Leaving Act 47 30 years of work led to Johnstown shedding 'financially distressed' status

Apr. 30—JOHNSTOWN, Pa. — Johnstown's economy and municipal government were in dire straits in the late 1980s and early 1990s, leading up to the decision to enter Pennsylvania's Act 47 program for financially distressed municipalities.

With Bethlehem Steel Corp. collapsing, more than 10% of the population was unemployed, and the decline in tax revenue forced the city to borrow more than $5 million. Moody's Bond Record gave Johnstown a speculative Ba rating.

Johnstown lost more than $1 million for its annual budget when a federal revenue-sharing program stopped.

Deep divides existed among elected officials. A one-week government shutdown occurred.

The population continued what is still a century-long slide. The median income was less than $15,000 per year among those who remained. Approximately 5,600 crimes took place in 1991.

Johnstown was in "total disarray," as Donato Zucco, who was then on City Council, explained.

Then two changes occurred.

Citizens voted to do away with the strong-mayor format and bring in a city manager instead.

And, on Aug. 21, 1992, Johnstown went into Act 47 — which it finally exited on Friday after more than 30 years of participation.

At the time, Johnstown met three of the necessary criteria to enter the program: spending exceeded revenue for at least three years; a deficit of at least 1% existed over the previous three years; and municipal services declined when the city reached its taxing limit.

"The idea was we would have outside professionals come in, take a hard look and guide us to getting ourselves stabilized and operating like a business, which is what it is," said Zucco, who later became Johnstown's mayor. "But, simultaneously, we got a study group put together, and we pushed through a referendum and we changed the form of government — so the two things together, in my mind, were transformational."

'Not just the city'

The "Act 47" label was often a stigma, though.

"When we talk to a lot of the smaller companies and people like that, it's not something that really overshadows Johnstown in that sense," said Linda Thomson, president and CEO of Johnstown Area Regional Industries, "but when you're marketing from a more global perspective, it's really a nice opportunity for us to say, 'We are no longer in Act 47 and we have a solvent local government that's functioning well and doing well.'

"That, in and of itself, I think is a really good, important thing for the whole region. It's not just the city. That (move) actually benefits, I think, the whole region."

Being in Act 47 enabled the city to receive consulting help from the Pennsylvania Department of Community and Economic Development, impose higher taxes than otherwise would be allowed, gain better access to grants and low-interest loans, and create a format in which unionized collective bargaining agreements needed to fit within the overall distress plan.

"I think (getting out of Act 47) is a breath of fresh air," said Eric Miller, president of the Johnstown firefighters' union. "For me, for the last 18 years, we've always been under that pressure of Act 47, the coordinators — not knowing where our next contract's going to lead us, because no matter how good of a relationship we had with (City Council members), it was always up to the (Act) 47 coordinators to approve the contracts.

"I think it's going to be a breath of fresh air that we, as a union and as city employees, can faithfully negotiate with the city now and not having that third-party entity involved."

Municipalities used to be allowed to stay in Act 47 as long as they met the requirements.

That changed in 2014, when the commonwealth imposed deadlines that were retroactively set at five years from when a municipality submitted its most recent exit plan. Johnstown's first deadline was in October 2018.

It requested and received a three-year extension from the DCED, and the state granted all participants another 18-month extension during the COVID-19 pandemic.

So Friday eventually became the exit date.

In preparing to exit Act 47, City Council and the city administration produced six consecutive budgets that finished in the black.

The city also sold its sewer system to the Greater Johnstown Water Authority for $24 million, plus the assumption of debt, with most of the money being used to shore up the fire, police and non-uniformed employee pensions to near 100%.

City Manager Ethan Imhoff described the sale of the sewer system as the "critical piece" and "one of the biggest accomplishments of Act 47."

"Talking in approximate numbers here, the payment on the pension debt was about $3 million (per year) prior to the sale, and now it's about $1 million, so it freed up about $2 million in revenue in the city budget," Imhoff said.

Johnstown received two other major one-time cash infusions in recent years.

The U.S. Department of Transportation awarded a $24.5 million Rebuilding American Infrastructure with Sustainability and Equity (RAISE) discretionary grant to repair and modernize the Cambria County Transit Authority's Downtown Intermodal Transportation Center, Johnstown Train Station, Johnstown Inclined Plane and Main Street.

Johnstown also received more than $30 million in American Rescue Plan funds for COVID-19 pandemic relief, with the money directed toward numerous projects, including home weatherization grants, Main Street beautification, child care and upgrades to city-owned facilities.

Imhoff said that "by no means is the city flush with cash that will make things super-easy moving forward," but he added that there is "a clearer path than (there) used to be."

Looking forward, Imhoff said, "Monitoring of the budget is certainly a critical piece and very important, making sure that we're making wise financial decisions and forward- looking financial decisions.

"It's very important to look not just a year down the road, but where we want to be five, 10 years down the road, too, and to make financial decisions accordingly."