Pennsylvania's Capital Must Change Its Financial Recovery Plan, Mayor Says
Harrisburg, Pennsylvania Delmas Lehman / Shutterstock.com
With revenues falling short, Mayor Eric Papenfuse floated amendments to the plan during his State of the City address on Tuesday.
A financial recovery plan put in place about two years ago to address Harrisburg, Pennsylvania’s extreme fiscal woes needs to be amended, Mayor Eric Papenfuse said during his State of the City address on Tuesday.
Papenfuse said revenues flowing to the city under the so-called Harrisburg Strong Plan are falling short of projections and will be insufficient to meet operating expenses in 2016.
“This defect in the Strong Plan’s framing cannot be remedied by cost-cutting alone,” Papenfuse said, according to a copy of his speech provided by the Mayor’s Office. “While the City is starving for capacity, we have already cut discretionary funding to the bone.”
Papenfuse noted that Harrisburg now has 369 workers, down from a high of 667 less than a decade ago, and that “2015 will mark the second year in a row that we have significantly underspent our adopted budget.”
He added: “That is simply not a sustainable course.”
The mayor delivered his remarks at a Hilton hotel, during an event organized by the The Harrisburg Regional Chamber & Capital Region Economic Development Corporation.
A Democrat, Papenfuse is in the second year of his first term as mayor of Pennsylvania’s capital city, which has about 49,000 residents.
During his address, the mayor proposed three key changes he’d like to make that are related to the recovery plan.
One is tripling a $1-per-week tax on employees working within the city limits to $3 per week, another is expanding the city’s sanitation operations, and the third is transitioning authority over Harrisburg’s basic municipal affairs away from state law toward a model of governance known as “home rule,” which would be based on a voter-approved city charter.
Under home rule, Harrisburg would still need to follow state and federal laws but could exercise powers that those laws do not deny. Information published by the Pennsylvania Municipal League points out that home rule can give cities more latitude when it comes to levying taxes.
Papenfuse said that the recovery plan, which was finalized in 2013, included overly optimistic estimates for how much earned income tax and parking revenue the city would get.
Absent any changes, Harrisburg’s revenues for next year are on track to be about $6 million below the projections in the plan, according to the mayor.
That shortfall is equal to about 10 percent of the city’s 2015 adjusted budget.
Harrisburg’s financial crisis was precipitated by hundreds of millions of dollars in debt that the city could not afford to pay, much of it tied to a troubled trash-to-energy incinerator. At one point in 2011, the City Council voted to file Chapter 9 bankruptcy, a move blocked by state law. The city wound up in what’s known as “receivership,” with a state appointee overseeing its finances.
Although the city formally exited receivership last March, Harrisburg is still considered financially distressed under Pennsylvania’s Act 47.
Papenfuse acknowledged during his address that because of the recovery plan “hundreds of millions of dollars in long-term debt was triumphantly wiped from the City’s books.” But he also said: “Unfortunately, years of irregular city accounting masked a long-standing structural deficit that was years in the making, and far more insidious than the Receiver’s team realized.”
In July, Stephen R. Reed, a Democrat who served as mayor of Harrisburg from 1982 until 2010, was charged with 100s of criminal counts related to corruption, theft and bribery, some of which involved the misuse of bond proceeds. Reed has said he will fight the charges.
The tax Papenfuse is seeking to increase is called the “local services tax.”
Right now, it is set at $52 annually per employee. Under the ordinance establishing the tax, at least 25 percent of the revenue must go toward emergency services. The remainder can be used for road projects or property tax reduction and relief. The mayor estimated that upping the tax would raise about $4 million annually.
“This is the fairest tax increase we can propose because it will not burden the working poor, seniors on fixed incomes, or the unemployed,” he said.
Referring to Harrisburg’s sanitation services, Papenfuse said they provided “the one revenue source for the City which is currently out-performing expectations and has room for growth.”
He also noted: “The sanitation fund, if carefully managed, can even serve as a low-interest means of lending to the general fund, which will help the city become ever more self-sufficient in the future.”
Bill Lucia is a Reporter for Government Executive's Route Fifty.
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