C. Alan Walker, secretary of the Department of Community and Economic Development Secretary, made the announcement Thursday. He has 30 days to appoint a recovery plan coordinator for the city under the Act 47 program.
Once named, the coordinator will have 90 days from contract execution to develop and propose a plan to the mayor, City Council and DCED.
“Altoona needs more than a short-term or week-by-week fix from its creditors and obligations; it needs a comprehensive recovery plan that will lay the groundwork for long-term financial solvency,” Walker said in a statement.
The city, with a population of 46,320, lies between Harrisburg and Pittsburgh.
Walker said Altoona meets four criteria under Act 47. It has maintained a deficit over three years, with a gap of 1% or more in each of the previous fiscal years; its expenditures have exceeded revenues for at least three years; it has accumulated and has operated for each of two successive years at a deficit equal to 5% or more of its revenues; and municipal services have decreased from the preceding fiscal year due to the city reaching its legal limit in levying real estate taxes for general purposes.
While similar in size to 49,500-population capital city Harrisburg, the last Pennsylvania community to seek distressed status, Altoona’s quandary is different, according to David Fiorenza, a Villanova School of Business professor and former chief financial officer of Radnor Township.
“Can their location in the commonwealth and recreation industry of hunting and fishing bring a suitable stream of revenues for the remainder of the decade?” he asked. “The challenge will not only be to keep residents in Pennsylvania to spend their vacation dollars but also attract neighboring states to visit this centrally located city.”
Altoona has operated with deficits in each of the last four years ranging from 11% to as much as 19% of revenues for all governmental funds. The deficits will widen without corrective action, the DCED said.
Meanwhile, a federal judge dismissed a lawsuit by three Harrisburg residents who charged that Pennsylvania’s takeover of that city was unconstitutional.
Former mayoral candidate Nevin Mindlin, St. Paul’s Baptist Church pastor Earl Harris and city firefighters union president Eric Jenkins had contended that last year’s state law enabling Gov. Tom Corbett to declare fiscal emergency in Harrisburg usurped the voting power of local residents and violated civil rights.
Critics of the law said the bill, which suburban representatives sponsored, was aimed at Harrisburg and its large minority population.
But Judge John Jones 3d of the U.S. District Court for the Middle District of Pennsylvania in Harrisburg on Wednesday struck down the suit against Corbett and David Unkovic, whom Corbett appointed as receiver shortly before the suit was filed in December. Unkovic quit in late March.
“Permitting the plaintiffs to proceed in this lawsuit would effectively give the green light to any citizen aggrieved with his or her municipality’s decision, considered or otherwise, not to challenge state legislation upon it,” Jones added. “Floodgates would open, and potentially frivolous lawsuits could abound.”
The state took over Harrisburg after its City Council three times rejected a financial recovery plan, recommended under the state’s Act 47 program for distressed municipalities.
Harrisburg is saddled with about $310 million of incinerator-related bond debt that it cannot pay, and in March missed two general obligation bond payments totaling $5.3 million.
The council filed for Chapter 9 protection last October, but bankruptcy Judge Mary France invalidated it one month later.
The City Council is appealing that rejection.