Year 2006
Mayor
John Callahan
State of the City Address
March 6, 2006
I want to thank the Greater Lehigh Valley Chamber of Commerce
and the Bethlehem Business Council for hosting and organizing
my fourth “state-of-the-city” address. It is fitting
for this event, that I am joined today by both my city management
team and by you, the private sector leaders of the Bethlehem
community. It is all of you – through your daily activities
of running your businesses, creating jobs, and volunteering
your time, who make this city work and this community so special.
I want to take a few moments to introduce you to the members
of my staff, who are here – many of whom you know…
Bethlehem is a historic city. And, this is a historic time.
In the last decade we have seen monumental change –
a level of change and transformation that is unprecedented
in our history and, probably, that of any other city in Pennsylvania.
Just 10 years ago, Bethlehem Steel was our largest employer,
owned nearly 25 percent of our taxable land and it was Bethlehem
Steel that most people thought of when they heard our city’s
name.
Just 10 years ago, we in Bethlehem had yet to hear of Main
Street Commons, Liberty Center, the Apollo Grill, Commerce
Center Boulevard, LVIP VII, BethWorks, the Bethlehem Brew
Works, Riverport or Arts Quest.
Just 10 years ago, Las Vegas Sands was a place in Vegas.
Just 10 years ago, the SouthSide retail district was John
Saraceno and Third Street Chicken and Ribs. And SteelStax
was what spewed the smoke that created that weird sulfur smell,
not a preservation and arts project.
Everything changed in March of 1998. The Bethlehem Steel
plant closed for good -- the company’s bankruptcy was
around the corner. Real estate tax revenue to the city would
drop by nearly 10 percent; water sales by about 1.2 million
gallons a day, just as the debt for the new $65 million Penn
Forest Dam came on the books. All less than 10 years ago.
A less resolute people could have been devastated. A poorly
managed government could have gone into financial distress.
Instead, we’ve prospered – not just survived,
but thrived. In a way, the end of steel was a rebirth of the
City.
We have two thriving downtowns where most cities are lucky
to have one. Our population is growing where most cities have
seen a steady decline. Investment in the city right now tops
$1.6 billion; many entire counties in Pennsylvania have less.
To put it simply, the state of our city is good; quite good.
I think Money Magazine summed it up best last year when they
chose Bethlehem as one of the 80 most livable cities in the
United States – the United States. We were the only
city listed from Pennsylvania.
All this, less than 10 years after March of 1998. Just as
many among us never dreamed of a Bethlehem without Bethlehem
Steel; there are not many who would have dreamed in 1998 that
we could be where we are today.
We, however, are still working our way through this transition.
A transition that’s easy to forget when each day we
read of the next great development in the making.
And, our biggest task – possibly the most important
we’ve ever faced in this city’s 266 year history
– is upon us: managing the development of the Las Vegas
Sands casino that will transform Bethlehem into one of the
most unique small cities in the world.
Today, I will lay out my Administration’s plans for
leading that transition, for ensuring that our quality of
life only improves as we welcome the financial engine that
will allow us to finally exit from the losses of Bethlehem
Steel.
We have yet to fully escape those losses. We have performed
well through the transition; lesser leadership would likely
have let their city slip into state receivership.
There was an overall drop of 78 percent in our total real
estate valuation from 1994 to 2006. Surviving that loss of
revenue, while trying to keep tax rates fair for our residents
has given us a cash reserve that is too small – only
about $500,000 in a budget of more than $58 million. That
needs to be changed.
Our emphasis on economic growth and our success has restored
our tax base. As you can see here, just last year we got back
to where we had been in 1994. We like to call this the Cunningham
Curve. And this the Callahan Climb!
While we have managed debt very well, reducing it by about
$34.7 million in that time period, the nearly $100 million
borrowed in the mid-1990s to rebuild the dam and add a water
filtration plant – followed by losing Bethlehem Steel
-- still hampers our water and sewer budgets today.
That caused us to see a slight drop in our bond rating last
year, which also needs to be changed.
