A House committee today passed a bill that would terminate Harrisburg’s Act 47 status, letting the city retain its current, enhanced taxing authority for the next five years.
An amended version of House Bill 2557, which would let Harrisburg exit Act 47, the state oversight program for distressed cities, and keep its current tax rates through 2023, was passed 24-1 by the House Local Government Committee.
The bill can now up for a vote before the House, and then the Senate.
The original legislation introduced by Rep. Greg Rothman, R-Cumberland County called for Harrisburg to retain its current taxing authority in perpetuity. Under Act 47, Harrisburg has levied a local services tax (LST) and earned income tax (EIT) that are higher than what is allowed under state law.
But the bill that the committee approved this afternoon was amended over the weekend to include two new provisions: one to retire the special taxing provisions for Harrisburg in five years, and another convening a special oversight committee to monitor the city’s finances.
Rep. Patty Kim, who represents Harrisburg and parts of Dauphin County, said the bill Rothman wrote “was what Harrisburg wanted and needed. But in order for us to gain enough support… we made a lot of concessions.”
One of those concessions is submitting to an Intergovernmental Cooperation Authority (ICA) — an oversight committee governed by five voting members, all appointed by state lawmakers. The Harrisburg City Controller will sit on the board but may not vote.
The ICA will receive a $100,000 annual operating budget from the general assembly. Kim said its duties and operations are so far vague, but would be modeled after an ICA convened for Pittsburgh, which exited Act 47 earlier this year.
“This is the best we can do, and this is what a compromise looks like,” Kim said.
Speaking to reporters after the meeting, however, Kim called the amendments a “gut and replace” tactic.
Committee members approved the amendment unanimously before voting on the bill, which only garnered one dissenting vote — from Rep. Gary Day, R-Berks County.
“Cities that have spent years managing themselves into Act 47 should work within the Act 47 framework,” Day said. “I think to be able to come out of Act 47 but maintain the enhanced taxing authorities sets a dangerous precedent for all municipalities.”
Harrisburg’s enhanced taxes bring in a combined $11.8 million for the city each year. Mayor Eric Papenfuse testified at a joint committee hearing last month that Harrisburg cannot fund basic services without them.
The local services tax, which takes $156 a year from every person who works in the city, has allowed Harrisburg to shift some of its tax burden from its 48,000 residents to the 50,000 commuters who enter the city each day for work. Papenfuse has said that the daytime population of the city stresses its infrastructure and emergency services, which are otherwise funded by Harrisburg’s small, largely impoverished tax base.
The mayor was restrained in his comments about the amendment at a city council meeting tonight.
“We’ll wait and see what happens,” Papenfuse said. “I don’t think it should pass in its current form, but we’ll wait and see.”
If the General Assembly does not pass the bill before its session days conclude next week, Harrisburg must adopt an Act 47 exit plan. That state-sponsored document will dictate Harrisburg’s budget until 2021, when its Act 47 status expires.
The latest draft of Harrisburg’s Act 47 exit plan called for massive property tax increases in two years to replace the revenue that would be lost without the LST and EIT. Residents, elected officials, and business leaders have called that proposal unworkable.
Kim said that the bill’s easy passage in committee bodes well for a final vote by the House.
“I was told my colleagues would vote for this [amended bill],” she said.
This post was updated on Tuesday night to include comments from Mayor Eric Papenfuse.