Mayor Gabriel J. Campana declared Williamsport to have reached a "predistress" financial condition, claiming he must take matters into his own hands prior to presenting a preliminary budget to City Council.
Unable to get the concessions on pensions and health care he wanted from the five unions that represent city employees, Campana said he would introduce an alternative revenue plan by Nov. 1.
That plan will include eliminating positions, not replacing workers, laying off employees, restructuring departments and finding alternative sources of revenue, he said Tuesday.
The city faces a $1.5 million deficit and a potential 2-mill real estate tax increase, or $200 more per year for a property assessed at $100,000, Controller Margaret Woodring said.
City Finance Director William E. Nichols said the city has reached a place where raising taxes won't solve the revenue crisis.
"Our pension plans are under a distressed level one," Nichols said.
Distressed cities under state Act 47 passed in 1987 must satisfy at least one of the following seven criteria:
Experience a budget deficit of 1 percent or more for three consecutive years or a deficit of 5 percent for two straight years.
Miss or default on bonds or other debt payments.
Miss payroll for at least 30 days.
Failure to pay bills for at least 30 days.
Be at least 30 days late in forwarding Social Security taxes withheld from employees.
Failure to make required municipal pension obligations.
Experience a quantifiable drop in necessary municipal services, such as fire or police or other services.
Failure to meet any one of these criteria can qualify the city to be distressed, according to Mayor Gabriel J. Campana.
"I'm particularly worried about number six on the list," he said. "That is - failure to make required municipal pension obligations."
"Our pension fund is better compared to some other distressed cities but woefully underfunded," he added. "We have a $2 million mortgage payment. It is $2 million higher than it would be if the pensions were fully funded."
He likened the situation to a house mortgage many homeowners face. "The city is paying on a past debt, within state guidelines, and paying off unfunded debt," Nichols said.
Municipalities with funding ratios of 90 percent or greater are considered Level 0, while the city has reached 70 to 89 percent.
Campana disagreed with any notion he should have introduced prior budgets that included increasing tax millage.
"That's just wrong," he said.
"Everything must be on the table until we figure out how to manage rising costs given inflexibility under state law to be able to deal with these inherited costs and other rising costs," said Councilman Jonathan Williamson, chairman of the finance committee.
"We're in a state that has 40 distressed cities for the same financial reasons we're pondering," Councilman Randall J. Allison said. "We need to be fiscally responsible while we have time to do something about it."
The state law, known as Act 47, provides for the restructuring of debt by financially distressed municipalities. It also limits the ability of financially distressed municipalities to obtain government funding, authorizes municipalities to participate in federal debt and bankruptcy adjustments under certain circumstances and provides for consolidation or merger of contiguous municipalities to relieve financial distress.
Allison, who once sat on the Williamsport Area School Board, said that school district faced a similar financial situation to what the city is facing.
"We were once on a watchlist and the school board and administration decided to take measures to ensure that would not happen," he said. "It can be done, but it takes a political resolve and the support of the taxpaying and voting public."
"We're in the mix ... Williamsport doesn't stand alone," Councilman Don Noviello said.
Unions representing city employees, River Valley Transit and Streets and Parks Department don't receive the "overgenerous" pension and health care packages of police and fire that are draining city finances, Campana said.
Police Lt. Steve Helm, who represents the police union, said in a previous interview the police contribute to their pensions, pay deductibles and can't go on strike.
Attempts to reach a union representative for the firefighters, Platoon Chief Vince Rundio, was not successful.