Thursday, December 16, 2010

Second Essay: Cities On Life Support Need Triage From Doctor Harrisburg

These are the times that try the souls of many of Pennsylvania's small cities – in all 54, with 53 of them being "Third Class Cities," even the official label of which sounds tired and demeaning.  In Pennsylvania, third class cities are treated like third class citizens.

As an aside, evoking the romance of the Italian language, coffee giant Starbucks labels its large coffees "Venti", its medium "Grande", and its small "Tall."  Starbucks does not label its small size as "third class coffees." 

Cannot Pennsylvania come up with a better label for Scranton than "second class-A" city?  It's Pennsylvania's only second class-A city, by the way.  Its category sounds like some sort of low-level professional baseball league?  If it keeps working hard, maybe Scranton will make it to AAA or even the big leagues one of these years. 

And, especially, can we please come up with a better label than "Third Class Cities" for 53 other cities?

Although I say some of this with tongue in cheek, word choices and categories matter.  Single A in professional baseball, which is two leagues away from the bigs, is not called "C-ball" or "third class league" or "the low class league."  Perception often is reality, the massaging (of words) is the message, and the brand is important.

Metro Cores, County Cores, Core Communities, County Seats (not all 53 are indeed county seats, but many are) or Poleis of Pennsylvania (the Greek plural noun for cities; after all, the Greeks invented the city-state) all give a sense of dignity, strength, and importance. 

But I digress.  As Joe Friday from "Dragnet" might have put it, let's look just at the fiscal facts, ma'am. 

Pennsylvania's only second class A. city and a distressed city since 1992, Scranton’s 2011 budget calls for eliminating 34 firefighters, ten police officers, ten clerical workers, nine administrators and five public works personnel.  To add injuries to injury, Scranton faces a $5.2 million deficit in 2011 and is projected to have an annual debt service payment of $6.9 million through 2025.

Upper Moreland Township is increasing property taxes by 13.6%.

Our third class cities are really feeling the pinch.

An Act 47 or distressed city as of 2009, Reading’s 2011 budget proposal calls for a 20 percent property tax increase and the elimination of 25 jobs, including 17 firefighters.

Bethlehem’s 2011 budget calls for eliminating 54 jobs and $1 million in fee hikes (i.e., recycling, housing, inspection, and permits).

An Act 47 or distressed city as of December 15, 2010, Harrisburg had proposed terminating 10 firefighters and closing one fire house, and now proposes selling $8 million worth of land under three public parking garages.  Some Harrisburg officials have proposed Chapter 9 federal bankruptcy.

In 2010, Lancaster's property tax increased by 25% as it cut 43 positions, including police officers, while raising water, sewer, and trash collection fees.  Its 2011 budget, the first one in without a real estate tax increase in six years, proposes increasing sewer fees by about 20% and eliminating two firefighters and a fire marshal position. 

In addition to a 15.4 percent sewer fee hike, York's 2011 property taxes increased by 11%, from 15.64 to 17.39 mills.  In the same precarious condition as its peer cities, York's real estate tax rate nearly doubled in ten years, going from 9.73 mills in 2001 to 17.38 mills in 2011.

After balancing its 2011 budget by selling the city's delinquent property tax liens to a private party for $4 million, Erie's officials already are bracing taxpayers for a tax increase in 2011.
This is just a small snapshot of cities, largely through no fault of their own, managing fiscal declines.  With public safety taking bigger bites out of cities’ general funds each year, many cities face a constant dance with distress every two years.  If they can avert raising property taxes in year one, they are forced to do so in the year two. 

In Bethlehem, Easton, Harrisburg, Lancaster, Reading, and York, annual property tax revenues are not enough to pay for annual public safety costs. So, to try to minimize increases in property taxes, cities dip into other funds, raise parking, trash and other fees, or incur further or refinance debt just to maintain a modicum of safety. 

This was a key finding of the Pennsylvania Economy League's Structuring Healthy Communities, a 2009 case study that should be required reading for anyone who reports, opines, or legislates on fiscal issues affecting Pennsylvania’s smaller cities.

That is no way to run a city.  

Considering all of the evidence, a crisis is at hand for Pennsylvania’s smaller cities – 54 in all, and most of them in the geographic “T” of Pennsylvania -- with no end in sight.  

