Core Communities Blueprint For The 21st Century To Save Our Cities And Towns

If you are reading this, it's likely that you live in or own property or work in a city or town.  Or maybe you remember the hustle, bustle, and magic of your county seat or downtown when you were younger.

Like many, you are probably concerned with rising property taxes and an imminent municipal pension crisis, a massive after-shock to the mortgage earthquake of the 2000s.  

It's sad to say, but many of Pennsylvania's mid-to-small size cities and towns -- over 1,000 in the Commonwealth alone -- and many throughout the nation are in decline.  World class cities, such as Philadelphia and Pittsburgh, God bless them, benefit from special state enabling legislation, flexibility, and political and financial support that their less famous siblings do not have.  The irony, is that Pennsylvania's 54 largely neglected cities represent metropolitan areas of over 5 million people.  That is the equivalent of nearly 16 Pittsburghs.  

This series of seven essays examines why our cities and towns are fiscally dying, politically neglected, and starved for development and job creation, while revealing some practical solutions to benefit millions of people.   

The series also details the inadequacy of current state remedies to resuscitate these once strong core communities.  One thing is for sure:  if we don't implement comprehensive real-world solutions soon, these cherished communities will continue to dither and decline, while our kids and grandkids will move out of state.  

The good news is that it doesn't have to be this way. 

Second Essay: Cities On Life Support Need Triage From Doctor Harrisburg

These are the times that try the souls of many of Pennsylvania's small cities – in all 54, with 53 of them being "Third Class Cities," even the official label of which sounds tired and demeaning.  In Pennsylvania, third class cities are treated like third class citizens.

As an aside, evoking the romance of the Italian language, coffee giant Starbucks labels its large coffees "Venti", its medium "Grande", and its small "Tall."  Starbucks does not label its small size as "third class coffees." 

Cannot Pennsylvania come up with a better label for Scranton than "second class-A" city?  It's Pennsylvania's only second class-A city, by the way.  Its category sounds like some sort of low-level professional baseball league?  If it keeps working hard, maybe Scranton will make it to AAA or even the big leagues one of these years. 

And, especially, can we please come up with a better label than "Third Class Cities" for 53 other cities?

Although I say some of this with tongue in cheek, word choices and categories matter.  Single A in professional baseball, which is two leagues away from the bigs, is not called "C-ball" or "third class league" or "the low class league."  Perception often is reality, the massaging (of words) is the message, and the brand is important.

Metro Cores, County Cores, Core Communities, County Seats (not all 53 are indeed county seats, but many are) or Poleis of Pennsylvania (the Greek plural noun for cities; after all, the Greeks invented the city-state) all give a sense of dignity, strength, and importance. 

But I digress.  As Joe Friday from "Dragnet" might have put it, let's look just at the fiscal facts, ma'am. 

Pennsylvania's only second class A. city and a distressed city since 1992, Scranton’s 2011 budget calls for eliminating 34 firefighters, ten police officers, ten clerical workers, nine administrators and five public works personnel.  To add injuries to injury, Scranton faces a $5.2 million deficit in 2011 and is projected to have an annual debt service payment of $6.9 million through 2025.

Upper Moreland Township is increasing property taxes by 13.6%.

Our third class cities are really feeling the pinch.

An Act 47 or distressed city as of 2009, Reading’s 2011 budget proposal calls for a 20 percent property tax increase and the elimination of 25 jobs, including 17 firefighters.

Bethlehem’s 2011 budget calls for eliminating 54 jobs and $1 million in fee hikes (i.e., recycling, housing, inspection, and permits).

An Act 47 or distressed city as of December 15, 2010, Harrisburg had proposed terminating 10 firefighters and closing one fire house, and now proposes selling $8 million worth of land under three public parking garages.  Some Harrisburg officials have proposed Chapter 9 federal bankruptcy.

