Worries cling to recovery plan

Three new people will be hired under the financial recovery plan.

By LAURE CIOFFI

VINDICATOR PENNSYLVANIA BUREAU

NEW CASTLE, Pa. — With New Castle firmly ensconced in Pennsylvania’s program for financial recovery — called Act 47 — John Altman still worries.

“Being under Act 47 doesn’t prohibit bankruptcy,” said Altman.

Altman was one of the citizen leaders who circulated petitions to get the city into the financial recovery program, which brings the commonwealth in to oversee the city’s finances. Without that help, the city was expected to run out of money sometime in October.

Two weeks ago, after some hesitation and delay, city officials did approve a plan for recovery created by the appointed state coordinators, but Altman worries it won’t come fast enough.

The plan calls for hefty increases in property and wage taxes collected by the city, as well as increases in fees for garbage bags and other services provided by the city.

For example, property taxes are now 9.916 mills and the current plan proposes they would be increased to 10.342 in 2008, and increased gradually through 2012 to 10.791 mills. That first year, a homeowner with a house and land valued at about $50,000 would see a $25 increase in their tax bill. The increases through 2012 would amount to less than a $100 increase in city taxes.

“I don’t think there’s anybody who is 100 percent for the plan. Overall I like most of what they put in, but I don’t think there’s enough neighborhood development,” Altman said.

Hiring recommendation

Mayor Wayne Alexander has his own beef with the plan: He’s unhappy with the recommendation to hire three more people in city administration to administer the financial recovery — including a new business administrator and financial office position.

The state will offer financial assistance for the salaries of those three new employees, but only for three years, Alexander said.

Alexander said he’s hoping to save money by not replacing workers who retire in the near future and by replacing essential positions, such as police officers, with those starting out at a lower wage.

Fred Reddig, executive director of the governor’s Center for Local Government, the agency that oversees communities in financial distress, said financial management has been one of the major problems in New Castle for the last several years.

“One of the areas of weakness is the city’s financial management system,” Reddig said.

They hope to do a national search to bring in administrators for the city, he said.

Shortfall has been building

This year’s financial shortfall, estimated to be $5.2 million, has been building up for several years, he said.

Last week, city council formally voted to pursue a $750,000 loan from the state to help get through the end of the year. Reddig said an additional $5 million loan will also be sought to help pay some of the city’s outstanding debts, but they must first go to common pleas court for approval.

As the city moves into planning next year’s budget, the other recommendations for increased taxes and fees will be put into place to pay back these loans, Reddig said.

“The city is in a significant financial hole. Getting out of that hole is not going to be easy. There is a need for all of the elements of government in New Castle to participate in this process,” Reddig said.

Reddig expects it to take several years before the city is on firm financial footing and no longer needs assistance.

cioffi@vindy.com