Reading could be placed under state oversight to help it address budget deficits and shrinking revenue if Pennsylvania officials approve the city’s request for supervision.

Reading last week applied for financially distressed status under Pennsylvania’s Act 47. If the application is approved, the Department of Community and Economic Development will assign a coordinator to work with the city to develop a financial recovery plan.

Act 47 enables the state to oversee and form partnerships with municipalities facing fiscal distress to ensure they continue to provide essential services to residents. To date, 18 municipalities have received state oversight through the act.

“Reading’s decision to request relief under Act 47 comes as no surprise and there may very well be similar requests from other cities over the next year or so,” DCED Secretary George Cornelius said. “Many of our cities are in serious trouble. The current economic downturn has had a ripple effect on local governments and some do not have the financial wherewithal to weather the storm.”

Reading officials project an estimated $2.5 million deficit in the fiscal 2009 budget, the city’s third consecutive budget shortfall due to underperforming revenue, according to Moody’s Investors Service, which rates the city Baa3.

Reading has $226.5 million of debt, including $45.8 million of general obligation bonds.

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