In 2010, Lancaster's property tax increased by 25% as it cut 43 positions, including police officers, while raising water, sewer, and trash collection fees.  Its 2011 budget, the first one in without a real estate tax increase in six years, proposes increasing sewer fees by about 20% and eliminating two firefighters and a fire marshal position. 

In addition to a 15.4 percent sewer fee hike, York's 2011 property taxes increased by 11%, from 15.64 to 17.39 mills.  In the same precarious condition as its peer cities, York's real estate tax rate nearly doubled in ten years, going from 9.73 mills in 2001 to 17.38 mills in 2011.

After balancing its 2011 budget by selling the city's delinquent property tax liens to a private party for $4 million, Erie's officials already are bracing taxpayers for a tax increase in 2011.
 

This is just a small snapshot of cities, largely through no fault of their own, managing fiscal declines.  With public safety taking bigger bites out of cities’ general funds each year, many cities face a constant dance with distress every two years.  If they can avert raising property taxes in year one, they are forced to do so in the year two. 

In Bethlehem, Easton, Harrisburg, Lancaster, Reading, and York, annual property tax revenues are not enough to pay for annual public safety costs. So, to try to minimize increases in property taxes, cities dip into other funds, raise parking, trash and other fees, or incur further or refinance debt just to maintain a modicum of safety. 

This was a key finding of the Pennsylvania Economy League's Structuring Healthy Communities, a 2009 case study that should be required reading for anyone who reports, opines, or legislates on fiscal issues affecting Pennsylvania’s smaller cities.

That is no way to run a city.  

Considering all of the evidence, a crisis is at hand for Pennsylvania’s smaller cities – 54 in all, and most of them in the geographic “T” of Pennsylvania -- with no end in sight.  

If our smaller cities were patients, they would be in critical care, suffering simultaneously from five serious illnesses with the acronym CHEMO: (1) Cancer--devastating, state mandated, annual spikes in pension and health care costs, made all the more costly by a societal good – increased life spans;  (2) Hypertension – high blood pressure associated with the struggle to make payrolls, bond payments, and contractual obligations; (3) Emphysema -- no chance to annex lands or breathe outward and little chance to get the oxygen of new private investments; (4) Malnutrition -- stagnant tax revenues, ever expanding percentages of tax exempt properties, a liberal definition of tax exempt charities, including private colleges and hospitals, and a disturbing over-dependence on one scarce food source – property taxes); and (5) Osteoarthritis -- lack of local flexibility and aging, brittle infrastructure and utilities, including streets, sidewalks, waterways, rail corridors,  interceptors, bridges, sewer and water pipes, electric lines, and gateways.

Consider the following X-ray of the first and most crippling illness.  Minimal Municipal Obligation or “MMO” is the state mandated annual payment that a local government must annually pay into its pension fund against future obligations.  The 2001 MMO for the City of York’s workforce was $546,042, but by 2009, the MMO was a staggering $5,203,433 – an 853% increase over just eight years.   Its MMO for 2011 is $6,575,288.  That's an eye-popping 1,104% increase in just ten years.

Simply put, because of a perfect storm of illnesses, many of our cities and towns are fiscally unsustainable.

The present crisis transcends our little burgs, continues to sweep across the state, and threatens to overwhelm many of our cities and towns, bringing all of us down with them.

Ironically, moral outrage, questions, and demands would be better directed to state elected officials because, at the local level, despite their commitments and competencies, the Burgermeisters, council members, and emperors have scant clothes. 

The deck is stacked overwhelmingly against our cities’ admirable public servants because of the cities’ systemic deficiencies, structural deficits, and, in effect, unfunded mandates. 

For any of our struggling community cores, a mayor, business administrator, and city council with the combined leadership talents, financial acumen, and fiscal discipline of Alexander Hamilton, Alan Greenspan, Warren Buffett, Robert Rubin, Bill Gates, Suze Orman, Dave Ramsey, and Clark Howard could not usher these municipalities into eras of fiscal sustainability. 

