Harrisburg is likely to spend another three years in the state’s Act 47 program for financially distressed municipalities, according to a state advisor who oversees the city’s finances.
Marita Kelly, Harrisburg’s Act 47 coordinator for the state department of Community and Economic Development, appeared at tonight’s budget hearing to offer an assessment of the city’s proposed 2018 budget. State law requires Act 47 cities to have their budgets reviewed by state coordinators for compliance with Act 47 provisions.
Praising the city’s “many achievements” since it entered Act 47 in 2011, Kelly said that the current administration has smartly managed the unrestricted fund balance, neighborhood services funds and debt payments. She acknowledged that the small budget surplus and healthy cash reserve balance were due to the augmented taxing authority allowed to cities under Act 47 and believes that the city will not be able to afford to exit the program at the end of next year.
Act 47 grants municipalities exemptions from the state tax code by allowing them to levy higher tax rates. City finance Director Bruce Weber said that $13 million of the city’s $65 million budget comes from taxes levied under Act 47.
“People say Act 47 is like a roach motel – you can get in but you can’t get out,” Weber said.
The city stands to lose that $13 million in revenue if it exits the program next year. It would regain independent financial oversight if it did leave the program, but Councilman Ben Allatt said that lone incentive isn’t enough.
Kelly said that Harrisburg has avoided some of the problems that plague other third-class cities across the state, such as difficulty financing legacy payments – healthcare and benefit payments for current and retired employees.
Weber reported that two of the city’s pension accounts are fully funded, but a third fund for police pensions is causing some concern.
“We only have one that’s slightly in distress,” Weber said. “We are contributing to it every year.”
Kelly will make a formal recommendation for Harrisburg’s Act 47 status in March. The only condition that would enable the city to exit the program would be a change to the third-class city code or a set of special taxing provisions for the city.
Kelly said that she did not expect any legislation to come quickly, but that the state Municipal League was working with legislators to propose changes to benefit third class cities.
City Council recently authorized a 12-month, $60,000 contract with a Harrisburg-based lobbying firm to represent the city in the state Capitol. Mayor Eric Papenfuse said that one objective of the lobbying effort will be to annualize the state’s annual $5 million emergency services payment to the city. He also hopes the firm might help enact legislative change to grant the city more taxing power.
Harrisburg will hold the second day of its annual budget hearing tomorrow night.