2017-08-02 (Special Meeting) Council Minutes





Call to Order: Council met in special session on Wednesday, August 2, 2017 in Council Chambers. The meeting was called to order at 6:00 pm.

Silent Meditation and Pledge of Allegiance: A silent moment was taken followed by the Pledge of Allegiance.

Roll Call: Cuozzo-present; Gavio-present; Mope-present; Sosar-present; Mundie-present

Courtesy of the Floor: (ON AGENDA ITEMS ONLY): Antonio Rodriquez, 718 Muir Ave., Hazleton, asked council where Act 47 comes into play. Mundie said this is just a study, Early Intervention Study, council is considering. Mundie said that is a different area. Rodriquez asked if the city is considering ACT 47. Mundie said council can decide or it can be recommended to go into ACT 47.

Dee Deakos, 43 West Mine St., Hazleton, said the absence of the city administrator and chief financial officer, at this meeting, with the city’s current financial problems and the public not receiving any financial reports is a disgrace. She said council discussing the proposals for the Early Intervention Program and the city’s administrator not attending this meeting is shameful.

Mark Rabo, 1st St., Hazleton, said he advocated for the city of Hazleton to pursue delinquent abandon property taxes for revenue. He said the vacant registration ordinance states the registration is to be collected every November. He suggested collecting the fee now. He also suggested enforcing zoning and land-use ordinances for businesses to update their registrations. He said there are fly-by-night contractors not obtaining the correct permits. He said he is not suggesting to the council and mayor anything that is not being done by any other municipality. He said the city needs to get back on track. He said all residents want to see the city improve. He said he hopes all parties do what they need to do to help the city’s fiscal situation.

Cuozzo asked Rabo if he is a member of the water authority. He said yes. She asked if the water authority brought, to the city, a contract for improving roads. He said the city did not accept this. He said the city administration should have accepted the city authority’s work. Cuozzo said the city has money, through the PEL grant, for the street lights. She said the money could be obtained through a CD to pay for an electrician and helper. She does not know why it is not being done yet.

Rabo said the city does have a non-producing asset, the Hazleton Regional Airport. He said this needs to be strongly looked at and the city is being short-changed. Cuozzo agreed with Rabo. She said it needs to go into an authority and repaying the city any money that is collected. He said he stands by all sides to improve the city’s financial situation.

Business at Hand:

Discussion Regarding Choosing Requests for Proposals for the

Early Intervention Program Study for the City of Hazleton

Mundie said the city of Hazleton received two proposals for the Early Intervention Study. He said one proposal is from Fairmount Capital Investors and the second is from FS&L, Stevens & Lee, and the Pennsylvania Economy League. He said all three companies are combined.

No representatives from either company were present at the meeting.

Cuozzo and Sosar asked the city solicitor if the Stevens & Lee present a conflict-of-interest by being the city of Hazleton’s bond counsel and now the agents in reviewing the city’s financial situation. Atty. Kevin Walsh said he does not believe it is a conflict-of-interest. He said it is for the city to get into a better financial position. Sosar asked if it affects what loans or borrowing plan the city decides. Sosar said the next step is ACT 47 and changes everything. Atty. Walsh said these are two separate issues. He said there is no conflict-of-interest and sees no problem. Cuozzo asked Atty. Walsh if that is his legal opinion for the record. Atty. Walsh said yes.

Sosar said the representatives should be present to answer questions. He asked Mr. Jim Rose and Marita Kelley from the Department of Community and Economic Development and the Governor’s Center for local government services what the city’s options are right now. He asked if there is a possibility for the city to go directly into ACT 47. Miss Kelley stated the city needs to meet one of the eleven criteria that is available to go into ACT 47. Sosar asked Miss Kelley to review the eleven steps to the audience. She said she does not have the steps with her today. Mundie and Sosar asked her what the major steps are to be eligible for ACT 47. She said some include the city missing a payroll, missing a payroll liability, or missing a minimal municipal obligation payment for the pension plan.