The problem is not at the local level; it resides with all branches of state government, particularly the legislature.  The systemic, chronic problems of small cities and towns have been brewing for decades largely because of a largely lethargic, unimaginative state government. 

The state has failed to give our smaller cities the flexibility that they need to get back on their feet, to strengthen the sinews and muscles of infrastructure, to keep cost cholesterols at manageable levels, to grow and efficiently share resources with neighboring municipalities, and to build and maintain a strong immunity system of public safety so bond ratings can be resuscitated and the free market can flow freely again.

Because of outdated, rigid state laws, simply to balance their budgets, smaller cities face stark, stomach-churning choices each year.   Pick one of or a combination of the following three poisons: (1) make hefty public safety terminations or leave positions vacant, (2) raise property taxes and fees to unacceptable levels, or (3) incur more or refinance debt, sell key physical assets, such as parking garages and public buildings, sell millions of dollars of tax liens for quick-fix cash infusions. 

This is no way to live, let alone thrive.  But there is hope.

If he chooses to do so, Doctor Harrisburg can become the hero by directing triage.  Game plan priorities include radical surgery (e.g., approving comprehensive legislation to enable our cities and towns to thrive, increasing the retirement age for newly hired public safety employees to receive full benefits to, for example, 55, as Illinois has done) and administering high doses of intravenous nutrients (e.g., approving aggressive, performance-based tax incentives, approving local option revenue tools to stabilize property taxes). 

Intense physical therapy must follow. 

Doctor Harrisburg traditionally has shown diligent care for his more famous patients, Philadelphia and Pittsburgh.   But in 2011, great suffering in the “T” of Pennsylvania calls for a wider patient base.  If he truly cares about Pennsylvania’s 54 smaller cities and their sibling, struggling boroughs and townships that suffer from related diseases, the good doctor must act boldly and comprehensively. 

Lives are at stake, not just the cities, themselves, but, most importantly, the 1.3 million people who live in them and are regularly jolted by spikes in regressive property taxes and the 5 million people who live in their metropolitan statistical areas.

Our core communities and their citizens deserve new leases on life fortified by justice, financial stability, fiscal predictability, self-reliance, and self-governance. 

An urban development, strategic planning, and public relations consultant, Matthew Jackson is the author of The Crisis: A Plea From York Town To Save Our Cities And Towns. 

Third Essay: Act 47 Emergency Room Admitting More, But Not Releasing Patients

The ambulances are starting to blare as they pick up more aging, diseased bodies for trips to critical care units that patients never leave.

On December 15, 2010, the state Department of Economic and Community Development has admitted our capital city, Harrisburg, into the Act 47, officially the "Municipalities Financial Recovery Act of 1987."  

Act 47 is not a state bail-out, and it is not a state takeover of city finances.  City leaders still must lead the show.  Act 47 involves state participation and oversight, a long-term recovery plan, limitations on future collective bargaining agreements, and the ability to levy a commuter tax. 

With court approval, participating municipalities may also raise property and income taxes past statutory caps.  Specifically, Act 47 binds management and unions to negotiate collective bargaining agreements within the constraints of the recovery plan.  It also gives participating municipalities preferred status for state grants and economic development programs.

All of this sounds helpful, but over the last 23 years, Act 47 has a lackluster record of resuscitating our cities to fiscal health.  Act 47 offers some helpful recovery medicines, but still is more of a haphazard critical care unit that treats only select diseases and tends to not discharge its patients.  In fact, no municipality that has ever entered Act 47 has left.

Harrisburg joins the City of Reading, which entered Act 47 last year.  Other dominos likely will fall because of small cities’ systemic inadequacies and structural deficits aided and abetted by rigid state laws and mandatory arbitration decisions. 

In March of 2010, Westfall Township in Pike County became the first municipality in Pennsylvania to declare bankruptcy, the next protracted, uncertain option after Act 47.  Harrisburg officials candidly have been discussing bankruptcy as a valid option for the capital city. 

