Twenty years ago this week, Johnstown officially became classified as a distressed municipality with the hopes of receiving the temporary assistance needed to avoid a complete financial collapse.
Now, two decades later, being in Pennsylvania’s Financial Recovery Act 47 program is an ingrained part of the city’s economic and political identity.
The change occurred gradually.
Councilmen, other politicians and business leaders originally hotly debated whether to enter the state program operated by the Department of Community and Economic Development.
Those individuals were confronted by a bleak reality.
More on Act 47 anniversary
- Why is Flood City still distressed?
- Pros and cons of reliance on Act 47
- Altoona, Harrisburg also on list
Johnstown needed to borrow nearly $5 million over a half-decade in order to meet its obligations. Nearly 5,600 crimes took place in 1991 alone. Unemployment stood at 13.2 percent in January 1992. The “brain drain” sucked almost 4,000 people out of the city between 1986 and 1991.
Many structures, such as the Roxbury Bandshell, had fallen into disrepair.
Bethlehem Steel Corp., the region’s most influential and important business, was collapsing. Median household income was mired at less than $15,000. Moody’s Bond Record slapped Johnstown with a Ba rating, meaning investment in the city was considered speculative. A week-long government shutdown occurred in 1987.
Johnstown lost a significant portion of its operating budget when $1 million in annual federal revenue-sharing dried up.
The city met three qualifying standards to be considered distressed:
• It maintained a deficit of at least 1 percent during the previous three years.
• Spending exceeded revenue for more than three years.
• Municipal services declined because the city reached its taxing limit.
“It was beyond our ability to solve,” admitted Don Zucco, a Johnstown city councilman in 1992 who later became mayor.
Another former council member, Gerald Zahorchak, concurred: “We were in a city that we knew was upside down in terms of income compared to expenditures.”
The situation since has stabilized, although the city still faces some tough economic challenges.
Unemployment is now usually only one or two points higher than the national average. Major renovation projects have revamped the Cambria County War Memorial Arena, Point Stadium and other landmarks.
Large events, such as Thunder in the Valley and the AmeriServ Flood City Music Festival, attract tourists and cash to the region. Conemaugh Health System has grown into a large and award-winning employer.
Farmers Insurance Group of Companies ranked Johnstown 16th on its 2011 list of most secure small towns in the United States.
Negatively, the city’s population dropped to 20,978 in the 2010 U.S. Census, meaning the tax base has dwindled. There is still plenty of underutilized business space.
About 5,000 people in neighboring municipalities receive services from the city without contributing to the tax pool.
Johnstown has had to deal with escalating pension and health-care costs in recent years. Currently, the city has one worker paying into the pension fund for every two retirees receiving benefits at a rough head count of 150 to 300, an incredibly difficult ratio to maintain.
Overall, though, the economic situation is considered stronger than it was in 1992.
“Though it’s very difficult every year to do our budget, I don’t feel that we are in any type of near economic collapse,” said Johnstown City Manager Kristen Denne. “I think that we’ve stabilized. We’re always arguing over a couple hundred thousand dollars, not looking at multimillion-dollar problems.”
Denne added, “We’re moving forward, but there’s still a lot of work that needs done.”