Colwyn Borough doing well under Act 47 revival plan

When Stephen Mullin arrived in Colwyn Borough last summer, he and a team of state-appointed consultants came ready to rescue the struggling municipality notorious for its financial woes and political turbulence.

His first order of business: assessing Colwyn's latest financial audit.

The borough didn't have it.

Its 2013 audit? Colwyn didn't have that, either.

As for 2012? Nothing.

For more than three years, Mullin found, the tiny Delaware County borough that borders Philadelphia kept virtually no financial records. No budgets. No receipts. No explanations for spending. While money haphazardly flowed in and out, bills and debts seemed to be no matter to Colwyn's leaders.

It's been nearly a year since Mullin and his team were rushed into Colwyn as part of Act 47, a state life-support program for struggling municipalities. It's been more than six months since it adopted the team's blueprint for saving Colwyn.

And while some municipal-government experts have questioned whether the likes of Colwyn should even exist, Act 47 specialists say the borough has exceeded expectations.

"I wouldn't be surprised if they could get out of Act 47 in the next five years," said Mullin, president of the Philadelphia consulting firm Econsult Solutions. "The Colwyn story is a favorable story - not that there weren't hiccups" along the way.

Regarded as one of the region's most tumultuous towns - a place where council meetings often end in screaming, where one in five residents lives in poverty, and where multiple investigations by the District Attorney's Office are ongoing - Colwyn has faced formidable obstacles in its turnabout.

Act 47 has not been exactly a panacea for struggling towns. Since 1987, 30 municipalities have entered the program, which is designed to provide state financial support and guidance to local governments.

Only 12 have emerged. Some have idled in the program for nearly 30 years.

The tepid success rate, critics say, is symptomatic both of a program that offers help too late and of a state they claim has too many municipal governments - 2,561 in total.

"Many of these places frankly should not be individual municipalities anymore," said Mark Muro, a policy director who has studied Act 47 at the Brookings Institution, a Washington research center. "You really do not have the ability to have top-quality municipal management of these places that are struggling with very serious problems."

Trailing only Illinois and Minnesota, Pennsylvania has the third-largest number of municipal governments in the country. Nearly 80 percent of the state's towns, boroughs and cities serve fewer than 5,000 people. Thirty percent serve less than 1,000.

The partitioning of communities made sense decades ago, experts say, when residents wanted localized government. But that local control has come at a cost.

"Think of the problems we are talking about - long-term economic transformation, the collapse of the manufacturing economy, household change, growth of poverty, demographic change," Muro said. "All are challenging the stability of municipalities, and when you have these tiny ones, it's really a tough scenario."

Colwyn is an ultimate case study. Measuring 0.3 square miles, Colwyn has a population of 2,500 and fewer than 1,000 residential structures - almost 20 percent of which sit vacant. It has nearly maxed out its tax base: Colwyn's effective property-tax rate is among the highest in the nation. It operates with a budget of just $1.5 million.

Colwyn's most severe problem was an inability to maintain the most basic financial records or controls, according to Mullin's team of consultants from Econsult Solutions and Fairmount Capital Advisors, and lawyers from McNees, Wallace & Nurick.

The consultants found that the town was $500,000 in debt.

Under Act 47, Colwyn will receive an interest-free loan from the state to pay down its debts, Mullin said. With help, it's now using an accounting system to track finances.

Guidelines passed by the legislature in 2014 mandate that municipalities must exit Act 47 within five years, though they can be granted a one-time, three-year extension.

If a municipality doesn't exit in time, it faces harsh consequences: being placed into receivership - like Harrisburg was in 2011 - or being dissolved.

No municipality under Act 47 has ever been dissolved, but many experts say it could happen in the future.

"I would submit that in another three or four years, dissolution is going to be the question for a lot of these places," said Brian Jensen, executive director of the Pennsylvania Economy League of Greater Pittsburgh, speaking of the state's troubled towns. "The tax base is gone, the municipality was there by virtue of an industry that is gone, what's the reason for that place to exist?"

According to the state's Department of Community and Economic Development, which administers Act 47, places like Colwyn are not eligible for dissolution if they have collective bargaining agreements for police and fire departments. Which leaves critics asking: What's to prevent places like Colwyn from relapsing once they exit Act 47?

"Because of that timetable, you may find places coming out prematurely," said Elam Herr, assistant executive director for the Pennsylvania State Association of Township Supervisors.

But based on its progress in the last year, Colwyn, Mullin said, is committed to change for good.

"I really do believe all the members of Colwyn's council would like to see that," Mullin said. "I think that ultimately when push comes to shove, having the borough not be seen as a fiscal washout or fiscally crazy is something that they all share."

cmccabe@philly.com

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