Time limits on the length of stays in Pennsylvania's distressed-municipalities program will have a mixed effect on Keystone State cities' credits, according to Moody's Investors Service.
The bill Gov. Tom Corbett signed on Oct. 31 granted cities additional taxing powers but limits the stays in the program known as Act 47 to eight years. Corbett, a Republican, four days later lost his re-election bid to Democrat and York businessman Tom Wolf.
"New authority to levy a payroll preparation tax is credit positive for cities in Act 47, allowing them to generate additional revenues to help balance their budgets. A new eight-year deadline on stays in Act 47 does not confer any noticeable benefits, however, and may heighten risks to bondholders," Moody's said in a report. "The deadline itself does not assure fiscal discipline on the part of local government management."
Only nine of 27 municipalities that entered Act 47 since the program began in 1987 have exited.
According to Moody's, the credit implications of distressed municipalities entering receivership is not clear. The potential for receivership was part of the original Act 47 legislation.
Capital city Harrisburg, which last year narrowly averted bankruptcy, exited receivership in March.