Mundie said one major area that ACT 47 allows is a city to increase the local earned income tax. He asked Miss Kelley if that is what cities do when they go into ACT 47. Miss Kelley said there are several options. She said cities can only do this when they are in ACT 47. She said to leave ACT 47, the city must reduce the EIT back to the original level. Sosar said the restructuring of tax programs and short of EIT, the suggestions of the PEL report are to increase property taxes. He said the residents of the city cannot afford a tax increase. He said DCED did a recent study and suggested the city sell one of their assets. He said the town of Gordon sold their sewer authority and are paying $120.00 every quarter. It was sold to the Schuylkill County Municipal Authority. He said now they are getting bills for $250.00 per quarter. He said the PA Economy League did a lot for Gordon. He said half the population are elderly. He said restructuring is important. He asked what the city can do besides increasing taxes or earned income tax. Miss Kelley said there is an option to adopt a Home Rule Charter to restructure taxes. She said there would be a Home Rule Board appointed to review the city’s charter and develop a new one. Sosar said there are nine months to do the study and to write the charter. Miss Kelley said the city can do an optional charter. Sosar and Mope said that was done in the past. Sosar said that is currently Plan B for the city. He said the state has not helped in improving property taxes for counties and municipalities. He said the communities are put in difficult situations. Mr. Rose said he realizes these are major issues. He said there are a lot of variables the city needs to investigate. He said right now the city needs to go forward.

Mope said she is not blaming anyone. Mr. Rose said the city needs to figure out what to do right now to help the residents. Mope said the recent report, by PEL, suggests raising property taxes. She said another option is to sell delinquent taxes. Mope said there is an option of transfers to come from council. Mundie said the mayor decided not to do this in 2017. Mope said all the plans can be accepted but there is no enforcement. She said there is no oversight. She said there were good recommendations in Mr. Rose’s report but some suggestions cannot be afforded by the residents. She said the residents are selling properties at half their value. She said there is a tax base that has been diminished. Mr. Rose said other communities have the same problem. She said if the recommendations are not followed, the city is in the same place. Miss Kelley said the recommendations need to be adopted by council.

Sosar said he respects both Miss Kelley and Mr. Rose. He asked Miss Kelley if the city could obtain a loan if the city accepts one of the two studies. Miss Kelley said the cities of Harrisburg, Shamokin and Reading have adopted the Early Intervention Program. They understood the emergency plan needed to be accepted first due to their fiscal situation. She said it shows the city there are no other choices other than accept ACT 47. It gives the council and the mayor an opportunity to see where the city stands. Sosar asked what the consequences would be if council approves a study. Miss Kelley said any municipality that has done an EIP is favorable to the bond markets and banks because the city has a financial plan. Sosar asked if the city can borrow money if the EIP is accepted. Miss Kelley said it helps if the city does approve the study. She said it shows the city has a plan. Sosar said the study, by itself, does not allow the city to go borrow money. Miss Kelley said it is up to the city to pursue the loan or the bond. Sosar said resolutions mean nothing in the city. He said without council’s approval or knowledge that the city will be “in banks” tomorrow. Miss Kelley said the city has a cash deficit. Sosar said there is a cash problem and also a budgetary problem. He said the past administrations have not followed a budget. He said council has worked diligently to pass budgets and takes it seriously. He said mayors have given raises instead of pay cuts. He said the council is frustrated. He said there has been borrowing of loans in 2017 without council’s approval. Sosar said council cannot continue when money is being spent, i.e. for snow ban parking signs without council approval. He said the signs are not 20 feet away from the corner. Miss Kelley said the street departments are under review from council. She said the final decision is made by the chief executive officer on street signs. She said it should be on the bill list that is approved by the council. Sosar said council does not receive the list. He asked how the council can function, as a city government, when the city is spending money without the council’s knowledge. Sosar said council receives an unclear monthly report, from the city administration, on the city’s expenditures. Mayor Cusat said the form of government the city of Hazleton is under states council does not need to approve expenditures. Mope said she recently spoke with Mr. Tom Pribula, city administrator. He said he receives invoices after the expenses are purchased through the city departments. Mundie said Tom Pribula’s job description also states purchasing manager.  Mayor Cusat disagreed. Miss Kelley said one of the recommendations, in the EIP study, is to have a proper purchasing system. Mope said council is not aware of money being transferred until after it is done. She said she discussed this issue with Mr. Pribula.

Sosar said council can approve the plan by voting on an ordinance with an amendment or stipulation added that it freezes the city in signing a bank loan without the council approval. Mope said it should also state a TAN note. Mayor Cusat said no one will give the city a TAN note or long-term borrowing without a plan in place. Sosar said the council gave the mayor an ordinance, budget and resolution to take money from MRS. Mayor Cusat said for the last two years he stated he would not do it. Sosar said the city is not receiving $100,000 because of Mayor Cusat’s decision. He said the city is in financial distress. He said he spoke with Mr. Geronimo from MRS. Sosar said he attends to get $336,000 from MRS for delinquent taxes. Mayor Cusat said it costs $60,000 to get the $100,000. Sosar said the city is still ahead of the game. He said that is the cost to do business. Mayor Cusat agreed.  

