PITTSBURGH -- The state on Monday ruled that Pittsburgh is financially distressed, and the city will get a state-appointed recovery coordinator within 30 days and an economic recovery plan within four months.

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The Pennsylvania Department of Community and Economic Development issued the designation under what's known as "Act 47." Mayor Tom Murphy requested it, hoping that the city will be empowered to create new taxes without approval from the state Legislature.

Murphy envisions a new payroll tax, so those who work in the city will pay more for its services. He has said Pittsburgh must stop relying on property taxes as a primary source of revenue, because the major steel mills are gone and the economy is now fueled by hospitals and universities that are wholly or partially tax-exempt.

Read Murphy's Statement About Act 47.

Pittsburgh meets three criteria for distressed status under Act 47: spending exceeded revenues for at least three years; it had a 5 percent deficit for two successive years; and it had at least a 1 percent deficit for three years.

"Act 47 is not a state takeover," state Community and Economic Development Secretary Dennis Yablonsky said in a statement Monday. "The state's role is to provide strong oversight and develop a partnership with the city in order to ensure that residents receive vital services."

Some lawmakers have criticized Murphy for not reigning in costs, but he has said Pittsburgh laid off one in five city workers from 1993 to 2002, and 640 in the past few months. He also closed numerous city facilities, from police stations to pools.

Pittsburgh's credit rating hit junk-bond status in October.

State Sens. Jane Orie and Jack Wagner tried to stop the Act 47 designation with legislation to create a five-member fiscal oversight board, but Gov. Ed Rendell has promised to veto that measure.

City Councilman Alan Hertzberg said Pittsburgh's financial recovery plan should focus on reducing the city's $1 billion debt, which costs $100 million a year in payments.

"I think (Act 47) is a good thing at this stage," Hertzberg said. "It's a bad thing that we got where we are ... we've pretty much bottomed out, reputation-wise. Things can only get better."

Since Act 47 was enacted in 1987, it has been used by 19 municipalities to give them financial tools like a recovery plan, a wage tax on nonresidents and state loans and grants. Before Pittsburgh, Scranton was the largest city operating under Act 47.

Scranton used Act 47 to improve its bond rating and refinance $12 million in debt.

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Department of Community and Economic Development