For much of Wednesday night’s budget hearing—the second regarding Mayor Eric Papenfuse’s amended budget and, like its sister hearing last week, a four-hour marathon—Councilwoman Sandra Reid aggressively set the tone, as she often has in the past year.
The recently re-elected Reid, who chairs council’s public works committee, has a confrontational style that can assert itself even over seemingly innocuous matters. Last November, she raised an awful lot of hell over what she claimed were exorbitant water bills, but which turned out to be no scandal at all. At other times, her complaints are like misbegotten PSAs: the right message, more or less, but the wrong delivery. This was the case when, on Wednesday night, council broached the topic of Papenfuse’s proposed partnership with the regional chamber, CREDC, under which CREDC will help fund an economic development position in city hall. Papenfuse has defended the proposal as a way to bring welcome assistance to the city without tapping tax dollars, which it may well prove to be, though some have reasonably wondered whether it will yield any quid pro quo.
Reid brought up the ethics question, but then drifted into a bizarre analogy, comparing the late-arriving boost from the chamber to the release of Americans in the Iran hostage crisis in 1981. “They made sure that the previous president was out of office before they let one hostage [be] released,” Reid said. Similarly, Dave Black, CREDC’s president, “didn’t do anything to help us when we were struggling financially. Now all of a sudden we have a brand new mayor, now he has $90,000 to give.”
This pugnacious quality of Reid’s also came into play during one of the more interesting points of discussion Wednesday night: whether the city should issue a tax and revenue anticipation note, or TRAN.
A TRAN is a form of short-term debt aimed at solving a cash-flow problem that afflicts many municipalities. A municipality must make payroll throughout the year, but it typically receives the bulk of its revenue in bunches. In Harrisburg, the largest influx of revenue occurs in March, when most residents pay their property taxes. A second injection, from the state, is subject to the caprice of the state budgeting process. Last year, the city received $5 million, much more than in years past, but didn’t get the money til October. The periods just before these influxes, like the last days of the month for someone living from paycheck to paycheck, can get pretty lean. The purpose of a TRAN is to establish a line of credit the municipality can draw upon in the event of a funding shortfall.
In December, under advice from the receiver, Harrisburg requested proposals from lenders for terms of a possible TRAN. According to Steve Goldfield, a financial advisor on the receiver’s team, a number of “one-time events” had placed additional pressure on Harrisburg’s budget, among them a spate of retirements since the fall and a delay in consummating the recovery plan. Though the city ended the year with a projected fund balance of $4 million, there’s a chance it might feel a pinch by the end of February and struggle to pay all its bills. The TRAN offer the city ultimately accepted, from Metro Bank, would likely be issued in the amount of $2 million—enough to cover any temporary shortfall before March revenues arrive.
In the eyes of Papenfuse administration, the $2 million TRAN is a modest proposal. Bruce Weber, formerly a council member, and now the mayor’s budget and finance director, has called it an “insurance policy.” It would cost Harrisburg around $15,000 in fees, plus interest on any portion of the $2 million that the city actually draws on, at an annual rate of 2.5 percent. At the first budget hearing, on Jan. 30, Weber expressed the administration’s hope that the amount drawn on “would be nothing,” and that the TRAN would expire “quietly” on June 30, the end of its term.
For some, however, the merest mention of new debt was enough to raise alarms. In a typewritten testimony submitted to council, Nevin Mindlin, the former independent candidate for mayor, took the TRAN as evidence that the recovery plan was already “headed for failure.” The city, he wrote, “remains in financial distress, as indicated by the need to take on debt to pay its bills”; given the city’s fund balance of $4 million, he added, there was “no excuse” for a TRAN. Reid concurred. In the wake of the recovery plan, she said, “We thought it would be kumbaya and angels singing.” How could it be that, barely more than a month into the new year, the city might already need to borrow again?
In a city so recently scarred by bad debt, it’s reasonable to be wary of anything even resembling a frivolous loan. But not all debt is created equal, and Reid, along with her colleagues on council, must know that sooner or later the city will have to borrow. When it does, a track record of modest, responsible borrowing will be a good thing to have. A TRAN, with its short term, its low interest rate, and its limited scope, is about as far from extravagance as debt can be. Neil Grover, the city solicitor, likened it to an individual applying for a gas card or other simple line of credit to rebuild her rating after bankruptcy. “The city needs to re-establish itself in the market,” he said.
In his column this month, Lawrance Binda, TheBurg’s editor-in-chief, described the return to “normalcy” he hopes will occur in Harrisburg. “In many places, normalcy would be judged as a low bar to aim for,” he writes. “However, in Harrisburg, it would represent an improvement, an end to years of uninterrupted crisis.” On council, and among some members of the public, the debate over a TRAN was greeted with reflexive distrust, as if it represented an extension of that crisis. But however council settles the debate, they should recognize—and we should be relieved to know—it’s a normal debate to have.