Mope asked Miss Kelley if the split is still 90/10- 90% by the state and 10% by the city. Miss Kelley said a 90/10 is approved but agreed to in kind. She said the city does not need to come up with the cash. She said the hours could be used through an Excel spread sheet. She said she does orchestrate the program. The state will pay the 90%. She said when the mayor receives the invoice, from the vendor, Miss Kelley will process the same day. Miss Kelley said the contract details a 3-year emergency plan. She said it could be completed in 3 weeks. She said there will never be a period where the city will come up with the cash. She said the hours will need to be matched up. She said the imminent issue now for the city is meeting the next payroll. Sosar asked Miss Kelley if the council should make an ordinance requiring the mayor not to obtain a bank loan or TAN note without council approval. Miss Kelley said the resolution is in the statute. Sosar suggested adding “shall enter into an agreement with city administration”. “City council shall wait upon receipt of the report in taking action on what the report suggests”. He said the financial problem is the spending by the city administration. He said the city residents witness this by attending council meetings. He said the city cannot get into bank loans now because the administration will not be able to repay this. Sosar said Mayor Cusat stated he wants to obtain a loan for 2018. He said there was a storm water fee instituted in the past. He said there are mercantile and business fees. He said business owners are leaving the city due to mercantile, property and license taxes. He wants people coming into Hazleton instead of leaving. Mope said it opens the door for Mayor Cusat to obtain a TAN note. She said the city would have to obtain a long-term loan to pay for the TAN note. She said a tax increase may follow, either an EIT or property tax increase. She said the residents cannot afford this increase. Sosar said he cannot “live” with a property tax increase. Sosar said over the past three years there has been a 1.5% increase. He said he cannot do this to the residents.

Gavio said the approval by council will be to follow the state’s recommendations. He said the council will be informed with administration consultation. He said the council approved a borrowing plan to avoid layoffs. Atty. Walsh said this is the last effort to hire a professional consultant to point the city in the right direction before ACT 47. Gavio said it shows the state that the city did everything “in their power” to alleviate this. Miss Kelley said the emergency plan for Harrisburg, Shamokin and Reading recommended an ACT 47 filing. Mundie said the city could miss payroll, agree to enter into a study, or not obtain a borrowing plan and still enter into ACT 47. Miss Kelley said missing a payroll does not put the city automatically in ACT 47. She said it requires someone with “standing” to exercise this. She said the council, mayor, DCED, or the city residents can request the secretary consider the city for ACT 47 if they meet one of the eleven requirements.

Mundie said in ACT 47, in each case, it allows each city to increase their local income tax. Miss Kelley said this is true except for the Home Rule Charter change. Cuozzo asked if the increase for the EIT requires going through the court system. Miss Kelley said the city needs to go through the charter process. Mope asked if the only way to increase the local income tax would be a recommendation under ACT 47. Miss Kelley said it is a likely recommendation under Act 47. She said the council and mayor retain a lot of autonomy and authority. She said the recovery team, which the state selects, will devise a recovery plan. This will take a total of four months to put together.   This is put in front of the council and mayor for a vote. She said most of the suggestions are tailored after phase-one of the EIP with the same list of recommendations. She said it is a detailed 300- page report. She said the city needs to adopt every individual piece of the plan. She said the city can still go into receivership with a little more autonomy. The council and mayor still pass their own budget. She said the rule is a city cannot be in ACT 47 no longer than 5 years. Mundie said the council looked at ACT 47 ten to twelve years ago.   He said they should have accepted ACT 47 back then because it would have helped the city. Mundie said the administration has a problem spending money and the council trying to restrict this. He said the mayor gave a city worker, who recently resigned, severance pay without council approval. Miss Kelley asked if this is contractually obligated. Mundie said no. Miss Kelley said if the study does recommend ACT 47, then it gives the mayor and council some “cover” that the city did not decide this on their own. Miss Kelley said Harrisburg, Reading, and Shamokin are in an equal amount of financial distress as the city of Hazleton is now. Mundie said Scranton is currently coming out of ACT 47. Mundie asked Miss Kelley how long West Hazleton was in ACT 47. She said about 9 years.

Chief of Police Jerry Speziale said he has worked with distressed cities in several states. He said when DCED comes in, there are many waivers and restrictions put on a city. He asked if the city goes into the Early Intervention study, would the city be able to raise the EIT tax. Miss Kelley said you cannot raise an EIT tax above the statutory limits. She said under ACT 47, the city could raise a non-resident tax, a commuter tax. Mundie asked if you can raise the income tax for residents under ACT 47. Miss Kelley said the city can only as the law permits. Mundie said the city is at the limit for earned income tax. She said the non-resident needs to be below the resident. Miss Kelley said the city is not allowed to raise earned income taxes under the statutory limits. She said there are “certain purposes” to seek court approval, i.e, debt or capital investments.