Aside from the fact that there is no guarantee or efficient timeline for the federal government to approve Chapter 9 bankruptcy applications, bankruptcy would leave a community with a black eye, if not crippled legs, for a generation to come.  

Consider the dire ramifications of dismal bond ratings and investors avoiding such municipalities like the plague.  Consider also the stigma of bankruptcy chasing away young families and would-be homeowners, entrepreneurs, businesses, and developers.

No municipality that has entered Act 47 should be blamed for doing so.  It makes preeminent sense for Harrisburg and Reading, for example, to enter Act 47.  The point is that Act 47 or bankruptcy may be in the financial best interest of some cities because, sadly, they have so few options for the future. 

That's the sad reality because they do not have the tools necessary to thrive.

Neither Act 47, nor bankruptcy, however, is ideal, or pretty, or easy, or conducive to building thriving urban communities.  They are stop-gap measures that absorb more and more municipalities unless the state approves comprehensive reform.

Embarrassingly, 20 Pennsylvania municipalities, including 12 cities -- ten third class cities, one second class city (Pittsburgh), and one second class A city (Scranton), six boroughs, and two townships, are Act 47 communities today.  Although it is called a “Recovery Act”, few recover and none leave.  Like the Hotel California, you can check out anytime you like, but you can never leave.  Eleven municipalities have been in Act 47 for more than ten years, and six have been in Act 47 for more than 20 years. 

Fourth Essay: Ten To Tee Up The “T”: Pumping In Oxygen Of Development, Job Creation: Part I.

Without large doses of the oxygen and new nutrients of private investment and job retention and creation, many of our small cities are dying on the vine.  To counter-act the competitive disadvantages of high property tax rates, concentrated poverty, and physical barriers to entry, a balanced, healthy menu of targeted incentives and decentralized flexibility and options are needed to jumpstart local economies. 

These incentives also are needed to help make our cores more viable and attractive so that shared services and boundary changes – long-term, systemic changes -- are increasingly seen as being in the enlightened self-interest of metropolitan areas.  Four of these first five proposals are new or original for Pennsylvania. 

(1) CORE Corridors: long term, low interest loans, property tax exemptions, environmental indemnification, and broad-based tax credits for CORE (“Comprehensive Opportunities for REvitalization”) -- locally designated under-utilized and interconnected tail and water corridors and industrial sites. 

Rhode Island, Colorado, California, and Maryland have extensive, successful programs that target fallow urban areas for major private development and job creation through comprehensive problem solving and incentives.  Our smaller cities’ abandoned and contaminated sites have virtually no chance of becoming assets and creating jobs unless the state provides comprehensive, targeted, one-stop assistance. Not only is Pennsylvania’s former enterprise zone program dormant, but its timeline was short (i.e., 7 years) and its focus was mostly on planning rather than making the numbers work for private development to works its magic. 

Focusing on census tracts of disproportionate poverty and blight, a radically revamped Commonwealth Enterprise Zone program is needed, with an emphasis on invasive surgery in the form of 100%, ten year tax exemptions for city, school district, and county taxes for the value of improvements to properties in the zone to bring to bring abandoned sites and buildings back to life. 

Accompanying the property tax exemption centerpiece of the program should be short-term environmental lawsuit indemnification or immunity so private developers can purchase the property without fearing liability and can finish remediation over time, ten year tax employer tax credits for new employees, ten year employer tax credits for job training of disadvantaged or out-of-work citizens in these zones, and ten year employee and resident tax credits for those who work or move into these zones.  

Such an aggressive state legislation and program are needed to override what is often the common pooling problem between three different local taxing entities that may not always agree on a bright-line, ten year, 100% exemption – likely the only incentive that make the private numbers work for development to occur in many of these distressed areas.  This would be a performance-based exemption, and different than the successful, but somewhat controversial Keystone Opportunity Zone ("KOZ") program, which provided for 100%, ten year exemptions for the owners of properties within KOZs, regardless of whether improvements were made or not. 

