Mayor John Callahan's State of the City Address

The full text of the mayor's annual speech to the Greater Lehigh Valley Chamber of Commerce at the Comfort Suites Hotel, South Bethlehem.


The Chamber speaks about the power of partnerships, which I think is true, we can achieve a lot more together than separately. There are probably few more important relationships allowing for the vibrancy of our downtowns than our cooperative relationship with the Chamber and in particular, the DBA. We feel so strongly about this partnership that even in tight economic times we contribute $75,000 — the most this city has ever contributed — annually.

This year we worked with the Parking Authority contributing an additional $25,000. The results speak for themselves … the DBA membership has blossomed to 141 members, which represents about 83 percent of the businesses located in Bethlehem’s two downtowns, and a high water mark for the organization. The association hosts more than 101 events throughout the year, averaging an event every 3.6 days, and maintains a strong social media presence through Facebook and Twitter.

This is my ninth State of the City Address. There is probably no event I look forward to more on an annual basis then standing up here to discuss the State of the City. It is a speech in which I get an opportunity to review the highlights of the prior year, but more importantly discuss with you, the investors in the City, the plans for this year. This is not a state of the economy speech, for, as we have learned over the past few years, predicting the state of the economy is no easy task, even for those paid to make such predictions.

Rather, this event gives me a chance to explain the State of your City government, how we spend your tax dollars, where we are trying to save your tax dollars, and how we are growing our economic tax base.

Before discussing the upcoming year, I would be remiss not to revisit last year. In last year’s State of the City I remarked that the 2011 “would be a dynamic year with much to celebrate” and that “the City was poised for prosperity.” 2011 was indeed historic and I’m happy to report that last year’s prediction has come true and projects that I could only show you an artist’s rendering of last year are now a reality attracting hundreds of thousands of people to Bethlehem.

You will also note that a good number of these projects are government-funded projects. As a City, we must always look for ways to invest in ourselves. Government spending done correctly can lay the foundation for the private sector and non-profit sector to really drive growth. As a City government, we might not create jobs, but we do play a critical role in ensuring that people want to invest their money here. 2011 and the years leading up to it represent perhaps the greatest period of expansion and investment in the history of the city.

Economic success in Bethlehem is not limited to just new development. Nor is it defined by some zero-sum gain where a dollar spent on the SouthSide is a dollar not spent on the North Side. Making Bethlehem a destination, in fact, is truly a rising tide that will lift all boats. Despite shaky national economic waters, all of Bethlehem enjoyed a remarkable year.

I spoke with Dennis Costello from the — which is a bell weather for economic health in the downtown — Dennis told me that the fourth quarter of 2011 was the best quarter the hotel has ever had and, in particular, December 2011 was best month ever on record. I doubt there are other hotels in Pennsylvania – especially historic hotels located in older, urban cities – that can boast those same numbers. What makes this success even more remarkable is that it came while 425 new hotel rooms were added in the City in the last 18 months.

Just as the last few years have been transformative to the city as a whole, itself has seen its share of transformation.

In 2011 we cut government spending by 9.9%. We representing a 7.2% reduction in the city’s total workforce. As a result of these cuts the city realized a savings of $3.1 million annually. In 2012, , which represented just a 0.1% increase over 2011 and we by another 10 full-time positions, resulting in an $870,000 annual savings.

The total workforce in the City now stands at 619 — easily the smallest workforce in our city’s history. Bethlehem, like so many other cities, can no longer afford the government it had, particularly during these tough economic times. In the face of rising pension and medical costs we need to right size our government and bring it in line with our ability to pay for it. Ultimately, it meant some very tough choices and separating the nice to have from the need to have.

The most important step we took over the course of 2011 will not be felt for some time, but the impact is no less critically important to the future of Bethlehem. Through labor deals, we reduced the legacy costs that have taken down the likes of big steel, almost bankrupted the automotive industry and hang around state and local governments like an albatross. Through our labor deals with police and fire, one litigated and the other negotiated, we reduced the pension expenses for all new hires in both departments.

The , compared to 70% today. The changes we made to these pensions alone will save the city approximately $28.7 million over the next 20 years. New hires are not entitled to post retirement health care. Lastly, current firefighters and police will have two years of salary freezes, yet each are paying more to cover the costs of health insurance. Our non-uniform employees experienced similar changes at the start of the recession.