Cuozzo said one of the problems are the debts. Cuozzo said the city needs to seek permission. Miss Kelley said with court approval the city can increase the earned income tax. Cuozzo said she reviewed a lot of financial documents the past few days. She said she will vote no to award any contracts. She said the city needs to go into ACT 47. She said the city needs oversight and direction. She said it is not coming from the administration. She said that repeating the same process is not working and sees no changes. She read the last study and no law was enforced. She is asking her fellow council members to direct the city to go into ACT 47. She said, in the past, the money is spent with nothing being done. Miss Kelley said this study would be different for the city. Cuozzo said there is a large elderly population. She said ACT 47, right now, would be beneficial for the city. She said the previous study done was only for a borrowing plan. She said a previous mayor left the city in $5,600,000 in debt. Mope said this is when the last study was done.

Sosar said the last two mayors have left the city in debt. He said there has been a tax increase of 46% and a storm water fee. He said loans of $5,600.000 have been obtained for refinancing debts and  

$1,200.000 in settling the court cases on the IIRO. Sosar said these are yet to be paid. He said residents cannot afford to pay these costs let alone increased property taxes which further borrowing can only make more difficult. Sosar said our mayors seem to say that only by increasing taxes can the city function. This council suggested other paths of reduced spending and have been obstructed numerous times.  

Sosar said for the past three years on council, he has voted on three budgets thus far. He has witnessed mayors, in the past three years, push aside the council budget and follow their own. He said each year the mayors have stated that the financial condition of the city is getting worse. Sosar said this year, through budget ordinance, resolution, and ordinance, the city council told the mayor to sell our delinquent taxes to MRS at a cost of approximately $50,000. He said the mayor refused. Sosar said even with the expense, the city would have realized approximately $370,000 in monies collected. He said, instead, we are collecting the money month by month and will realize approximately $205,000 at the end of the year. Sosar said at this late date, selling our delinquent taxes to MRS will realize approximately $100,000 more than expected from the way our mayor has chosen.

Sosar said over the past several years, there have been no transfers coming before council. He said mayors have created jobs or hired individuals without council ever being informed, let alone approving the action. He asked if the city should be placing new street poles in the ground when our streets need potholes filled and paved. He said council has worked diligently to raise money to help the city. He asked why the administration turned down a $400,000 paving agreement with the HCA to repair its construction projects. He said it appears in the press that council is fighting with the mayor.

Sosar said the answer to Hazleton’s problems is not simply to raise taxes that our residents cannot afford. He said unless we work to reduce some of the spending and spend more wisely, we will not solve our problems. He said the citizens of Hazleton have given city council their trust.

Sosar said the city can conduct a study without needless and careless borrowing with putting the city in jeopardy. He said he would rather have the state watch the city carefully than have the needless spending going on. He spoke of the city layoffs in the late 70’s and early 80’s that occurred. He said there is money being spent without council’s knowledge. He said he will vote no tonight and for the city to go into ACT 47.

Mope said every year, the city workers are being threatened with layoffs. She said the council is then pressured to find revenue. She said sometimes it is utilized, and sometimes it is not. She said the previous PEL report was not followed except for a tax increase. She is not in favor of doing another report because it will keep the city in the same place. She said she is in favor of ACT 47.

Mundie asked Atty. Walsh if either one of the proposals can be voted on. He asked if the rules have to be suspended.   Atty. Walsh said no. Mundie made a motion to go into an agreement with Fairmount Capital Advisors. He said Fairmount Capital Advisors is a little less than FS&L.

Mayor Cusat said one of the proposals that is more expensive has 107 more hours’ of work priced into it. The conglomerate are the three companies that came together that worked with Nanticoke, which is part of our county, and with West Hazleton, who is part of our school district and county. He said this company is already informed of what needs to be done in our area. He said the one that is cheaper is really more expensive. He said FS&L is the better proposal overall.

Mundie asked Atty. Walsh when the motion to vote on Fairmount Capital Advisors was made and not seconded, does the motion die. Atty. Walsh said yes.

Gavio made a motion to vote on the FS&L proposal. Mundie seconded this.          

On the Question:

Roll Call: Cuozzo-no; Gavio-yes; Mope-no; Sosar-no, Mundie-yes


Cuozzo made a motion to seek ACT 47 from the state. Mayor Cusat said the council needs to make a resolution, to unify council, to enter into ACT 47, and make an official record.

Atty. Walsh said council needs a resolution and to advertise the meeting.

Adjournment: Mundie motioned to adjourn the meeting. Meeting adjourned.

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