Valencia grapples with financial issues, looks to St. Barnabas for partnership
Valencia is in negotiations with St. Barnabas Health System to address the southern Butler County municipality’s growing emergency services costs.
A potential public-private partnership would help cover the costs of police, fire and ambulance services in the 218-acre community, which is largely dominated by the nonprofit health system and retirees.
“We are still having discussions, and (St. Barnabas is) still very interested in pursuing that,” said Valencia Borough Councilman Shanon McKenna.
With limited tax dollars flowing into the municipality, borough leaders have said creativity is needed to avoid drastic measures, such as Act 47 restructuring, Act 47 is the law under which the state can intervene and take steps to stabilize a municipality’s finances.
McKenna said he hopes to have the agreement take shape sooner rather than later because the Adams Township Police Department’s contract to provide services for Valencia will run out by the end of 2026. Valencia is also served by the Adams Area Fire District and Quality EMS.
“Time is of the essence because we have a police contract that is going to be coming due by the end of this year,” McKenna said. “To sign a long-term contract, I need to make sure that we have funding available to pay for that. This public-private partnership would provide the contributions to do a long-term contract.”
McKenna said he hopes to at least have the framework for an agreement with St. Barnabas in place by fall at the latest and for an agreement to become official by the end of 2026.
“We need to have it signed off before the end of the year, so that’s what we’re tracking toward right now,” McKenna said. “I would not want to push anything up to the end of the calendar year because we need to make sure that we're in alignment with our police contracts.”
According to Valencia’s 2026 budget, the borough is operating with an expected deficit of $9,683. Projected revenues stand at $127,965, but are more than offset by expenditures of $137,648. The borough plans to compensate for the deficit using the borough’s fund balance.
Contributing to the expenditures are $50,797 earmarked for public safety, including $30,300 for police services and $16,422 for fire services.
In prior conversations with the Butler Eagle, McKenna stressed a long-term agreement with St. Barnabas is necessary because the health system owns roughly 85% of taxable land in Valencia through its senior living facilities. Because St. Barnabas is a nonprofit, Valencia does not receive any property tax revenue from the land.
In addition, because a high portion of the borough’s population consists of retirees, Valencia collects relatively little earned income tax.
Under a separate arrangement, St. Barnabas has agreed to make an annual contribution to the borough in lieu of property taxes. Valencia is expecting to receive $27,000, which is about 60% of what taxes on the value of the property owned by St. Barnabas would be.
Valencia’s residents — who number just over 500 as of the 2020 census — are charged 10 mills in property tax as of 2026, which was raised from 7.5 mills at the start of 2025 due to the financial pressures caused by the emergency service expenditures.
Despite the borough’s financial situation, McKenna said a declaration of financial distress and Act 47 restructuring is unlikely, though the possibility was brought up at a council meeting earlier this year.
“The only reason that would occur is if we are financially distraught and the state would have to step in to address our insolvency,” McKenna said. “We are not at that stage.”
Act 47, also known as the Financially Distressed Municipalities Act, allows the state of Pennsylvania — specifically, the Department of Community of Economic Development — to officially declare a municipality as “financially distressed” and implement procedures to stabilize it.
According to the terms of the act, a “party with standing” — which can include DCED itself, the municipality or the trustee of a municipal pension fund, among other groups — can make a request to the DCED secretary, if the municipality meets at least one of 11 criteria. If a determination of financial distress is made, the department will appoint a coordinator to work with the municipality and prepare a recovery plan.
“A municipality is required to adopt its recovery plan by ordinance and work with its recovery coordinator and DCED to implement it,” said DCED spokesman Justin Backover. “The plan, formulated by an appointed coordinator, shall be consistent with applicable law.”
As of May 19, only three municipalities in Pennsylvania are currently undergoing Act 47 restructuring: Newville Borough in Cumberland County, the city of Chester near Philadelphia and the state capital of Harrisburg. A total of 29 others have entered the Act 47 process and later come out the other side. Most recently, the city of Shamokin in Northumberland County, had its “financially distressed” designation removed in August 2024.
“Act 47 is not something that we need to pursue,” McKenna said. “We have St. Barnabas’ support and interest in continuing contributions with the borough and establishing a long-term contract with us.”
