Aug. 27—JOHNSTOWN, Pa. — Only eight months remain until Johnstown must exit Pennsylvania's Act 47 program for financially distressed municipalities on April 28.

Government officials generally speak optimistically about the economic condition of the city that finished in the black five years in a row through 2020, with the 2021 audit pending; shored up its pensions for police, fire and non-uniform employees to almost 100% funded; recently received approximately $50 million in federal money; and continually held the line on real estate taxes, even though the rate of 52.48 mills remains the highest in Cambria County.

Mayor Frank Janakovic said "a lot of people working together — business, government and officials in the city" has put Johnstown in that position, compared to about a decade ago, when Johnstown faced the possibility of bankruptcy.

But they also point to a specific major concern that will exist when Johnstown leaves the Pennsylvania Department of Community and Economic Development-administered program, which it entered 30 years ago — on Aug. 21, 1992.

Currently, because it is in Act 47, the city can levy a $3-per-week local services tax (LST) on residents and nonresidents who work in town, as it has done since 2016.

However, municipalities that are not in the program can only impose up to $1 per week.

That $2-per-week loss for every worker would equate to approximately $900,000 annually that would no longer be available for the budget.

Johnstown City Manager Ethan Imhoff said not having the increased LST would be "definitely a challenge," but explained that officials are working with state legislators to see if a plan could be developed to keep the $3 rate.

Leaving Act 47 would also cause the city to lose preferential consideration it receives when applying for funds and access to a team of advisers provided free of charge by the DCED.

City 'financially stable'

Participation in Act 47 was originally open-ended. But in 2014, the state changed the law to require a municipality to exit within five years of when its most recent recovery plan had been adopted.

For Johnstown, that meant the original exit date was supposed to be October 2018, since its plan dated back to Oct. 23, 2013.

But the city was not in condition to step away, so it received a three-year extension. Then 18 more months were added due to the impact of the COVID-19 pandemic, moving the deadline to April.

Over the past eight years since the law changed, the city:

—Adopted budgets that resulted in approximately $8 million in reserves, according to Janakovic;

—Sold its sewer system to the Greater Johnstown Water Authority for $24 million, with $19 million being used to bolster the pensions, which had been down to 65.41% funded for police, 50.01% for fire and 62.04% for non-uniform;

—Won a $24.4 million U.S. Department of Transportation Rebuilding American Infrastructure with Sustainability and Equity (RAISE) discretionary grant that will be used to repair and modernize the Johnstown train station, Johnstown Inclined Plane, Cambria County Transit Authority's Downtown Intermodal Transportation Center and Main Street;

—Collected $30.7 million in American Rescue Plan money for COVID-19 relief, enabling the city to set up a variety of programs, including for home ownership and home weatherization repairs;

—Negotiated contracts with all three unions — International Association of Fire Fighters Local 463 Johnstown Professional Firefighters; Flood City Fraternal Order of Police No. 86; and American Federation of State, County and Municipal Employees Local 630 — to get the deals on staggered years, as opposed to all being on the same time schedule.

"It's definitely a positive sign for the city," Imhoff said. "It's a positive thing for a lot of our partners and other organizations in the city that are working to do good things. When you have a city that is financially stable, I think that is a good base for investment and a good base for being able to provide a high level of services to the residents and ultimately a good return on the taxpayer dollar."

Imhoff and Janakovic credited individuals and organizations — both in government and the private sector — for the developments.

"I'm very proud, as the mayor, to say this could have never been done just by City Council or administration," Janakovic said. "It's been a collective effort. That's how I think we got to where we are today, to really even be discussing getting out of Act 47 come April of next year. It's been a long haul, a lot of hard work by a lot of people."

'Fund our police'

But those strides have not led to economic growth.

Johnstown's poverty rate is more than 30%. Unemployment was 5.9% in June, higher than the national level of 3.6% and 4.5% for the state.

Drug trafficking and other types of crime are rampant, with the city recording its ninth and 10th homicides of the year earlier this week.

The group 24/7 Wall St. named Johnstown, at one time, the seventh-poorest city in the United States. The median household income was $29,171 from 2016 to 2020, using 2020 dollars.

And the population continues to plummet, with Johnstown having lost 12.2% of its population in the 2010s — the 10th consecutive decade of decline, dropping the number of people living in Johnstown to 18,411, per the 2020 U.S. Census.

A U.S. Census Bureau estimate placed the unofficial count at an even lower 18,238 in 2021.

The loss of people living or woking in the city means fewer are paying the LST, which goes toward funding police, fire and other services.

City officials have approached state Rep. Jim Rigby, R-Ferndale, and state Sen. Wayne Langerholc Jr., R-Richland Township, about trying to get an exception for Johnstown that would allow it to maintain the $3-per-week tax even after leaving Act 47.

Precedent exists, with the state permitting Harrisburg to maintain the higher LST even though it has left the Act 47 program.

Rigby said the idea had been discussed, but no proposal was fully developed before this year's state budget process was complete.

"That tax was going to be pretty much a designated tax," Rigby said. "That would have been for police and fire needs. That's where the funds would have been restricted to. Unfortunately, once they called me and were ready to take action on it, we had just passed the budget, which was in July. It's not to say we can't go back."

Janakovic emphasized that losing the LST "(would hurt) our general fund and our budget, but we are working with our state legislators to retain this tax. Our approach is we need these funds to continue to fund our police, our fire employees budget and current and any additional staff."

Johnstown is one of only 13 municipalities left in Act 47, along with Franklin Borough, which joined on July 26, 1988, and faces an exit date of Feb. 1.

Being in the program has carried a stigma for three decades, since Johnstown joined in the aftermath of the local steel industry's collapse.

Imhoff called it a "negative moniker" and "a label that nobody wants to wear or wears proudly."

"I would think the city would take it as a sign of relief to finally have that gone," Rigby said. "It's certainly going to hurt them financially, I think, because they were able to get some fundings and stuff because of the distressed status. But at some point, they've got to pull themselves up by the bootstraps and stand on their own.

"The fact that they wanted to and talked about trying to get off a little bit early is reassuring. I'm hoping they can move forward, and be able to maintain and stay off the distressed status once they're off it."

Along with the financial work being done by city officials in recent years, an effort has been underway to rebrand Johnstown and the surrounding area as an outdoor recreation destination with a small urban center.

"I think it's an exciting time," Cambria Regional Chamber President Amy Bradley said. "I think it reflects just how much progress has been made and how people are really working to move the city and the region forward. I see it as a really positive thing, kind of like a new era."

Bradley added: "There's just so much potential."

Numerous steps remain in the actual process to leave the distressed program, including needing a report filed by the city's Act 47 coordinator, holding public hearings, receiving final approval from the DCED secretary and, if all goes according to plan, signing of a certificate to terminate Act 47 status on April 28, 2023.

"We're finally getting to the point where it's coming into view and it's becoming real," Imhoff said.