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The city could be out of Act 47 distress within 10 days, according to a state official who conducted a public hearing Wednesday on whether the city should exit the financial recovery program it entered five years ago.
Department of Community and Economic Development Secretary Dennis Davin has 30 days to rule on the exit recommendation that came out of Wednesday's hearing, but he'll probably do it far sooner, said Marita Kelley, deputy director of the Center for Local Government Services, a division of DCED.
City officials previously thought that the city wouldn't leave the program until late in the year.
The city is ready to go because it has eliminated its systemic operational deficits, accumulated a healthy surplus in cash and established revenue streams it can adjust to keep solvent for the foreseeable future, according to Ryan Hottenstein, the lead member of the city's Act 47 coordinator team.
Altoona had an operational deficit for three consecutive years before it entered the program in mid-2012.
It also had one in 2013, its first year under a recovery plan, but the following year, it realized an operational surplus of $1.3 million.
The next year, there was a surplus of $891,000 and the following year, a surplus of $1.2 million -- with a $7.8 million cash balance, Hottenstein said.
The coordinator team projects that Altoona will realize an operational surplus -- more revenues than expenses -- of $1.8 million at the end of this year, boosting the fund balance to $10.5 million.
Without tax increases, there will likely be a deficit by 2020, but the city has the tools now to take care of that.
The main toolbox was the move a couple years ago to home rule.
Before home rule, the city was hobbled by state caps on property and earned income tax.
Home rule eliminated those.
But even if the city hadn't moved to home rule, Blair County's reassessment, which took effect this year, would have rendered the state's property tax cap virtually irrelevant -- as the assessment increased the collective value of real estate in the city by a factor of 10.5, which means that it shrunk the millage by the same factor -- creating plenty of room under the old 30-mill cap, which the state has since raised to 35 mills in the Third Class City Code.
The city further created a bulwark against insolvency -- and cementing annual payments that had previously been made by the Altoona Water Authority -- by taking ownership of the water and sewer systems the authority operated and converting those payments to lease obligations that will increase in the future.
Also key to a return to solvency were three-year wage-freeze contracts with the city's three unions, beginning with 2014, followed by five-year contracts with raises of 2 percent annually.
"We accept your decision," said Mayor Matt Pacifico of the recommendation to exit. "We will continue to demonstrate sound financial management."
"It's pretty outstanding," Kelley said of the city's performance under Act 47. Altoona will be only the third city to exit the program and the first to come out in the prescribed five years, Kelley said.
The city succeeded because it stuck to the recommendations in its recovery plan, which is a credit to council, the manager and the employees, she said.
"It's a happy occasion," said Susan Friedman of Stevens & Lee, the Reading law firm that took the initial lead with the coordinator team.
There was consternation among city officials at first about whether an early exit would jeopardize the city's collection of earned income tax for general purposes from nonresidents who work in Altoona.
But after he thought about it for awhile, solicitor Larry Clapper grew comfortable with the idea that a Blair County judge's ruling that the nonresident EIT was applicable until the end of 2017, even if the city was no longer technically in the program for the last several months of the year.