Under CORE, which is more of a KOZ-light and based on performance, the tax exemptions would not decrease the revenues to local taxing bodies because property taxes would still be required on the base value of participating properties before improvements are made.  Under KOZ, property owners were not required to pay property taxes on the base value of the buildings and lands.  Further, but-for this program and holistic tax exemptions of property taxes from all three taxing bodies, the new development would not occur. 

Currently, such a bill has not even been introduced for discussion in the legislature. 

(2) REV: "Revitalize for Equity and Value” Program: double value cap for 20 years.  Despite adequate population density and market demand, the City of York does not have a fully occupied, shiny retail strip with a full-service grocery store.  Although it would make sense in almost any other state, it does not have a hotel, convention center, and private parking garage next to the popular York Fairgrounds and Toyota Arena, which attract year-round crowds.  Although York has several clean and green sites ready for multi-million-dollar investments, the only major projects (i.e., over ten million dollars) that have occurred in the last 20 years are ones heavily subsidized by the state and/or local governments.  It’s simply a matter of numbers. 

If a developer wants to build a new $5 million retail mall in Metro York, and has three comparable sites available in Spring Garden Township (total tax rate – township and school district combined -- of 26.10 mills), Manchester Township (total of 22.41 mills), and the city, with a combined tax rate of 49.33 mills (29.54 of which is school tax), which municipality will drop out of the running?  The answer is clear: Pennsylvania’s outdated reliance on property taxes for schools and governments means that the economics for private projects of this magnitude currently do not work in small cities without a combination of aggressive incentives. 

Fifth Essay: Ten To Tee Up The “T”: Pumping In Oxygen Of Development, Job Creation: Part II.

Picking up where the last column ended, this column proposes two further policy proposals – aggressive, performance-based tax incentives and state catalysts – to pump in tons of private investment and job retention and creation needed to rebuild our core communities.

(4) New state historic tax credits for historic commercial and residential properties to preserve our rich heritage, to foster homeownership, to create jobs, and to make downtowns walkable attractions. 

Thirty-one states have adopted incentive programs to foster historic rehabilitation, and twenty-five states offer credits for rehabilitating owner-occupied residences, while the Keystone state, despite two tries to get such legislation passed, does not.  Once again, despite their historic charm, remarkable architecture, and potential, our historic community cores are neglected. 

Pennsylvania’s program would have the following two features to preserve the heritage of commercial and residential sectors and offer true economic value through private investment reusing historic buildings.  First, the residential program would provide grants, with a maximum of at least $15,000 per project for homeowner-rehabbers who live there for at least five years.  Second, the commercial component is a 25% tax credit for qualified commercial properties, with a maximum of $500,000 per project per year.  Despite being supported by Preservation Pennsylvania, Penn Future and 10,000 Friends of Pennsylvania, two bills to accomplish as much never got out of committee for an up-or-down vote.   

(5) Community Core Keystone Zones.  This program would have two components, neither of which would cost the state or local governments a dime in tax revenue.  First, core communities would have the ability to adopt an automatic, rolling trigger of ten year tax exemptions starting whenever properties are acquired by redevelopment, industrial, and general authorities to make these parcels attractive for development and job creation. 

Sixth Essay: Ten To Tee Up The “T”: A Balanced Diet Of Revenue Nutrients: Part I.

The following reforms and revenue options are needed to stabilize core communities' property taxes, which have become barriers to reinvestment and job creation, while giving cities the revenues they need to provide essential services and quality infrastructures and improve bond ratings. 

The following two measures have the added advantage of working to equitably stabilize local property taxes while not increasing a citizen’s net tax burden in any form.

