Fred Reddig and Neil Grover before members of City Council Wanda Williams, Eugenia Smith, and Brad Koplinski Wednesday night.
“Someone suggested that we think of the citizens of Harrisburg,” said former Mayor Stephen Reed, during a public meeting of the Harrisburg Parking Authority board in May of 2008. “Well, I can tell you that we have.”
The room was crowded, and the atmosphere was tense. The issue before the board was the long-term lease of the city’s parking garages, to the developer Jacob Frydman, in exchange for $215 million. Frydman had already given his talk, promising—unpersuasively, judging by the tone of Reed’s speech, which was half entreaty, half rebuke—that the authority’s union employees, many of whom were present, would not lose their jobs.
Reed spoke for ten minutes. Public approval of the proposal was waning, and his plea grew increasingly strained. “I’d have to be out of my mind to come to a press conference, to a public meeting of the parking authority, in front of all of you, and offer a transaction here that was bad for the city of Harrisburg,” he said towards the end. “Why would I do that? Why would any mayor of any city do that?”
In hindsight, it’s hard not to see that night’s speech as a prelude to Reed’s unraveling. Though the board narrowly voted for the deal, City Council would ultimately reject it; a year later, Reed would lose the Democratic primary. But at the time, it seemed almost possible that the lease would buy the mayor a fresh start. The Frydman deal, he pledged, would wipe out both the parking authority’s and the city’s debt. And best of all, it would mean lower taxes—including a 100% rebate to homeowners making less than $40,000 a year, and, starting in 2009, “an across-the-board rate reduction that becomes permanent.”
Five years later, another long-term lease of the city’s parking assets is taking shape. After months of delicate brokering behind closed doors, the state-appointed receiver’s roadmap for recovery, alias Harrisburg Strong, has surfaced for public review. A major component is the 40-year lease of the city’s lots and garages and on-street meters, in exchange for which, as promised before, the parking authority’s debt and much of the city’s debt—particularly debt related to the retrofitted incinerator, which will be sold—will be wiped clean.
The difference, this time, is what happens with the taxes. As one of the plan’s many legislative conditions, City Council must pass an extension of the hike to the earned-income tax, or EIT, to 2%.
Last night, at a three-hour committee meeting, members of City Council reviewed three bills linked to the implementation of Harrisburg Strong. Two of them pertained to the parking assets: one would add 88 meters in Midtown, and the other would raise on-street hourly rates. The third was the EIT ordinance. When it came time to discuss it, the reaction from most council members was predictably cranky.
Council President Wanda Williams observed that, when council voted to raise the EIT to 2% last October, they did so on the understanding that the increase would only last a year. “We’re still putting the burden on the citizens of Harrisburg who had nothing to do with this financial debacle,” she said.
Councilwoman Sandra Reid harped on the continued absence of a so-called commuter tax. Recalling that the state legislature expressly forbade Harrisburg from implementing a tax on nonresidents who work in town, she complained that the city was “not taking every revenue stream available.”
Resentment towards commuters, a time-honored tradition among urban voters, is a reliable whipping post for elected officials. (Reed, at the 2008 meeting, flogged it twice, at one point referring to the garages as “facilities that are largely used by non-residents who come into Harrisburg and at the end of the business day go out to the suburbs.”) Sympathizing with voter pain is likewise a standby. Even the council members who approved of the hike, like Bruce Weber, were keen to show that they understood the frustration. Throughout the night, a frequent refrain was that comments were “just for the record” or “just so residents know.”
This posturing on taxpayer pain—that it afflicts the blameless, per Williams, or that it’s unequally shared, per Reid—distorts reality. Nobody likes higher taxes, of course. But an increasingly common perception is that the ignominious incinerator debt, whipped up by a handful of politicians and professionals, is being settled on the backs of city residents by way of the EIT. As Neil Grover, an attorney for City Council who worked closely with the receiver’s team, explained at Wednesday’s meeting, this isn’t the case.
Though the EIT hike is included in the recovery plan, it’s only indirectly related to the debt solution. Even if there were no debt, the city would still face a structural deficit—that is, the rise in the cost of city services would still outpace, as it has for years, any growth in the city’s revenues. It would seem that the answer is to trim the services, but the city, having already gouged its payroll, can’t go much deeper without disrupting essential functions. “We’ve had cuts as close to the bone as you can get, and yet we’re still short on our budget,” Grover said.
The reason it’s a part of Harrisburg Strong, according to Grover, is that it’s a critical signal to creditors and investors that the city is willing to work “in good faith” towards a solution. When council adopted the hike for one year, he said, it “got creditors to come to the table and put their skin in the game.” Part of the continuing negotiation towards recovery depends on Harrisburg’s enduring effort to balance its own books. “Everyone has come to believe the city is capable of righting its own ship,” Grover said.
Beyond that, the increase to 2% would make Harrisburg’s rate comparable to other distressed cities. As Fred Reddig, with the state Department of Community and Economic Development, explained at the meeting, many other municipalities under Act 47 have EIT rates even higher than Harrisburg’s. (Reading is at 3.6%; Scranton is at 3.4%.) Deciding that further city services can be cut, of course, is one matter. But if residents want to keep the services they’re getting, the cash has to come from somewhere. And as Grover explained, there are virtually “no other legal means of raising revenue.”
Since the recovery plan was made public, many have rather cynically remarked—including here on the blog—that tax hikes, once passed, are never repealed. That’s true, and the idea that this one will actually expire at the end of 2016, as it’s supposed to under the ordinance, is probably fantasy.
But it’s nothing compared to the much worse fantasy that was peddled for years under Reed: that the city could somehow provide more and better services while its revenues stagnated. “Each of Reed’s deals,” the receiver recently said in an interview, “if you peel it back, was to fix a $5, $6, $7 million hole in the general fund.”
By 2008, when Reed promised a tax cut, people saw it for what it was. At the end of his speech, he remarked, sourly, that throughout almost everything he’d said, two members of the public at the back had been shaking their heads. “You just rejected out of hand—you don’t want to hear anything,” he said. “God help us if that’s how we’re thinking about the future of Harrisburg.”
He was right, at least, that the city’s prospects depended on a change in thought. The recovery plan seeks to replace wishful thinking with long-overdue accounting. Citizens enjoyed a cheap ride for years—and voted, against their better judgment, to keep it going. Painful as it may be, it’s time to pony up.
