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Colwyn: Can this town be saved?

After years of financial disarray, government infighting, and lawsuits, Delaware County's tiny Colwyn Borough has been thrown a life preserver.

After years of financial disarray, government infighting, and lawsuits, Delaware County's tiny Colwyn Borough has been thrown a life preserver.

Earlier this month, it entered the state's Act 47 program, a near last-resort option for towns declared "financially distressed," and after nearly three weeks Colwyn officials say they are making progress in their efforts to save the troubled 0.3-square-mile borough.

Colwyn leaders next month will begin meeting with a state-appointed coordinator, who will work with borough officials to develop a comprehensive recovery plan. Options include refinancing debt, applying for state loans, and raising taxes.

But the program has not been a panacea for struggling communities, and Colwyn's $1.2 million debt and a government labeled as "ineffective, at best" by outside consultants have raised questions about whether the town can survive.

Colwyn joins the ranks of 28 other Pennsylvania municipalities that have been declared financially distressed since 1987. Only nine of them have emerged from the program.

Some have languished in financial distress with little signs of improvement: Delaware County's Chester has been in the program for 20 years. Others, such as Mercer County's Farrell, have been in it from the beginning.

Legislation passed last year now prevents municipalities from indefinitely operating under Act 47, and towns already in the program weren't grandfathered.

Legislators said the deadline forces municipalities to jettison their "semi-zombie-like statutes" and make the tough decisions that many have avoided.

But critics said the timetable could force municipalities out of Act 47 prematurely without addressing deep-seated issues. They worry that municipalities will relapse, entering a cycle of distress yet again.

If municipalities do not emerge within five years, the options are sobering: At best, municipalities are granted a one-time, three-year extension. At worst, they can be dissolved and annexed by a neighboring municipality. That has never happened under the program.

State Rep. Chris Ross (R., Chester), who sponsored the new legislation, said dissolving a government would happen only in "very special circumstances," such as a municipality losing its entire tax base or having people "incapable of filling the roles of government."

And the issue is more complicated, he said: Many neighboring municipalities do not want to annex a community burdened by debt.

Instead, Ross said, municipalities that cannot emerge from financially distressed status within eight years will likely have a receiver appointed to oversee the town, which happened in Harrisburg in 2011. In more severe cases, he said, the borough would file for bankruptcy.

"The goal is always to implement a good plan that is well thought out and designed to provide long-term relief," Ross said.

But Colwyn faces unique challenges, said Stephen Fehr, a senior officer with Pew Charitable Trusts' state and local fiscal health initiative. As a primarily residential borough of 2,500 people with few businesses from which to draw tax revenue, Colwyn has limited options.

"You can't keep going back to the same taxpayers and increasing their taxes," Fehr said. "That's just not an option for them."

Under Act 47, distressed municipalities can increase one tax base, choosing among bases that include a borough's local services tax, property tax or, earned income tax.

Colwyn's tax rates are among the highest in the nation, five times higher than in some of the region's wealthier communities. Not a single building has been built since 2007.

Fred Lesher, president of the Colwyn Council, said increasing taxes is not an option. Instead, he said, the borough will focus on cutting personnel and applying for low-interest loans.

Lesher's cost-cutting decisions have already come under fire: Last month, he fired Paula Brown, the borough manager, and Dan Rutland, the code-enforcement officer. In protest, Brown locked herself in the borough hall for nearly 24 hours.

"We just can't raise taxes," Lesher said. "People don't have the money - we're maxed out here."

While cost-cutting and raising taxes can be effective, deeper issues, such as expensive pensions, will continue to plague distressed communities, said Amy Sturges, director of governmental affairs at the Pennsylvania Municipal League.

"When you take care of all those things, there are still larger issues that must be addressed before a community can be fiscally sound," Sturges said.

But Lesher said he is confident that Colwyn will emerge in five years.

"Five years, it's going to be enough," Lesher said. "It has to be."