(6) Comprehensive state reform of local pensions and reform of arbitration process.  People and our public safety retirees are living longer.  According to the Center for Disease Control, the average American lifespan is 77.9 years.  God bless us all; that’s a good thing.  Note also that pension reform cannot legally change public employees’ pension benefits retroactively.  That’s the good news.

Yet, Pennsylvania has over 3,000 separate local government pension plans, which, ludicrously, is 25% of all such plans in the nation.  Two-thirds of the plans have ten or fewer active members.  This is sheer madness.  In New Mexico, as urban expert David Rusk points out, all state and local government employees belong to one state-run pension system (PERA), and all school district and state university employees belong to another (ERA).  Once again, the Commonwealth of Complication confounds commonsense.

Further, during flush times in the 1990s, cities like York did not adequately pay into their pension funds until the state required them to do so in recent years, meaning that the days of reckoning are at hand.

Ever upward arcing city pension costs are now devastating cities’ general funds.  Over many years of tough collective bargaining negotiations, despite the recent brutal recession and market downturns, it has become more and more usual for city’s public safety employees who retire after twenty years of service to receive full pensions, equal to 50% of the average salary during one’s last three years of employment, and full health care for the rest of their lives. If an individual retires at age 40 and then lives to the age of 80, the math speaks for itself. 

Between pensions and health care payments, it is likely that a retiree actually will receive more dollars from a city as a retiree than he or she did as a full-time employee. 

Cities pay for 100% of these costs.

“MMO” or Minimal Municipal Obligation is the state mandated annual payment that a local government must annually pay into its pension fund against future obligations. The 2001 MMO for the City of York’s workforce was $546,042, but by 2009, the MMO was a staggering $5,203,433 – an 853% increase over just eight years.   Its MMO for 2011 is $6,575,288.  That's an eye-popping 1,104% increase in just ten years. (City Of York 2011 Budget Introduction)

Our public safety employees are trained professionals who put their lives for the citizens who they serve, and they deserve reasonable pensions and health care coverage after retirement.   However, given the cities' stagnant tax revenues, concentrated poverty and blight, sluggish property values, and increasing number and value of tax exempt properties, coupled with longer retiree lifespans, the pension system is unsustainable, and something has to give. 

In order for our cities not to drown in rising pension costs going forward, we first need comprehensive state reform to mandate consolidation within some of the 3,000 local government plans.  This will enable participating municipalities to have competitive leverage with insurance companies when negotiating pension and health care deals, realize volume savings via consolidation, and eliminate duplicative administrative costs.

Consolidation also will provide more clarity of and consistency between pension plans throughout the state, so municipalities are not cannibalizing each other’s talent by offering different plans.  Further, it should lead to more portability between municipalities so, if Pittsburgh and any other participating cities, for example, lay off 50 police officers or firefighters, these veterans can take jobs in third class cities without losing their prior years of service for vesting and without leaving the state.

Second, we need to seriously explore switching from requiring cities to provide defined benefit plans to enable them to offer voluntary benefit or 401(k) or 403(b)-style plans, increase normal retirement age triggers for benefits to be paid (e.g., pensions and retiree health care not paid until age 55) or otherwise curtail early retirement subsidies.  For example, in December of 2010, the Illinois legislature passed a measure to increase the retirement age to 55 for newly hired police and fire fighters to receive full benefits.

Capping individual retiree health care costs per year and changing Act 111 arbitration rules so arbitrators must take into account cities’ financial predicaments before making decisions must also be on the table.

Although the state recently made good faith efforts to reform the pension issue as it relates to state public employees, public teachers, and state elected officials, the reform did not, in any way, affect the pension crisis confronting core communities.  Tough to defuse and with passionate people surrounding it, it’s a time bomb ready to explode in the faces of our cities’ taxpayers.  

(7) 50-50 earned income tax reform.  This would not increase anyone’s tax bill and would not be a new tax.  It would be a 50-50% split between the municipality in which one works for the majority of the year and the municipality in which one resides for the majority of the year.

