Year 2007
Mayor
John Callahan
State of the City Address
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March 6, 2007
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
No. 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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