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The financially distressed city’s revised recovery plan, which council is set to approve this week, offers a variety of solutions including proposed limitations on benefits offered to employees.

But it is clear that, after years of economic stabilization under Pennsylvania’s Act 47 program for distressed municipalities, the city has taken a step backward.

“While the recovery program initially was successful in helping Johnstown turn the corner, the city has not arrived at its destination of a strong, sustainable financial base,” the city’s recovery team writes.

“The residents’ expectations for delivery of basic services will continue to exceed the city’s resources until its business climate improves and its population stabilizes.”

Johnstown, distressed since 1992, achieved a budget surplus of more than $700,000 in 2001. But by 2005, the report notes, “the city was experiencing a core operating deficit of over $1 million.”

The reason is relatively simple: Revenues have averaged only 2.7-percent growth over the past five years while general operating expenses increased by an average of 4.8 percent during the same time period.

Property-tax proceeds are stagnant. A lack of economic growth, a declining population, successful assessment appeals and the increasing dominance of tax-exempt property have played a role.

Those trends have had “a devastating impact,” the recovery plan says.

At the same time, rising expenses continue to pull city budgets toward the red. Health care, which jumped 59 percent since 2001, and pension costs, which doubled since that year, are particular concerns.

The report offers an exclamation point for city officials’ recent consternation over employee-pension costs. The recovery team writes that “the extremely weak funding status of the city pension funds threatens the ongoing stability of retiree benefits as well as the city’s finances.”

In an effort to increase disappointing returns on pension investments, City Council this year appointed two new financial managers for those funds.

“Strong monitoring and action will be critical to improving pension-fund health,” the recovery report says.

While spelling out Johnstown’s financial conundrum, the recovery team also offers some possible answers.

The plan’s two biggest initiatives – a “commuter tax” and a pending staffing study – already have been publicized.

The state has approved the reintroduction of a tax on commuters’ salaries and an increased levy on city’s residents’ wages. Combined, those taxes are expected to pump an additional $1 million into city coffers in 2008.

Officials are pledging, though, that the commuter tax is a short-term solution and will decrease over the next three years.

“As those revenues drop, the city’s got to reduce its expenditures,” said Pittsburgh attorney Jim Roberts, who coordinates Johnstown’s recovery efforts.

The in-depth staffing study, paid for by the state and performed by an outside consultant, is expected to commence early next year. It will examine every city employee and his or her function.

The recovery plan says that, with the exception of Easton, “the city of Johnstown has more employees than any other third-class city of similar size.”

The report also contends that expenses for both unionized and nonunion employees “must be reduced if the city is to become fiscally sound.”

It advocates a redesigned health-care plan for all workers. To be implemented by Jan. 1, 2010, the plan would cut the city’s costs and limit future growth of those costs.

However, there is a caveat. Officials admit that any health-care initiative – along with some of the plan’s other personnel-related proposals such as the elimination of a minimum-staffing requirement in the fire department – cannot simply be inserted into current union contracts.

Even when those labor contracts expire, it is not a given that any new agreements would include drastic health-care cuts or other changes.

“It would all be part of the normal negotiating process,” Roberts said.

City union leaders are not happy with any discussion of benefit reductions or job loss, especially in the public-safety sector.

“I think the writing’s on the wall that the city plans on cutting services by cutting employees,” said city police Detective Sgt. Tom Owens, a Fraternal Order of Police representative.

“I don’t think that’s the answer,” Owens added. “Growth is the answer.”

Officials acknowledge that cost-cutting is not the only possible solution for Johnstown. Officials also must try to increase the city’s revenues, and economic development is key.

The recovery plan notes some positive trends in that area and also mentions an upcoming study that will identify economic opportunities mainly in the downtown and Kernville areas.

That effort already is beginning with help from a Cumberland County consultant and a $102,000 state grant, said Jim White, Johnstown’s economic development coordinator.

Part of the plan is developing a “life-sciences corridor” in Kernville focusing on the biotechnology industry. Already, ITSI-Biosciences plans to build a new facility on Napoleon Street next year.

White also envisions an “incubator” building for new, small bioscience companies in Kernville. And other land is currently available for construction in that neighborhood.

“It’s not like we’re starting from scratch,” White said. “We want to expand on things we’re already doing.”

Among other initiatives in the recovery plan:

• Prepare a business and marketing plan for the renovated Point Stadium.

• Review Johnstown’s fees – for instance, charges paid by participants in recreation programs – as well as service contracts with other communities to ensure that the city is recouping its costs.

• Explore possible revenues from advertising sales. For example, ads could appear at outdoor venues, inside city-owned structures and even on vehicles.

http://www.tribune-democrat.com/local/local_story_342230601.html?keyword=topstory

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