Currently, because of a rigid state law that local municipalities cannot change, 100% is paid to where one resides, typically the suburbs, yet core communities are responsible for infrastructure, public safety, and other services commensurate with work-day swells in their populations. In other words, although York’s population increases by 78% each work day, none of its commuters’ earned income tax is paid to the city to help pay for public services.

Based on 2009 dollars, non city residents earned $1,091,765,814 – that’s right, over $1 billion -- working in the City of York while city residents who worked in the city earned only $143,454,935.  A fair 50-50 split in earned income tax revenues between where one works and where one resides would generate over $850,000 for the city each year.

Based on 2011 cost projections for the City of York, $850,000 would pay for the entire Office of Business Administration and come close to paying for the entire Parking Bureau or the entire Department of Community Development.  It also would be twice the cost of the city’s Human Resources Department.  Looked at yet another way, the infusion would pay for both the City Economic Development Department and Human Relations Commission in their entireties.

Currently, such a bill has not even been introduced for discussion in the legislature.

While providing equitable relief to our battered core communities and alleviating property tax burdens, these two proposals – comprehensive local pension reform and 50-50 earned income tax reform, would not create a new tax or increase an individual’s net tax burden.

An urban development, strategic planning, and public relations consultant, Matthew Jackson is the author of The Crisis: A Plea From York Town To Save Our Cities And Towns. 

Seventh Essay: Ten To Tee Up The “T”: A Balanced Diet Of Revenue Nutrients: Part II.

Picking up where the last column ended, this final column proposes a healthy, balanced diet of revenue nutrients -- local options and revenue tools for our smaller cities to stabilize property taxes, attract homeowners and investors, build quality infrastructures, maintain public safety levels, create viable neighborhoods, and improve their bond ratings.  The following are aimed at stabilizing if not decreasing the onerous property tax burdens in our core communities.

(8) 1% county option sales tax for public safety.  Exempting food and clothing, this tax would generate revenue specifically directed at stabilizing real estate tax at the municipal level, paying for public safety and shared municipal services.  According to one version of the bill originally introduced and long supported by Lancaster Representative Mike Sturla, 40 percent of the additional revenue raised county-wide through the levy would go to municipalities throughout participating counties to stabilize property taxes and support public safety costs.  Fifty percent would go to the participating county governments to be used broadly to stabilize property taxes.  The additional ten percent would be used to study and implement shared multi-municipal services programs aimed at stabilizing or reducing property taxes.  The Pennsylvania League of Cities and Municipalities (PLCM), Pennsylvania State Association of Township Supervisors (PSATS) and Pennsylvania State Association of Boroughs (PSAB) support this legislation.  Why have 40 states approved such a levy to strengthen their local municipalities while Pennsylvania waits?

(9) Redistribution of Johnstown flood tax tevenues to municipalities with high concentrations of tax exempts or 1/3 fair share minimums from tax exempt charities and non-profits.  Pennsylvania has a very liberal definition of charities, with hospitals and private colleges lumped together with county governments, non-profits, and public colleges.  That’s right.  For profit hospitals and private colleges are exempt from property taxes.  Undeniably, these tax exempt entities provide valuable services.  Their presences and expansions require, however, public services and infrastructure – unfunded mandates, in effect. 

A staggering 49% of the value of all properties in the City of Harrisburg, 38% in York, and 33% in Lancaster are tax exempt.  York’s 38%, accounting for $604 million in tax exempt real estate, is disturbingly up from 27.3% in 2003. As county and federal governments, courthouses, administrative buildings, colleges, hospitals, churches, and non-profits – all tax exempt under Pennsylvania law -- grow, through expansions and appetites for more parking, these percentages creep upward, taking larger chunks of a limited piece of pie.

