Pennsylvania Borough Successfully Exits Financially Distressed Status With Help from KMS
by Dan Connelly and Brooke Queenan
Even before the COVID pandemic crisis, many municipalities across the Commonwealth were coping with fiscal distress. In most cases, the underlying cause of distress is a contracting tax base, which results in a gap between local resources and service needs. However, in some cases, there are other contributing factors such as weak management infrastructure, inflexible cost structures, and a lack of political will to make the right (but sometime unpopular) decisions. Pennsylvania’s Financially Distressed Municipalities Act, commonly known as Act 47, was enacted to provide municipalities with tools to address issues leading to distress, stabilize finances, and build fiscal capacity.
In 2015, after experiencing years of operating deficits, overwhelming debt, managerial deficiencies, and multiple lawsuits, a small Borough in Delaware County, Pennsylvania entered the Act 47 program. The Pennsylvania Department of Community and Economic Development (DCED) appointed a team including McNees Wallace & Nurick LLC as the Recovery Coordinator responsible for developing and implementing a recovery plan for the Borough of Colwyn, PA. The engagement was led by Keystone Municipal Solutions staff Dan Connelly and Brooke Queenan, and Dave Unkovic and Adam Santucci of McNees.
The Recovery Team developed and oversaw the implementation of a multi-year financial recovery plan that addressed several major issues in the Borough including labor contract and personnel matters, management practices, and fiscal stewardship. The Recovery Team set the framework for the Borough to negotiate a favorable contract with the FOP and also resolve issues with Colwyn’s non-uniformed union, the SEIU. The team facilitated the hiring of several key professionals including a Borough Manager and Treasurer, helped the Borough better utilize its financial management software, and developed a comprehensive manual of policies and procedures for financial functions. The team also recommended and helped implement revenue enhancement initiatives such as the implementation of an earned income tax on residents and non-resident and strategies to improve real estate tax collections.
Under the supervision of DCED and the Recovery Team, the Borough resolved significant past due payables and made progress towards achieving structural budgetary balance. Earlier this year, the Secretary of DCED removed the Borough’s distressed status, enabling the Borough to successfully exit Act 47.
KMS was proud to help lift the Borough out of fiscal distress and set it on a course of financial sustainability and prosperity. It will be no easy road, but with discipline the Borough can be successful.