This leads to us having three primary financial goals for
the city.
1) as always, keep taxes stable or reduced for the next five
years, 2) bring budget reserves up to around ten percent of
budget, 3) pay down water debt and improve our bond rating.
Accomplishing these goals is imperative. And, that’s
why they need to be a major focus of how we use our casino
host fees, which I will outline in a minute.
Equally important to retaining financial stability and keeping
tax rates in check or reduced is how we direct our operations
and control our spending. Last year, we embarked on a cost
control and quality control initiative with the help of Air
Products and Chemicals, sending all of our senior level managers
to work with Fortune 500 private sector experts on how to
control costs and improve operations.
Our goal in Bethlehem is excellence in everything we do, and
through the discipline of Continuous Improvement (CI) we can
achieve that. As a city we need to be strategic in our growth,
continually trying to deliver more with less, to improve our
processes, and to increase our efficiencies.
As you can see here, it’s a focus on that area that
has allowed us to weather this transition. Total employment
in the city is less than it was in 1998. The results have
been impressive. CI initiatives have brought hundreds of thousands
of dollars of current savings and millions of dollars in future
savings, to city taxpayers.
Along with reduced expenses and increasing collections and
revenues, we’ve managed to put our resources where they
matter most: into public safety.
The result is that Bethlehem is the safest city in Pennsylvania
with a population of more than 30,000. There is no more important
indicator for a city’s livability and ability to attract
more economic growth. Without a safe city you can’t
develop your community or your economy.
There is a direct linkage between Bethlehem being the safest
city in Pennsylvania and Money Magazine’s choice of
us as the state’s most livable city. And, no matter
what the budget constraints, we will never skimp on public
safety. And, we will invest whatever is necessary of our casino
host fees to ensure that we maintain or improve our public
safety as the casino is developed. I will not tolerate anything
less.
Today’s speech is the appropriate forum for me to share
with you my Administration’s plans for managing the
development of the Sands BethWorks Casino – and to ask
for your help and your input.
As you know, I’ve been a strong advocate for Bethlehem
being a host for one of the state’s gaming licenses
and lobbied hard. I did it not because I am a big fan of gaming
but because I saw this casino – proposed by the first-class
operator Las Vegas Sands – as a path to the greater
good; as a financial means for us to finally restore our struggling
city finances, and as an investment catalyst to fully realize
our dreams for a redeveloped Bethlehem Steel site that preserves
and honors our history and heritage and allows that land to
once again generate thousands of jobs and become the engine
for our economic base in the city.
Now that the victory has been won, we must manage the transition.
This is not a time for political grandstanding or for ideas
cooked up in the backroom. As a community, this proposal created
a spirited debate and healthy discussion. Some among us were
– and are – opposed to this project. I understand
and respect the opposition. Let me assure you that I want
the same thing that you do: a Bethlehem that continues to
respect its history, its heritage and its quality of life.
But, I also want a Bethlehem that is growing; prospering and
can balance its budgets and pay for its services without putting
current or future taxpayers at risk.
That’s why, today, I am releasing a four point plan
to direct our Transition to the Future and to ask for YOUR
help and to involve OUR community in ensuring that our future
is even greater than our past.
Already, there has been discussion about what to do with the
$8.7 million in annual host fees the city will begin receiving
in 2009. As the Morning Call said in its recent editorial
on the issue, this is not a time for politics. This is a time
for leadership, for community dialog, for planning and for
thoughtful investment. For we all know that an ounce of prevention
is worth a pound of cure. Better to anticipate and prepare
than to be blindsided and forced to react. We have already
begun this effort – we’ve rewritten our zoning
to prevent a proliferation of noxious uses not only in South
Bethlehem but throughout the city, we’ve required the
developers incorporate crime prevention through environmental
design concepts…but this is just the beginning.
