Sunday, March 21, 2010

Fw: Municipal Debt Train Wreck ahead

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From: "Bob Logue" <>
Date: Sun, 21 Mar 2010 19:07:04 -0400
To: <Undisclosed-Recipient:;><Invalid address>
Subject: Municipal Debt Train Wreck ahead

Too many towns, too much debt: Welcome to Pennsylvania

By Jeremy Boren and Brad Bumsted
Sunday, March 21, 2010


The small town of Westfall in Pike County this month quietly became the first municipality in Pennsylvania to declare bankruptcy.

It might not be the last.

"A train wreck is coming, and, because of my position, I think it's my duty to alert people," said George Cornelius, secretary of the state Department of Economic and Community Development. "Some of these municipalities may get into a situation where they have no choice; bankruptcy is the only option left."

Cash-strapped municipalities suffering from the industrial decline, population loss and overwhelming tax increases common in the Rust Belt face a "downward spiral," Cornelius said. He wouldn't single out cities but said a major reason is that Pennsylvania is bloated with local governments and many resist cutting costs through government consolidation with neighbors.

"We have municipal boundaries that were drawn in a different era that bear no relationship to current economic realities," he said.

Act 47, the state-managed safety net that provides "financially distressed" cities with state-prescribed recovery plans while requiring them to cut costs, "failed in its essential purpose," Cornelius told the House Appropriations Committee last month. In November, he predicted that "financial distress is almost assured" for all mid-size and large cities in the state.

Since 1987, 25 cities and towns, including Pittsburgh, fell into state receivership. Six escaped. Eleven languished there for a decade or more. The state's capital could be the next. Harrisburg officials are contemplating selling City Island Park, parking garages and other public assets to cover a looming debt larger than the city's annual budget.

Similarly, Pittsburgh Mayor Luke Ravenstahl wants to lease city parking garages and meters for 50 years to infuse at least $200 million into Pittsburgh's anemic pension funds and avoid a state takeover of the pension system. The funds contain 30 percent of the money needed to cover $899 million in long-term obligations.

Pittsburgh remains under state oversight. Its general debt payments consume 17 percent of the city's budget, and anticipated deficit spending could begin eroding the city's surplus next year. (End quote from the Tribune Review article). 


   This is just the initial segment of the excellent Tribune-Review article which goes on to share more info about how cities and towns are trying to deal with their budgetary problems.  (A copy of the full article is attached to this message.)  One proposed solution discussed in the article was annexation of neighboring municipalities.  Pittsburgh did that many decades ago when the North side (a once prosperous independent Old Allegheny) Carrick and perhaps other boroughs were annexed into the City Of Pittsburgh.  What eventually happened was just a bigger blighted, declining Pittsburgh with even bigger financial problems, crime problems, etc.  Yes, merging municipalities would mean some savings on duplication of services, but since such a large number of Pennsylvania municipalities are in economic trouble, wouldn't merging two depressed municipalities (without changing the economies of either) eventually just make one bigger economically depressed municipality. 

    Doesn't it make more sense to try to help the cities and towns grow and prosper?  Let's think outside the box for once...and try reversing the decline by attracting more residents to make our towns and cities home for their families.  More residents....mean more revenue from existing taxes; more customers for existing businesses, and a magnet for new businesses to serve the growing population. 

     Answer this yes or no question for yourself:  If all property taxes --school, county and municipal--were abolished on all primary residences--homesteads\farmsteads--would there be a greater attraction for individuals and families to buy homes and live in our municipalities? 

Ownership changes attitudes.  Stakeholders have greater pride in their homes and communities.  With a growing population there would be fewer abandoned properties, fewer closed schools and houses of worship, fewer closed businesses and our communities would be revitalized WITHOUT ANY COSTLY, INEFFICIENT GOVERNMENTAL PROGRAM. 

Read below the damage done to communities by abandoned properties...with statistics from the Federal National Mortgage Administration (Fannie Mae). 


ABANDONED PROPERTIES:   According to the Federal National Mortgage Administration's Fannie Mae Foundation, the impact of abandoned properties is much greater than most people realize. 

   Quote from Fannie Mae Foundation:  "Of all of the conditions that adversely affect neighborhoods, abandoned properties may be the most destructive, because they exacerbate many of the other problems communities face, including:   Decreasing property values. The presence of abandoned properties in a neighborhood significantly affects the value of the remaining properties.  A Philadelphia study found that the presence of one abandoned property on a block reduced the value of the other properties on the block by nearly $6,500 each. (End quote.)



S.T.O.P. believes high property taxes, absentee landlords and predatory lending are all major contributors to the ever-increasing number of abandoned properties and increasing decline and blight in our communities throughout Pennsylvania.  In Philadelphia roughly one in every ten homes and lots are abandoned.  Pittsburgh has had an average of 350 newly abandoned properties every year.  While it is often looked upon as an urban problem, there are many abandoned homes and properties in suburban and rural Pennsylvania.

   Abandoned properties provide NO TAX REVENUE to the municipality, school district and county.  The municipal government is obligated to try to care for the abandoned property to prevent them from becoming crack houses or fire traps endangering nearby homes or businesses; and the municipal government is often required to expend thousands of dollars per property to demolish the slum properties and clean up the sites. 




Abolishing all property taxes on primary residences will make many of those abandoned homes and properties desirable again.  Punishing a homebuyer with higher property taxes for purchasing an abandoned or dilapidated property and investing substantial money and sweat in upgrading the home and land is stupid.  Knowing they could make the improvements without penalty—since there would be no property taxes ever imposed on their home--would encourage investment by private citizens.  More residents means more revenue from the local earned income tax, per capita taxes, and Emergency and municipal services tax; the Emergency services tax;  plus more attract and keep more businesses that pay business taxes to the municipality.   The STOP Primary Residence protection legislation has been proven fiscally sound and viable by the PA State Government's Legislative Budget and Finance Committee's experts.  Any questions? Write Bob Logue at

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