Johnstown found way to solvency

Now, the Electric City finds itself light years behind the smaller Cambria County community, which sought relief under the Distressed Municipalities Act at roughly the same time as Scranton.

Strapped for cash, Johnstown shifted from a strong-mayor to city manager/council form of government in 1994 -- the last time residents incurred a tax increase.

Once faced with a $463,000 operating deficit, the city expects to finish this year with a general fund surplus of $300,000 to $400,000.

There are no tax hikes, or layoffs, in the 2001 spending plan of roughly $30 million.

Emerging from the financial quagmire sounded almost too easy, as explained by officials: A city manager manages, while city council and a part-time mayor stay out of his way. Bipartisan business executives and community leaders develop long-term strategic initiatives, aided by an infusion of public money to spur investments in the city.

"I'm the ceremonial mayor," quips Donato Zucco, one of the pioneers who paved the way for a home rule study commission, "But I guarantee you, I exercise as much influence as necessary. I don't overstep my bounds, but I don't get involved in daily operations. That's the city manager's job."

It's a far cry from Johnstown's old system, when the mayor and council didn't meet, plan or work together. Without cooperation, "we couldn't get to solving problems," Mr. Zucco said.

"Instead of squabbling about partisan politics, our politics works by way of partnership," he said.

Compromise and concessions were critical, as the city downsized its work force to stabilize finances. "The first contracts under (Distressed Municipalities Act 47) weren't easy, but it gets back to making difficult decisions that allowed us to put our house in order," said Karl Kilduff, who assumed the city manager's post in August 1998. "Under the old form of government, there was no need to compromise -- it was based on the choices of one individual."

Using third-party evaluations, Johnstown assessed what it needed to effectively manage the city, and in the process found opportunities to sell services.

By expanding coverage to four surrounding municipalities, Johnstown's police force has grown to 50 officers -- up from about 40 when the city went into distressed status.

Sustaining the process isn't easy. Lower Yoder Township opted out of the arrangement, reportedly over the right to make personnel decisions and have a say in operations.

Johnstown has about 220 employees, down from 270 when the process began. Cuts came through attrition, and personnel cost savings through a two-tiered pay scale. Last year, the city successfully renegotiated contracts with its four unions.

"We used legislative ability under Act 47 as it pertains to caps on collective bargaining agreements," Mr. Kilduff said. "That allows us to work with our employees to control personnel costs, which represents about three-quarters of the city budget."

On top of managing daily operations, Mr. Kilduff has the right to hire, fire, and set salaries for subordinates -- with council's approval.

Despite wearing a distressed label for so many years, the city has no trouble finding and doing business with vendors, said Ron Stevens, chairman of council's finance committee.

"Once you start looking at it like running a household, there is no stigma to it," said Mr. Stevens, a councilman for the last 20 years. "We were financially distressed because the steel mills closed down. We lost revenues because we had too many contracts that were too high, and we had to cut back.

"With a city manager, we tell him we want a budget with no tax increase, and we try to stay within those means," he said.

A state official overseeing Johnstown's recovery agrees the city is making inroads, and could shed its distressed label by 2002.

"The fiscal performance has been very solid," said Fred Reddig of the state Department of Community and Economic Development. "With consecutive balanced budgets for several years, they're beginning to grow a fund balance. Though not fully recovered, they've made significant progress."

He credited a strong administrative structure, a good management and policy team, as well as the efforts of the Johnstown Partnership, a public-private marriage of economic and community development activities that helped the city develop priorities.

"There have been bumps in the road, but a key aspect of this is a willingness to work together and develop an excellent partnership between the city and related entities," he said. "They've definitely turned the corner, but there is a lot that needs to be done."

Contracts were negotiated without arbitration or work stoppages. Raises were limited to no more than 3 percent, and labor-management committees found ways to reduce skyrocketing health-care costs.

"We have complied with the provision of the recovery plan that set down standards on certain cost levels," said Dave Andrews, a lawyer who represented the city through contract talks over the last six years.

"When we started years ago, I was not optimistic that we could get this done," he said.

"What I told the unions in negotiations is we were not here to make this harmful to the workers. In a sense, what we said was, 'Here are the goals we have to achieve in the recovery plan... You can decide among yourselves the least harmful way of achieving them.'"

With a turnaround in City Hall, things are happening downtown. A private developer is talking about a multiscreen movie theater, which the mayor hopes will stimulate more night life.

"It (Act 47) was the right thing to do," said Mayor Zucco. "It worked."

FRIDAY: A close-up look at government in Erie.

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