Farrell, first city on oversight list, shows progress but still struggles

It may be seven more years before the town is off the list.
FARRELL, Pa. (AP) -- Steel was good to this community, and residents showed their gratitude by naming roads, schools and even their city after industry leaders.
It's no wonder: The construction of a steel mill at the turn of the century led to the conception of Farrell, the success of the works sparked other development, and that allowed residents to enjoy a middle-class lifestyle.
But when the steel mill hit financial troubles and eventually filed for bankruptcy in 1987, residents lost jobs, businesses closed, the population dropped, and Farrell became the first Pennsylvania city to be declared distressed under a state law known as Act 47.
About 17 years later, Farrell is still on the distressed list and will probably be there for seven more years when the Keystone Opportunity Zone status is lifted from new development in the city, said Tom Tulip of the Pennsylvania Economy League and the recovery coordinator for Farrell.
Until then, the city of just more than 6,000 can't collect taxes on the development and will have to rely on a .4 percent wage tax on nonresidents -- a tax the city was able to implement under Act 47, Tulip said.
Farrell's 2004 budget sits at $2.2 million and the earned income tax from nonresidents could bring in about $200,000 this year, said Farrell manager Lavon Saternow. The earned income tax from Farrell residents should bring in $600,000 in 2004, she said.
"Farrell is a solvent community and has a balanced budget. But it's still supporting its general fund with the wage tax," Tulip said.
History
Workers once considered Farrell, located about 60 miles northwest of Pittsburgh, to be a land of nearly endless possibilities.
In the late 1890s, Frank H. Buhl formed the Buhl Steel Co. of Sharon, which the Carnegie Steel Corp. would later buy, and constructed the Sharon Steel Co. on land that would later become Farrell. The latter became part of the Union Steel Co. and then the Farrell Works of the Carnegie Steel Corp.
Companies making products from the output of the steel mills opened in the area, making the Shenango Valley a hotbed of industry by the early 1900s. The industrial growth led industrialists and community leaders to advertise that there were jobs and land to be had in Mercer County.
"They called for people to come to Sharon, buy lots for homes at a low price and hitch your wagon to the star of the Buhl steel company," Farrell Mayor William A. Morocco Sr. said.
The borough of South Sharon was incorporated in November 1901, and its population grew to about 10,000 in 10 years. In 1912 -- in a move that perhaps best illustrates residents' loyalty to the steel industry -- the borough changed its name to Farrell, in honor of James A. Farrell, then the president of U.S. Steel Corp.
Steel stayed strong until after World War II, when the Carnegie-Illinois Steel Corp. attempted to close the steel mill but instead sold it to Sharon Steel Corp.
Farrell Councilman Robert Burich has owned a gas station in town for about a year and a half, but his family has owned it for five decades. The 50-year-old remembers when the streets were lined with restaurants, stores and other businesses when steel was strong in Farrell.
"At four o'clock, you couldn't get out of here," Burich said as he pointed to the street next to his gas station. "Guys were getting off work and traveling up and down the street."
The way Burich sees it, the city started to change in the 1970s, when residents were attracted to new housing and retail development in nearby Hermitage. Business either moved to new malls or closed completely; today, the once-bustling retail corridor is desolate.
Bankruptcy
But Farrell was dealt a devastating blow in April 1987 when Sharon Steel, which was then controlled by financier Victor Posner and was the nation's 12th-largest steelmaker, filed for Chapter 11 bankruptcy protection. By then, the mill had 2,200 workers, down from a peak of about 5,000 in the 1950s.
That year, Farrell sought help from the state's new law known as Act 47.
"I don't think it was [controversial] on the council's part because, at that point, we needed to have some money or the city would have been shut down," Burich said.
The mill changed hands a few times after the bankruptcy. Investment banking firm Castle Harlan Inc. in 1990 purchased Sharon Steel and assumed its liabilities, but the mill again filed for bankruptcy two years later.
Industrialist Swraj Paul in 1995 bought the mill and renamed it Caparo Steel, but sold it in 1999 to a Swiss steel producer. Today, the mill is called Duferco Farrell and employs about 550 workers.
After the mill's initial bankruptcy, the amount of taxes the owners paid steadily decreased, Morocco said. Today, Duferco Farrell is part of a Keystone Opportunity Zone, an area designated by the state that exempts businesses from locating there from paying taxes for 10 years.
Cutting costs
That, along with dropping population and housing values, meant the city needed to cut costs. But in the meantime, Farrell received about $650,000 in loans from the state, Tulip said.
Farrell cut employees and merged its police department with those in nearby West Middlesex and Wheatland. It pared down its fire department to just a full-time chief and assistant chief and a handful of part-time and volunteer firefighters.
Farrell also had to be creative, Tulip said. For example, the city transferred two firefighters to the public works department so they can pull double duty if a blaze starts during their shifts, he said.
The city also sold its city park to a developer for nearly $130,000. The primary care facility that will be built there will be the first tax-generating development to be built in the city since 1987, Morocco said.
"For the most part, we stayed with it almost to the letter and it's done well for us. The city has paid off its debt to the state, we've paid off our bond issues [and] we've kept what few employees we have," Burich said.
Leaders always wish they had more money for projects, especially when it comes to recreation, Burich said. But they're hopeful that businesses in the now tax-free Keystone Opportunity Zones will bring in more money for the city in the future.
The two largest businesses in the KOZ are Duferco Farrell and Sharon Tube, a steel pipe manufacturer.
"We'll see things turn around, but it might not happen until the next decade," Morocco said.