At a hearing in Altoona on Tuesday, a delegation from the Department of Community and Economic Development recommended the department secretary admit the city into the state's Distressed Municipalities Program.
It put the city one step short of a designation its leaders fought for years to avoid - until they faced a 2012 budget with a $1.6 million deficit projected to exhaust their entire unreserved fund balance.
The city has showed it meets more than the minimum qualifications for the distress program, according to Marita Kelly, a policy specialist who led a department review of city financial data over the last few weeks.
Mirror photo by Patrick Waksmunski
Altoona City finance and personnel director Omar Strohm leaves the podium after giving his presentation during a Distressed Municipalities Program hearing at Altoona City Council Chambers on Tuesday evening.
Department Secretary C. Alan Walker will have 30 days to decide whether to accept the recommendation.
The great majority of the time, the department secretary accepts Act 47 hearing recommendations, according to Fred Reddig, executive director of the Governor's Center for Local Government Services, who chaired the hearing.
If Walker follows precedent, Altoona would become the 27th municipality to enter the program - and the 13th city.
No city has ever come out.
The city qualifies, because even though it's taxing to the max, operational revenues have been at least 1 percent short of expenses for three years, and that has cut into services.
Lack of funds has led to the workforce dropping from 255 in 2009 to 229, said Finance Director Omar Strohm.
The police department has shrunk from 74 to 68 officers, with three unavailable last year, because they were in training, said Chief Janice Freehling.
That contributed to an 11 percent increase in serious crime, she said.
It also contributed, oddly, to a 4 percent decrease in less serious crimes - because there were fewer officers to ferret out those crimes, she said.
The department has become "highly reactive," she said.
The Public Works Department has shrunk 20 percent to 56 workers over the last decade, said Director Dave Diedrich.
That means that it takes 36 hours instead of 24 to clear the streets after a major snowstorm, he said.
"The current pattern of structural deficits is unsustainable," Kelly stated.
About 40 people attended the hearing, which included far less testimony than for recent hearings on admitting Reading and Harrisburg to the distress program, Kelly said afterwards.
Fewer people testified because council's openness about the need for the program has persuaded people to accept it, according to Mayor Bill Schirf.
But not everyone accepts.
Firefighters union President Bryson Peterman continued to speak out against entering the program.
Council has given up too easily on solving the problems in-house, according to Peterman, who compared those problems to a Rubik's Cube.
"They don't have the patience or determination," he said of council. "They sit down, take a few wild guesses and toss it aside."
The distress program is a "black hole," he said.
"If the DCED knows so well how to help municipalities recover, why haven't all the municipalities under control by Act 47 coordinators recovered?" he asked rhetorically.
The program is "politically driven," and a "full employment act for consultants," he said.
Actually, city councils over the years have postponed distress through a variety of financial maneuvers.
Those have included extracting more than $2 million a year in payments for services from the Altoona Water Authority after threatening to sell the systems the authority runs; turning a workers compensation reserve into cash; redirecting state liquid fuels money to the general fund for highway worker salaries; borrowing to pave streets; and levying additional millage in the uncapped category of recreation to pay costs related to taking care of open spaces.
Retired firefighter Allen Weaver suggested postponing distress for another couple years with yet another maneuver - using state pension subsidies to supplement the general fund.
The city's 0.2-percent earned income pension surtax is enough by itself to cover Altoona's pension obligations, for now at least, he said. Unfortunately, redirecting designated pension funds to the general fund is illegal, department officials said later.
After the hearing, Peterman conceded that the firefighters are concerned about getting squeezed.
"I hope not," he said. "[But] it could happen."
A distress recovery plan could call for personnel cuts in the department that would expose firefighters to more fires, greater hazards and more carcinogens, he said.
It could also presumably call for frozen or even reduced wages.
A recent state Supreme Court decision makes recovery plans subordinate to binding arbitration - which public safety workers can resort to because they can't strike. The city firefighters haven't resorted to that since 1987, and don't want to start, he said.
It's expensive, he said.
Besides, the firefighters want to cooperate, he said.
"We're not looking to be difficult," he said. "I love the city too."
Binding arbitration from years ago was a heavy contributor to the financial problems that necessitate entering distress now, said former City Councilman and Controller Travis Young, who testified.
He recalled one ruling that conferred $40,000 a year in dental benefits for police union families.
He emphasized that he
didn't blame the unions for such rulings.
If Walker allows Altoona to enter the program, the department will advertise for a consulting company to become the Act 47 coordinator for the city, Kelly said.
All the companies capable of doing the job are competent, Kelly said.
The state would pay the bill. The coordinator would have 90 days to create a recovery plan, which City Council would approve - unless it creates its own plan that is subject to department approval, according to Reddig. The city doesn't give up all autonomy.
"The state doesn't take over," Reddig said. "City officials remain in place."
But at that time, they'd be obligated to make "hard decisions," he said.
They would need to "set aside politics" and "do what's best for the residents," he said.