Leaving Act 47 'Significant hit': Loss of local services tax will be felt in Johnstown's budget
Apr. 28—JOHNSTOWN, Pa. — The City of Johnstown could lose almost $1 million in annual tax revenue as a result of exiting Act 47.
Participants in Pennsylvania's program for financially distressed municipalities can levy a local services tax (LST) of up to $3 per week per resident and out-of-town people working in the city. Johnstown has been applying that rate since 2016.
But third-class cities such as Johnstown that are not in Act 47 can only charge $1 per week.
Johnstown reverted to that lower amount when it officially left Act 47 on Friday.
"It does mean the loss of close to a million dollars — not quite," City Manager Ethan Imhoff said. "That's something the city's been planning for. It's something that will still need to be managed vey carefully. We have about a $14 (million), $15 million overall annual budget, so losing a million dollars is a significant hit to the budget."
Johnstown has been using the LST money for capital improvements, including purchasing vehicles and other equipment for police, fire and public works.
"Part of what will soften the blow, I guess, is they've been transferring a million dollars a year into their capital fund," said Deborah Grass, the city's Act 47 coordinator. "With that loss, beginning in 2024, they will lose that $900,000, so it will greatly reduce the ability to continue capital projects and infrastructure, but it should not affect our operating. They have been planning for that."
The government has effectively prepared for the loss of revenue, in Johnstown City Councilman Ricky Britt's opinion.
"I don't think it will hurt us too bad," Britt said. "I just think that it's something that we can't depend on. There are going to be a lot of things that are going to change. I think we planned for those things. Hopefully, we're pointed in the right way that, when they come about, we'll be ready to handle them. We won't be caught blindsided."
City officials have approached local state legislators to see if Johnstown could continue using a higher LST, even though it is no longer in Act 47.
They referred to Harrisburg, which, because of a state law, will be allowed to maintain the increased rate even after it leaves the program. Scranton also has a special exemption, even after exiting Act 47 in 2022.
In the past, state Sen. Wayne Langerholc Jr., R-Richland Township, proposed using part of the Johnstown Flood tax on alcohol sales to benefit communities in Act 47 or those transitioning out of the program.
That tax was originally enacted specifically to raise money for Johnstown after the St. Patrick's Day Flood of 1936. Over the years, it became incorporated into the state's general fund.
"We're looking at revisiting that legislation to help give them, maybe, a little bit of a buffer going forward," Langerholc said. "Some of that money that is coming in under that could be able to come back to Act 47 cities, to help them in that transition. When they get out, they're not able to take that (increased) LST tax any more. That can be a very real hole in the city."