Without our dedicated employees Bethlehem would not be the City it is. They have recognized the impact of the economy and worked cooperatively to help strengthen the City’s financial picture. We have worked to do this and I want to thank our employees for their hard work, dedication to the City and a willingness to work cooperatively to ensure our financial stability.

With their cooperation, we have held the line on spending and produced a budget that continues to meet the needs of the residents of Bethlehem and also a budget that meets the ability of the residents to pay for it. We cut fat and waste from the system and will continue to do so through the implementation of Continuous Improvement, or “CI in the City,” a program that has already produced $11 million of savings to the taxpayers.

The culmination of these efforts is a year ending 2011 cash balance of approximately $650,000 dollars — the first positive cash balance since 2002. Perhaps more importantly, with an eye towards sustainability, we achieved this cash balance with no interfund borrowing. The last time that happened in the City of Bethlehem was 1993 — almost two decades ago — when they were still making steel in Bethlehem.

I repeatedly talked about the City aggressively paying down debt, even at times to the detriment of our annual fund balance. From 2004 through 2010 we did just that, paying down $78 million in principle and interest. Unfortunately given the declining revenues resulting from the Great Recession, paying down debt as quickly as we have in the past is no longer an option.

A restructuring freed-up $2.7 million in 2011 and $1.2 million in the 2012 budgets to provide us with some additional relief as the economy recovers. And even with the $16 million dollar working capital loan, the City remains on pace to retire approximately $91.8 million in principal and interest over the next five years and $17.3 million this year alone. Our debt position and how quickly we were set to payoff our debt was noted as a positive by S&P. “Bethlehem’s estimated overall debt burden is moderate and rapidly amortizing.”

While we are particularly proud of how we finished 2011, the challenges of local governments are very real. This past Saturday the New York Times ran an article on the pressures local governments feel in this recession. In fact, the article paints a rather grim picture of the future of both counties and cities. Without the intervention of state legislatures, local governments across this country will lag behind the recovery as costs continue to rise and the pressure to make cuts continues to grow. As a result, critically important government services are in danger. We have not cut services in Bethlehem.

In fact, the average tax bill for those services in the City of Bethlehem is $742 -- $62 per month. Understanding how much you pay for the services the City provides shows it is still a pretty good bargain. City government is the most tangible of government of all three levels. Reductions and cuts have a very real impact on quality of life issues in a City. The services provided by the City include fixing potholes, snow removal, leaf pickup, fire and police protection, 911 and EMS services, and parks and recreation. Most of these services are 24-hour, 7-day a week operations and deficiencies in these services, have real tangible impacts on a resident’s life.

Public safety is easily the most important investment any City makes with tax dollars. Without a sense of safety, people will not invest in Bethlehem, either by opening a business or purchasing or renting a place to live. In tough economic times, it is important not to sacrifice public safety for short-term financial relief.

Crime is down again in Bethlehem. Overall crime is down 10% from last year. Our rates have decreased more than other municipalities, so Bethlehem remains the safest City in the Commonwealth of Pennsylvania and that gap widened this year. I am always proud of this accomplishment. Through the hard work and dedication of our police officers, we have a true community policing effort and a strong partnership and trust with our residents. Each of you who have made an investment here, or decided to live here also deserve credit. By making the investment you have made, we are able to deploy the necessary resources to ensure Bethlehem remains safe.

This year we are opening a new substation at 60 West Broad Street. It will be the new home of the Street Crimes unit and will provide a presence in our downtown that has been lacking for five years. This investment is possible due to the generosity of , who have provided the City the space for a year for free. Also Chuck Stehly and Corporate Environments of Bethlehem donated furniture for the City. This is a prime example of how the private sector and public sector can work together in these difficult financial times to ensure that we continue to deliver city services. It is an excellent partnership and one that I hope we can replicate when necessary.

We are in the midst of a $463,000 upgrade of the into a new state-of-the-art EMS station. The remodel is scheduled to begin in the next month. By splitting our EMS services, we will be able to better cover the City on the fastest growing sector of public safety: EMS services. EMS calls continue to rise and the dual service station system is in the best interest of our residents.

