Pennsylvania DCED Secretary: City of Reading Qualifies as 'Financially Distressed'

Pennsylvania DCED Secretary: City of Reading Qualifies as 'Financially
Distressed'

Determination Triggers Financial, Technical Assistance While Ensuring
Essential Public Services

READING, Pa., Nov. 12 /PRNewswire-USNewswire/ -- Department of Community and
Economic Development Secretary George Cornelius has determined that the City
of Reading is "financially distressed" under the guidelines of Act 47, the
Municipalities Financial Recovery Act.

Cornelius now has 30 days to appoint an Act 47 coordinator, whose job it will
be to develop a financial recovery plan for the city; once appointed, the
coordinator will have 90 days to develop and propose a plan.

"Act 47 status is neither a state takeover, nor a determination of
bankruptcy," Cornelius said. "No interruption in the delivery of essential
services is anticipated. Moreover, ultimate responsibility for city policies
and priorities, and the day-to-day management of city affairs, remains with
elected city officials."

Cornelius announced his decision at a Pennsylvania Economy League public
policy forum here, following meetings with the mayor and city council
Wednesday evening. A public hearing on Reading's Act 47 application was held
Oct. 14

Act 47 triggers procedures, guidelines and powers that help financially
distressed municipalities provide vital services, meet debt and other
financial obligations, and supply improved accounting, budgeting and taxing
practices. Pennsylvania's oversight emphasizes long-term fiscal management
improvements, service delivery efficiencies, intergovernmental cooperation,
and economic and community development priorities.

Cornelius cautioned that many Pennsylvania cities face daunting financial
challenges from factors both within and outside their control.

"In the long-term, workable systemic changes to the way Pennsylvania
organizes, manages, and funds local government are necessary, particularly
with respect to our cities," Cornelius said. "The current organization and
systems are ill-suited to address the fundamental changes that have taken
place since World War II.

"The migration of the middle-class and much of our industrial, business and
retail sectors to the suburbs and, in some cases, to other regions or
countries, together with an aging urban infrastructure, tax and governance
systems that were designed for a high-growth era when our cities were the
economic hubs of our regional economies, leaves us with municipal financial
challenges that cannot be addressed adequately with existing tools, including
Act 47," he said.

"Regardless of what has brought us to this situation in Reading, everyone --
the city, county, region and state -- must be a part of the solution,"
Cornelius said. "If our cities fail, entire regions will be at risk,
economically and socially, and the entire state will suffer in the long term."

Reading is the 19th Pennsylvania municipality currently active in the program.

A DCED report concluded that the city has experienced a continued pattern of
year-end structural deficits that have only been addressed by one-time
solutions; a debt burden in excess of 10 percent of revenues; a stagnant tax
base; socio-economic and demographic trends that reflect a tax base
insufficient to fund public safety services; an ineffective financial
management system that cannot provide timely and accurate financial reports;
and significant cash flow difficulties.

"Reading's financial condition has deteriorated significantly over the past
six years," the report said. "The city's demographics portray a community with
high levels of poverty, low housing values and per capita income levels that
are significantly below the average for the county and state. These factors
raise serious concern about the ability of the city's current tax base to
generate the revenue necessary to support core municipal services."

For more information, visit www.newpa.com or call 1-866-466-3972.

Media contact: Steve Weitzman, 717-783-1132

SOURCE Pennsylvania Department of Community & Economic Development

Steve Weitzman of the Pennsylvania Department of Community & Economic
Development, +1-717-783-1132