If our smaller cities were patients, they would be in critical care, suffering simultaneously from five serious illnesses with the acronym CHEMO: (1) Cancer--devastating, state mandated, annual spikes in pension and health care costs, made all the more costly by a societal good – increased life spans;  (2) Hypertension – high blood pressure associated with the struggle to make payrolls, bond payments, and contractual obligations; (3) Emphysema -- no chance to annex lands or breathe outward and little chance to get the oxygen of new private investments; (4) Malnutrition -- stagnant tax revenues, ever expanding percentages of tax exempt properties, a liberal definition of tax exempt charities, including private colleges and hospitals, and a disturbing over-dependence on one scarce food source – property taxes); and (5) Osteoarthritis -- lack of local flexibility and aging, brittle infrastructure and utilities, including streets, sidewalks, waterways, rail corridors,  interceptors, bridges, sewer and water pipes, electric lines, and gateways.

Consider the following X-ray of the first and most crippling illness.  Minimal Municipal Obligation or “MMO” is the state mandated annual payment that a local government must annually pay into its pension fund against future obligations.  The 2001 MMO for the City of York’s workforce was $546,042, but by 2009, the MMO was a staggering $5,203,433 – an 853% increase over just eight years.   Its MMO for 2011 is $6,575,288.  That's an eye-popping 1,104% increase in just ten years.

Simply put, because of a perfect storm of illnesses, many of our cities and towns are fiscally unsustainable.

The present crisis transcends our little burgs, continues to sweep across the state, and threatens to overwhelm many of our cities and towns, bringing all of us down with them.

Ironically, moral outrage, questions, and demands would be better directed to state elected officials because, at the local level, despite their commitments and competencies, the Burgermeisters, council members, and emperors have scant clothes. 

The deck is stacked overwhelmingly against our cities’ admirable public servants because of the cities’ systemic deficiencies, structural deficits, and, in effect, unfunded mandates. 

For any of our struggling community cores, a mayor, business administrator, and city council with the combined leadership talents, financial acumen, and fiscal discipline of Alexander Hamilton, Alan Greenspan, Warren Buffett, Robert Rubin, Bill Gates, Suze Orman, Dave Ramsey, and Clark Howard could not usher these municipalities into eras of fiscal sustainability. 

The problem is not at the local level; it resides with all branches of state government, particularly the legislature.  The systemic, chronic problems of small cities and towns have been brewing for decades largely because of a largely lethargic, unimaginative state government. 

The state has failed to give our smaller cities the flexibility that they need to get back on their feet, to strengthen the sinews and muscles of infrastructure, to keep cost cholesterols at manageable levels, to grow and efficiently share resources with neighboring municipalities, and to build and maintain a strong immunity system of public safety so bond ratings can be resuscitated and the free market can flow freely again.

Because of outdated, rigid state laws, simply to balance their budgets, smaller cities face stark, stomach-churning choices each year.   Pick one of or a combination of the following three poisons: (1) make hefty public safety terminations or leave positions vacant, (2) raise property taxes and fees to unacceptable levels, or (3) incur more or refinance debt, sell key physical assets, such as parking garages and public buildings, sell millions of dollars of tax liens for quick-fix cash infusions. 

This is no way to live, let alone thrive.  But there is hope.

If he chooses to do so, Doctor Harrisburg can become the hero by directing triage.  Game plan priorities include radical surgery (e.g., approving comprehensive legislation to enable our cities and towns to thrive, increasing the retirement age for newly hired public safety employees to receive full benefits to, for example, 55, as Illinois has done) and administering high doses of intravenous nutrients (e.g., approving aggressive, performance-based tax incentives, approving local option revenue tools to stabilize property taxes). 

Intense physical therapy must follow. 

Doctor Harrisburg traditionally has shown diligent care for his more famous patients, Philadelphia and Pittsburgh.   But in 2011, great suffering in the “T” of Pennsylvania calls for a wider patient base.  If he truly cares about Pennsylvania’s 54 smaller cities and their sibling, struggling boroughs and townships that suffer from related diseases, the good doctor must act boldly and comprehensively. 

Lives are at stake, not just the cities, themselves, but, most importantly, the 1.3 million people who live in them and are regularly jolted by spikes in regressive property taxes and the 5 million people who live in their metropolitan statistical areas.

Our core communities and their citizens deserve new leases on life fortified by justice, financial stability, fiscal predictability, self-reliance, and self-governance. 

An urban development, strategic planning, and public relations consultant, Matthew Jackson is the author of The Crisis: A Plea From York Town To Save Our Cities And Towns. 

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