Altoona has a blueprint for staying in the black.
Despite warnings from two unions, Altoona City Council Wednesday passed an Act 47 recovery plan - breaking through the state's earned income tax barrier, freezing wages, shrinking benefits and laying out numerous strategies for saving or generating money.
Only Councilman Mike Haire dissented to the plan.
Mirror photos by Gary M. Baranec
(From left) Bruce Kelley, Mark Geis, Mayor Bill Schirf, Erik Cagle, William Neugebauer and Michael Haire prepare for Wednesday’s meeting. The council approved the most recent version of the Act 47 recovery plan.
The recovery plan inflicts "drastic measures" on workers who "put their lives on the line," but it's better than losing a third of the workforce come August, when the city could have run out of money without the fiscal leeway the plan provides, Councilman Mark Geis said.
"I'm not excited about it, but I'm relieved," said Councilman Erik Cagle. "We can start getting to work."
The changes won't necessarily be easy, because the city had snatched the "low-hanging fruit" - the easy ways to save money or generate funds, Cagle said.
"Rabbits out of the hat," Geis said. "There just weren't any more rabbits."
Union leaders are very unhappy with council's decision.
"They just launched an all-out war on workers' rights, wages, pensions and benefits," President Bryson Peterman of Local 299, International Association of Fire Fighters, said after the meeting.
The union plans to respond with "all legal measures," but that won't include a lawsuit, Peterman said.
But it could mean resorting to binding arbitration in negotiating a contract to succeed the current one, which expires at the end of 2013, he said.
Unfortunately for public safety workers - firefighters and police - the state several months ago passed a revision to Act 47 that restores the primacy of recovery plans over arbitration awards, a primacy the state Supreme Court had reversed in a surprise ruling in a case involving Scranton firefighters.
"They lost the battle, so they changed the rules," Peterman said.
The Act 47 revision reveals the "underlying agenda" of lawmakers to "bust unions," he said.
Still, the ruling doesn't mean binding arbitration is hopeless, he indicated.
"They always want to cut wages and benefits," nonuniformed workers' union agent Tim Miller of the American Federation of State, County and Municipal Employees said, referring to consultants like Stevens & Lee that draw up recovery plans.
"It hasn't worked," he said, citing the failure of any third-class city to get out of Act 47.
Frozen wages and higher costs for benefits - in addition to higher taxes - actually means "you're going backward," Miller said.
Nonuniformed union President Scott Campanaro agreed, but took a more conciliatory approach.
"We're going to work to get this done," he said.
Haire voted against the four-year plan because of several misgivings, including his belief that the unions won't accept three years of a wage freeze, beginning in 2014.
Council on Wednesday also passed a 2013 budget, which it had put together to mesh with the Act 47 plan.
The city expects to begin next year with a fund balance of about $750,000 and to end it with a fund balance of about $1.5 million, according to Finance Director Omar Strohm and the recovery plan.
Without the plan, the city would be insolvent by the end of next year, officials said.
Council included a provision that resolves any conflicts with the plan in favor of the plan.
That clause will undo the budget's managerial raise, its 2 percent reduction in nonpersonnel and nonutility related costs and its retention of the two-worker parks division of the Public Works Department.
The recovery plan initiates the managerial freeze a year earlier than the contract-protected union workers, requires a 4 percent reduction in nonpersonnel and nonutility costs and eliminates the parks department workers, despite the likelihood that will mean one less snowplow route.
The plan calls for raising the earned income tax rate for residents by 0.25 percentage points.
It recommends raising it for nonresidents by 0.15 percentage points - thus instituting a commuter tax, the rationale for which is that those workers benefit by city services like police, firefighting and streets maintenance.
The increase for the average resident would be $75 a year, and for the average nonresident $62 a year.
The plan recommends raising the property tax for capital borrowing for priority projects - in the category of debt service - by 1.27 normalized mills for next year and 1.41 mills for the three years after that.
The debt service category is uncapped, so the city doesn't need to be in Act 47 to levy these increases.
A Blair County judge will hold a hearing Friday on a city petition to exceed the state earned income tax cap for general purposes, based on Act 47, and to exceed the state's soft cap of 25 mills on property tax - a request the court has granted for many years.
City officials said little Wednesday about the hearing in connection with a ruling in Lackawanna County Court denying an Act 47-based request by Scranton to levy a commuter tax.
Altoona's petition has a similar component.
For now, Altoona is headed in the right direction, Mayor Bill Schirf said.
"We have a balanced budget next year and following," Schirf said. "A true budget."
Mirror Staff Writer William Kibler is at 949-7038.