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Rough Financial Waters Ahead?


The mere mention of Act 47 consideration can cause a municipality and its leadership team a great deal of stress. After all, it is the Financially Distressed Municipalities Act – meaning that municipality is on the edge of a fiscal cliff.


It’s understandable that elected officials might fear it. But, in truth, Act 47 is a lifeline to help pull those financially challenged municipalities back from the brink of fiscal calamity. Those municipalities that enter Act 47 status allow the Commonwealth to step in and provide intense oversight. The state Department of Community and Economic Development (DCED) provides municipalities the tools to address the issues leading to distressed status, stabilize finances, and build fiscal capacity. It is a last-resort safety net that, as of this writing, nineteen municipalities are utilizing.


Although some view Act 47 as gloom and doom, there are success stories of municipalities that have been able to correct their fiscal situation and emerge out of Act 47 status in a much healthier state. Just ask the City of Reading, who recently successfully left the act behind them after 13 years of implementation. But in truth, these municipalities would have certainly preferred never to have entered Act 47 in the first place. The good news is that options exist to help avoid Act 47, and experienced help is available. If the boat is taking on water, don't wait until the lifeboats have to be deployed; fix it before that occurs. If you are reading this and have even the slightest concern for the financial health of your municipality, that means that possible leaks have sprung, and it may be time to right the ship before it capsizes.


One step municipalities can take is to develop a Strategic Management Plan (STMP)? This plan will carry out a multi-year financial management, administrative, and economic development programs and strategies. A detailed assessment of managerial policies and procedures with recommendations will be provided to improve efficiency and productivity in the municipality's best interest. You'll receive resources to address those financial difficulties and have goals to implement in order to achieve them. By introducing long-term financial plans and including them in the yearly budgeting process. This can be achieved in many ways with a combination of proven techniques. It can consist of the promotion of multi-municipal and regional cooperation, cost-sharing opportunities, along with the expansion of your tax base over an extended period of time. These and many more options will be closely examined. Fortunately, the Commonwealth of Pennsylvania does offer financial assistance for municipalities seeking to implement a STMP. It’s certainly preferable to waiting until financial disaster hits and needing Act 47 as your lifeline.


Another option to avoid Act 47 is the creation of a sound Capital Improvement Plan (CIP). This path is based on several primary components. First, it begins with a statement of the community's current fiscal policies. Then it should provide a thorough review of the budgetary assessment of the community and its ability to facilitate additional growth. Once you have quantified the anticipated growth, you will then make an assessment of the current and future facilities' needs based on that projection.


We know that even before the pandemic, municipalities struggled with various forms of fiscal distress. The primary reasons are a diminishing tax base, weak managerial oversight, inflexible cost structures, and lack of political fortitude to make the right decisions. Unfortunately, sometimes the right decision isn't always the popular one.


Chances are, if the municipality is experiencing problems, it is not in a position to implement these options successfully. That is where KMS comes in. A skilled, experienced group of dedicated professionals that are seasoned in what needs to be done and how to avoid reaching that threshold of ACT 47. Now is the time to utilize these tools and set the ship on a clear path. Contact us and let us help you before the storm clouds form. "Fire this thing up," because it looks like rough waters may be ahead.

 

About the Author

David L. Anthony is a member of the Keystone Municipal Solutions team of experts. He is a veteran of municipal government, having served more than 32 years in various positions of public service. Contact him at david@keystonemunicipalsolutions.com. To learn more about David and the Keystone Municipal Solutions team, click here.


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