Financially Distressed Municipalities Act

The Financially Distressed Municipalities Act (Act of 1987, P.L. 246, No. 47), also known as Act 47, empowers the Pennsylvania Department of Community and Economic Development to declare certain municipalities as financially distressed. It provides for the restructuring of debt of financially distressed municipalities, limits the ability of financially distressed municipalities to obtain government funding; authorizes municipalities to participate in Federal debt adjustment actions and bankruptcy actions under certain circumstances; and provides for consolidation or merger of contiguous municipalities to relieve financial distress.

Most provisions of Act 47 initially remained suspended until the termination of the Pennsylvania Intergovernmental Cooperation Act (Section 708 of Act 1991, June 5, P.L. 9, No 6).

The cities of Erie and Altoona, among others, have narrowly avoided Act 47 designation. Their mayors seek legislative changes to the binding arbitration rules of Act 111, as well as a reduction in the designation of tax-exempt properties, to improve their financial health.

Although some municipalities (listed in the chart below) have had the Financially Distressed designation removed, all but one of them (Chester) are cities, in part because none could afford to lose the benefits Act 47 provides. The benefits include revenue from the nonresident wage tax available only to cities with Act 47 status.

The following municipalities were designated as part of the Municipalities Financial Recovery Program as of the date indicated. Any dates of imposition and lifting of sanctions, and the rescinding of the initial designation are also noted.

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