How we continue to manage this project and its resources will
be the final chapter in this city’s transition. We have
been given a tremendous responsibility – a responsibility
to this city, to this region, and to this commonwealth. We
must do four things with our host fees: 1) stabilize city
finances, 2) invest in public safety and human services to
ensure no negative affect from gaming, 3) invest in our existing
business districts and the marketing of all of Bethlehem,
and 4) return a financial benefit to all of our taxpayers.
There is no more important issue during the next two years
than how we manage the development of this casino and its
host fees. This issue must be addressed with the input of
our community. That’s why today I’m announcing
the formation of a Task Force, which will consist of representatives
from our downtown business communities, our neighborhood associations,
our public safety professionals, county human services staff,
city council and other key members of our community.
If we do it right, with all of us involved, we can 1) restore
financial stability, including paying down debt, creating
a solid cash reserve, improving our bond rating and creating
a tax stabilization or rainy day fund. This will bring us
back in full from the impact of March of 1998 when Bethlehem
Steel closed.
No. 2), we also need to ensure that we remain the safest city
in Pennsylvania and that whatever potential affect the new
casino may have on our community, it will be met head-on and
eliminated with thoughtful planning related to police, fire,
emergency services, traffic and neighborhood stabilization
efforts. We don’t know yet what all those needs may
be but I’m confident we have the people and the resources
to meet them. We just need to have the patience to do it right.
No. 3), our business community was one of the strongest advocates
for the casino. I think that’s because business people
saw the benefits and also understood that we could meet the
challenges. Retailers in both of our downtown saw the benefits
of more visitors and more marketing. The charm and strength
of Bethlehem lies in its neighborhoods and the quaint and
unique business districts that we have on both sides of the
river. That needs to be maintained. Therefore, we need to
ensure the right level of investment in our existing downtowns,
the right level of services and, finally, the proper spending
on marketing all of Bethlehem. We will need to let people
know that Bethlehem’s retail district stretches far
beyond the boundaries of the new casino. Finally, we will
have the resources to do some of the things we’ve wanted
to do for many, many years.
And, No. 4), but by no means last, because all four of these
objectives are of equal importance, we need to give a direct
financial return to all of our taxpayers in the form of a
tax cut. The people of Bethlehem have been the reason we’ve
weathered this historic transition and emerged an even better
city than before. It’s our residents that make our neighborhoods
great, our non-profits thrive, our neighborhood associations
serve as models to other communities, and our little leagues,
youth groups and schools thrive. As I have said from the beginning
– they deserve a break: a tax break. How much and when,
we still need to decide.
I think the people of Bethlehem understand and would much
prefer that we create permanent city financial stability,
not allow any negative affects from gaming to exist here,
and to invest in and grow all of our business districts prior
to making that decision.
This is a once-in-a-lifetime situation. We need a thoughtful
plan that involves all of our community. We can and will get
that done.
As I move to conclusion, I want to leave you with the results
of how this community has “got it done” during
the last several years – how a partnership of the private
sector, our neighborhood groups and our city government has
generated more than a billion dollars in new development,
community projects, parks & walking trail growth and new
neighborhood initiatives. The credit for all of this goes
not just to those of us in City Hall but all of you, the people
of Bethlehem and the people who believe in Bethlehem.
As I said at the outset, Bethlehem has been a city in transition
for the last decade. I don’t know if any city has grown
and prospered as much as we have during a time of financial
distress and change.
The death of Bethlehem Steel truly gave birth to a new Bethlehem.
Fortunately, for us, we are one great extended family that
has nurtured this newborn with all the challenges of development
into a strong and growing adolescent.
Now, we have to get through those troublesome teenage years
– for us, they are the years of gaming transition. But,
as before, this extended family is strong and smart. I’m
confident that this village will raise this child. With the
right plans, the right forethought and putting politics aside
and focusing on the future and what really matters, we will
once again do what is right.
For, if there’s one thing that Bethlehem should have
shown the people by now is that we can solve any problem,
face any challenge and make our community safe for those who
live and work here and attractive for those who visit here.
Thank you for all your work in making the state of our city
good and getting better.
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