 $3,085 $0 $1,002,031

1993 $159,247 $319,782 $208,704 $289,768 $20,186 $3,918 $0 $1,001,605

1994 $152,151 $367,013 $255,878 $269,040 $13,036 $5,803 $0 $1,062,921

1995 $169,638 $401,090 $247,196 $337,077 $32,595 $792 $0 $1,188,388

1996 $211,334 $359,474 $165,230 $311,116 $47,977 $254 $0 $1,095,385

1997 $286,004 $397,869 $175,402 $294,547 $385,914 $580 $0 $1,540,316

1998 $258,817 $561,013 $165,759 $616,566 $394,797 $2,286 $0 $1,999,238

1999 $344,110 $549,056 $168,541 $367,839 $504,881 $7,180 $30,000 $1,971,607

2000 $276,436 $659,439 $184,512 $547,268 $516,438 $5,173 $30,000 $2,219,266

2001 $223,435 $675,437 $183,600 $325,733 $539,108 $3,550 $0 $1,950,863

2002 $234,515 $614,717 $204,472 $365,609 $607,525 $4,640 $0 $2,031,478

2003 $228,894 $634,246 $214,140 $345,940 $616,080 $13,367 $0 $2,052,667

2004 $252,375 $664,856 $260,771 $443,714 $617,347 $1,219 $0 $2,240,282

2005 $263,854 $593,858 $257,701 $464,624 $460,222 $110 $60,924 $2,101,293

2006 $290,167 $670,419 $260,408 $478,152 $394,294 $2,725 $6,695 $2,102,860

2007 $308,201 $756,815 $269,757 $579,329 $583,483 $9,444 $0 $2,507,029

2008 $281,510 $761,106 $277,979 $559,368 $486,778 $1,250 $0 $2,367,991



262

APPENDIX T. WILKINSBURG DEPARTMENTAL EXPENDITURES

Yr. General

Govern. Admin.

Public Safety

Refuse Collect.

Public Works

Sanitary Sewers

Culture, Recreat. Library

Planning Zoning Codes

Total




86 $654,907 $2,130,206 $491,173 $734,578 $78,472 $319,348 $290,814 $4,699,498

87 $777,977 $2,237,231 $387,567 $816,154 $76,294 $351,707 $74,074 $4,721,004

88 $879,363 $2,332,090 $808,092 $855,097 $0 $179,315 $73,716 $5,127,673

89 $760,536 $2,467,039 $786,212 $787,293 $0 $211,526 $64,658 $5,077,264

90 $815,434 $2,677,680 $1,001,209 $918,845 $0 $243,882 $9,854 $5,666,904

91 $885,007 $2,783,819 $919,544 $999,700 $0 $280,834 $24,743 $5,893,647

92 $1,000,779 $3,008,208 $1,041,637 $930,808 $0 $236,961 $140,580 $6,358,973

93 $777,950 $3,091,107 $965,416 $886,820 $617,706 $251,842 $134,667 $6,725,508

94 $687,403 $3,162,691 $791,687 $835,433 $922,662 $251,571 $129,090 $6,780,537

95 $692,360 $3,449,609 $705,056 $834,688 $982,666 $330,573 $131,432 $7,126,384

96 $844,012 $3,445,198 $741,196 $863,254 $1,054,543 $380,567 $116,136 $7,444,906

97 $706,306 $3,192,536 $769,187 $861,002 $997,576 $420,306 $120,694 $7,067,607

98 $980,951 $3,467,410 $790,901 $838,943 $1,146,379 $442,928 $221,051 $7,888,563

99 $928,793 $3,857,166 $962,616 $1,269,887 $1,617,649 $371,294 $204,143 $9,211,548

00 $1,032,870 $4,322,097 $816,790 $1,953,194 $1,879,443 $507,724 $321,204 $10,833,322

01 $1,312,055 $5,285,815 $739,351 $1,305,512 $1,653,834 $519,041 $189,997 $11,005,605

02 $1,028,896 $4,523,961 $898,184 $1,621,401 $1,569,989 $710,636 $231,789 $10,584,856

03 $1,682,740 $4,815,293 $959,777 $1,609,928 $1,631,583 $724,591 $0 $11,423,912



A MULTIPLE CASE STUDY EXAMINATION OF MUNICIPAL FINANCIAL DISTRESS IN PENNSYLVANIA

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