“The clock is ticking” on the next step in Harrisburg’s path to financial recovery.
That’s the message that a state official had for Harrisburg’s administration and City Council tonight, as both bodies were briefed on the timeline for the city’s remaining six months in the state’s Act 47 program for distressed municipalities.
Marita Kelley, Harrisburg’s Act 47 coordinator, appeared at a council work session to explain the city’s duties before Act 47 status expires on Sept. 23.
Here’s what lies ahead, according to Kelley: the mayor and the city clerk will receive a financial condition report, prepared by Kelley and the Pennsylvania Economy League, on March 22. The mayor and council then will have 15 days to review the report and 20 days to schedule a public meeting on its contents.
After that public meeting, which Kelley said would take place around April 11, she and the Pennsylvania Economy League will have 90 days to prepare a final exit plan for the city. In that plan, they’ll make a formal recommendation for what the city should do in September: extend its Act 47 status, exit the program or enter the oversight of a state-appointed receiver.
The exit plan should arrive before city officials in mid-July. After another round of commenting and a public meeting, Kelley will finalize the exit plan in time for the Sept. 23 expiration deadline.
Kelley thinks it’s highly unlikely that Harrisburg will enter receivership in September. She was hesitant to recommend an action to the city tonight, but said during budget meetings in December that Harrisburg will likely to spend another three years in the program, at least.
Kelley reiterated tonight that the city’s fiscal health has improved significantly since it entered Act 47 in 2012, but upcoming capital expenses could preclude it from making a clean exit in September.
“There are some items on the horizon that will be tough for everyone to digest, but the leadership of administration and City Council has been very good under the Strong [financial recovery] Plan,” Kelley said. “I think that bodes well for the city and its ability to manage finances.”
Act 47 helps municipalities balance their budgets by, among other things, granting them enhanced taxing authority. In Harrisburg, that’s translated into a heightened Local Services Tax, which is paid by anyone who works in the city – including more than 30,000 commuters. Harrisburg’s LST tripled from $1 per week to $3 per week in 2016, and Mayor Eric Papenfuse insists that reverting to its former level would cause financial ruin for the city.
During budget talks last year, city officials said that Harrisburg could lose as much as $13 million in revenue if it exited the program in September.
As a result, it’s unlikely that the city can afford to shed its Act 47 designation until Pennsylvania lawmakers amend the state’s antiquated Third Class City Code, which caps tax rates for cities across the commonwealth.
In November, council authorized the hiring of a lobbying firm, Harrisburg-based Maverick Strategies, to help push for legislative change in the statehouse. Papenfuse said then that Harrisburg deserves special taxing authority as the state’s capital city, since it provides services to a large commuter class and cannot collect taxes on state land.
The lobbyists Harrisburg hired could push for amendments to the Third Class City Code or could advocate for the creation of new laws specific to the capital city. Legislative action could provide an alternative to a Home Rule Charter, which would give the city more leeway in setting tax rates.