At the same time, state law does not require that cities be compensated at all for the ongoing public duties that such expansions impose.  The unintended, problematic consequence of the creeping concentration and expansion of tax-exempts is that about 50% of each city taxpayer’s bill is due to the high concentration of tax-exempt property. 

Here are two proposals.  First, the legislature could resurrect House Bill 1018, which the legislature failed to act on in 2009.  This bill would have distributed the state’s revenues, estimated to be $240,000,000 annually, from the 1936 Johnstown Flood Tax, which is an 18% levy on the wholesale of wine and liquor, to those cities that have at least 15% of their properties that are tax exempt.  Passage of this bill would mean that at least one million dollars would come to the City of York annually to help offset the burden of its tax exempt properties.

Second, the legislature could require tax exempt entities, with the exceptions of public school districts, in municipalities in which at least 15% of the value of its real estate is tax exempt, to pay at least 1/3 of what their property taxes would be if they were owned by private entities. If the 1/3 requirement was enacted into law, York would stand to generate about $3.1 million in 2010 dollars, a fairer amount that more adequately represents the cost of public services associated with the non-profits.  This amount is much more than the $700,000 that the city begs for and receives through its Fair Share Program, whereby non-profits admirably make voluntary payments-in-lieu-of-taxes (“PILOTS”). 

The 1/3 requirement would be more reflective of the true costs that the city bears over time for the disproportionate concentration of tax exempt properties within its narrow boundaries.  To date, a bill proposing the 1/3 requirement or something similar thereto has not even been introduced for discussion in the legislature. 

(10) 7% county option alcohol per drink tax for infrastructure, public parking, mass transit, rail corridors, waterways, and rail trails.  Philadelphia has a 10% alcohol per drink tax and Allegheny County has a 7% alcohol per drink tax, and their downtowns and nightlife are flourishing.  Yet, all other Metropolitan Statistical Areas in Pennsylvania do not have the ability to consider whether such a levy would make sense for them, based on their inequitable funding predicaments, as well as infrastructure, public safety, and other demands associated with downtowns being cultural and nightlife centers.  Currently, such a bill has not even been introduced for discussion in the legislature.

Note that local option revenue tools would not put businesses in community cores at a disadvantage with neighboring municipalities or encourage a cannibalizing of private business because they would be local option measures that, upon approval by county governments, would be implemented county-wide.  Revenues would be distributed to municipalities throughout participating counties based on an equitable funding formula, compensating communities based on the percentage of their properties that is tax exempt.   

Some of these measures undoubtedly will be opposed by special interest groups, and passing these and similar measures will require considerable bi-partisan cooperation, political will, and legislative and executive leadership. 

But desperate times demand dramatic, comprehensive action.

We cannot fiddle while our little Romes burn, enter distressed status, or contemplate or enter bankruptcy. 

The stakes are too high and the people too important. Comprehensive, bold, bi-partisan action is needed. 

The 1.3 million people who live in our small cities, the five million of people who live in their Metropolitan Statistical Areas, and the hundreds of thousands who live in hundreds of other struggling municipalities deserve justice, a better quality of life, and sound, proud county seats and core communities.

We need the right balance of  the five “Cs”, Carrots (aggressive performance-based tax abatements and exemptions to incent private development), Curbs, containments, or cuts (pension consolidations, pension and health care reforms, and arbiration reforms for long-term cost savings), Catalysts (grants, low interest loans, tax credits and other programs seeded by the state), Capabilities (reasonable revenue options and flexibilities for developing distressed areas), and Commonsense (a shared acknowledgment that our core communities, representing five million people in their metropolitan areas, are too big to fail, and a shared commitment to make them succeed).

Empowered by the five Cs, our 53 cities in the “T” and beyond and their borough brethren, 958 statewide, can radiate enlightenment, opportunity, and productivity throughout the Commonwealth.

An urban development, strategic planning, and public relations consultant, Matthew Jackson is the author of The Crisis: A Plea From York Town To Save Our Cities And Towns.