As a result of this change we are investing $100,000 to improve the Lincoln Fire Station to make sure that there is sufficient room for our firefighters. We continue to schedule the same number of firefighters every shift, as we have in the past. However, as a result of last year’s labor award we are no longer mandated to use overtime dollars to fill slots when firefighters call off sick. That obligation cost the City over 1 million dollars last year.

Public infrastructure is another area where demands far exceed the availability of funds, a problem, which exists on the state and national levels. Much like the recession and stresses on pension obligations, the current condition of infrastructure is the result of decades of neglect. You need look no further than the to understand the impact of the state and national governments failure to invest in infrastructure.

Nevertheless, here in Bethlehem, we have been somewhat fortunate to have large infrastructure projects underway. The Third Street ramp was completed in the fall and a special thanks to , which stepped up and paid additional dollars to allow the workers to work longer hours and speed up the completion of construction.

The other side of the Route 412 project will break ground this spring, finally taking 412 from two lanes to four and really opening up the potential of Commerce Center Boulevard. The is under design with construction slated to begin in 2013 and the replacement is under design.

Additionally, we will be completing the Broad Street streetscape project that started last summer and will bring additional parking, street trees and street lights to a critically important commercial corridor. Also, speaking of streetscapes, in the coming months you will hear about a project to provide a facelift and upgrade to another critical commercial corridor in Bethlehem. Few downtowns have the magic we have and we need to make sure we continue to find ways to reinvest in our infrastructure.

In 2011 we completed a $750,000 , a time honored community treasure, now known as the Earl E. Schaffer Memorial Rink. 2011 was the year of the highly anticipated . 

In 2012 we will complete Phase II of our enormously popular as well Phase III of the Greenway.  We will continue to drive the Greenway not just to but to the border of Hellertown, connecting with the Saucon Rail Trail, which opened in 2011.  This year we will see a significant upgrade to WPA era and the western end of .

Lastly, the city will initiate discussions with Norfolk Southern regarding the creation of another rail to trail project that would connect the neighborhoods of West Bethlehem to our downtown and our other trail networks in the city.  I believe this project will make Bethlehem one of the most bike friendly communities on the East Coast.

Sometimes cost savings require you to reinvest in yourself. Our sewer plant was commissioned in 1953. Through the years it has evolved into a regional facility serving 11 communities. The plant is in need of expansion of its capacity and recapitalization. These improvements are detailed in out Act 537 Plan which took over a decade to complete and is now pending before DEP for final approval. In 2012, we are making considerable upgrades and investments to our sewer facility; the lynchpin is the construction of a $9 million upgrade to our digester complex. These are critical investments to our plant that have been deferred for too long.

The City has entered in to a guaranteed energy savings agreement with Constellation Energy. Constellation evaluated our energy consumption and proposed $2.5 million in conservation measures that have a payback of $200,000 per year. These much needed building upgrades will pay for themselves in less than 13 years. These improvements combined with the $702,000 of federal Recovery Act dollars will allow the city to reduce its operational carbon footprint by 25% from our baseline year of 2005.

While we work on the business of being a city, we cannot forget our duty to drive economic expansion in the City. With our eyes to the future, understanding the realities of today, we will reach our destination, to be the model for the transformation of an old industrial town into a modern, dynamic city, competitive in the 21st century and the place everyone wants to live, work and visit.

That role is one we take very seriously in the City of Bethlehem. As an urban community, we continue to compete for investments with the suburbs where green fields and open spaces entice developers and business owners. Pennsylvania has an alphabet soup of incentives to attract economic development and Bethlehem is no stranger to those programs. We have long been successful with loan programs in Bethlehem and this year that success will continue with the new Bethlehem Small Business Loan Fund. The fund will be administered by the Rising Tide Loan Fund, a subsidiary of Community Action Development Corp. of the Lehigh Valley, a longstanding partner in economic development.

In 2012, you will see an aggressive economic development department, one that has certainly had success and is hungry for more. I have challenged them to aid in the remediation and the residential development of the SGO Building, as well as drive additional residential uses on the BethWorks site — a site that given all of the amenities present is poised for such use. I’ve asked them to bring a grocery store to the SouthSide. By the end of this year, I expect to be in the design phase of a new intermodal transportation hub and a new parking deck to support the growth of South Bethlehem.

