The state says the Delaware County borough of Colwyn has been classified as distressed under a Pennsylvania program for financially struggling municipalities.
The Department of Community and Economic Development said Wednesday that Colwyn will enter the state's Municipalities Financial Recovery Act program, also known as Act 47.
Under the program, cities submit their budgets to a state oversight board and are granted flexibility to amend collective bargaining agreements to save money and, in some instances, to assess new taxes.
The state will name a recovery plan coordinator who will have 120 days to develop and propose a plan to the mayor, city council and the state department.
Twenty-eight other municipalities have been declared distressed in Pennsylvania since 1987. Officials say nine have successfully emerged from the program.