PITTSBURGH City officials consider seeking help with financial troubles through Recovery Act

Pittsburgh's $40 million deficit this year will grow to $80 million in 2004.
PITTSBURGH (AP) -- Pittsburgh's financial troubles are leading some officials to question whether it will become the largest city to seek help through Pennsylvania's Municipalities Financial Recovery Act, also known as Act 47.
Enacted in 1987, the state law helps financially distressed municipalities that are in danger of filing for Chapter 9 bankruptcy protection. Act 47 gives elected leaders financial tools -- such as a recovery plan, wage tax on nonresidents, and state loans and grants -- to help them restore their towns' fiscal health.
The law does not prevent a town from filing for bankruptcy, but that has not happened since Act 47 began. So far, 19 municipalities, including Duquesne, Johnstown and Aliquippa, have sought help under the law.
Scranton, with a population of 90,000, is currently the largest city operating under the law. Mayor Christopher Doherty said the process wasn't easy and the recovery plan was not widely accepted at first, but it eventually helped Scranton improve its bond rating and refinance $12 million in debt.
"Three and a half years ago, we were almost bankrupt, but for the last two years, we've finished in the black," Doherty told the Pittsburgh Post-Gazette for a story appearing Sunday.
Financial troubles
With a $40 million deficit this year and a projected $80 million budget shortfall in 2004, Pittsburgh has its financial troubles. But before it can seek help under Act 47, an official -- such as Mayor Tom Murphy or a creditor who is owed at least $10,000 -- must ask the state to designate the city as financially distressed. A majority of city council, the state Department of Community and Economic Development and other groups can also approach the state.
Those people or groups must prove that Pittsburgh meets at least one of many criteria, such as budget deficits, delinquent bills and missed payroll payments.
Dennis Yablonsky, secretary for the Department of Community and Economic Development, has considered the city's deficit and how the law could help, said department spokesman Kevin B. Ortiz.
"He thinks Act 47 is possibly a part of the solution for Pittsburgh but only a part," Ortiz said.
Possibilities
If the state deems Pittsburgh as economically distressed, it would hire an outside fiscal consultant to develop a recovery plan, which the city would be obligated to approve and enforce.
Pittsburgh officials have considered the recovery act, but Murphy had little to say about the idea, other than "there are certain things we can or cannot do that a smaller municipality can do in accessing that state money."
Pittsburgh would be too large to be eligible for grants or no-interest loans under the law. The state is concerned that larger cities would use up too much of the loan and grant money.
The law would help the city start a wage tax for nonresidents and keep future labor contracts in check. Act 47 doesn't negate labor agreements, but it does force city unions to keep their labor demands within the city's economic recovery plan.