We’ll also be targeting the technology sector this year as we continue to grow Bethlehem as a City of Innovation. Math fans in the crowd may know that today, March 14 is National Pi Day – 3/14 or 3.14, the first three digits of pi. As I’m sure we all know, pi is the ratio of a circle’s circumference to its diameter. This year in Bethlehem, pi means something a little more.

Just last week, we celebrated the grand opening of Pi: , Bethlehem’s latest tech hub. Businesses moved into the space in October and it is now 98 percent occupied with seven of the eight office suites filled. A total of 40 employees come to Pi every day and we anticipate that number will swell to 60 as those businesses continue to grow.

In true Bethlehem style, Pi is an adaptive reuse project which involved the conversion of the second floor of the building, a 100-year-old former silk blouse mill. Pi was designed by and built by . It is, as one of the entrepreneurs who works there calls it, “The coolest workspace in the Lehigh Valley.” More than that, Pi allows us to send a message to the business community. To every entrepreneur, inventor, scientist, developer, hacker, mathematician, student, professor and thinker: Bethlehem wants you.

I want talented professionals young and old to know that Bethlehem is a community that embraces innovation. We’re here to help you grow your business. What we know is that the demand for tech space is so high we could have filled Pi three times over. We at City Hall are hard at work looking for the next tech center location.

Every day, Bethlehem’s Economic Development Office fields calls from entrepreneurs who want to open restaurants, boutiques and offices in our City. Our downtowns – both North Side and SouthSide – in the last year alone we have issued over 100 new Business Certificates of Occupancy. 2011 also saw West Bethlehem emerge as a neighborhood, which welcomes new business. The City has laid the groundwork for the private sector by investing in streetscape improvements and infrastructure, which make our neighborhoods appealing to entrepreneurs like you who start and grow businesses.

The Majestic Corporation continues to make progress at its 441-acre development project. It is anticipated that this project will bring 3,000 to 4,000 jobs and 500 million dollars in economic development when it is completely built out. We are excited about the recent planning submissions.

The national economy is starting to shake the dust off and we need to be ready to work with the private sector. Liberty Property Trust has begun construction of 1.2 million sq. ft warehouse off Commerce Center Boulevard last year and I’m pleased to announce that Liberty Property Trust has filed plans to construct an additional 800,000 sq. ft. warehouse in LVIP VII. I’m also pleased to announce today, another 170,000 sq. ft. project is in the development phase along the Route 412 Corridor. All total this represents roughly 2.2 million sq. ft. of new development and a approximately $120 million private sector investment in Bethlehem — much of it is speculative in that it is being built without tenants. It’s hard to imagine a stronger vote of confidence on the future of the City of Bethlehem.

Everything I’ve just talked about is great news. We have a lot to be proud of as residents and business owners in the City of Bethlehem. To those of you who have been to these a few times are expecting to see this slide.

While these national accolades are great, what’s most important to me is what our residents think. As some of you may recall in last year’s State of the City we announced that we would be undertaking a broad based survey to measure how we are doing. Like you in the private sector, we understand the need to stay in touch with our customers. With the help of Muhlenberg Pollster Chris Borrick, we sent that survey to 5,000 residents to get a sense of how they view Bethlehem. The most rewarding news came from the results of this survey.

76 percent of residents would recommend moving to the city, 75 percent of residents rate their neighborhood as an excellent or good place to live, and 85 percent rate the city as an excellent or good place to live. Even with the positive results of the survey last year, we recognize there is always room for improvement. We accomplished much last year, but I have no intentions of resting on that success.

American businessman and writer Max De Pree once said. “We cannot become what we need to be, remaining what we are.” I’m proud to say today that in 2012 I serve as Mayor of the City of Bethlehem, the safest mid-sized City in Pennsylvania, a fiscally-sound and growing City with a diverse economy, a City which attracts residents young and old, indeed the Jewel of the Lehigh Valley.

But I will be more proud 10 years from now in 2022 when I hear that Bethlehem is a better City than it was in 2012. It is always the job of one generation to make the world a better place for the next and that is what we’re doing today. We’ve proven we can accomplish great things here and the best is yet to come. I have set an aggressive agenda for 2012 and I believe we will reach our goals. Thank you all for your continued support, your continued investment and your continued love of Bethlehem. It’s going to be another great year.


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