A proposal to raise Harrisburg’s property taxes by 105 percent over three years would lead the city into financial ruin and “state-assisted suicide,” Mayor Eric Papenfuse said on Tuesday.
Speaking to reporters after a ribbon cutting for a building in Uptown Harrisburg, Papenfuse said that he would not support the enormous property tax increases that the Pennsylvania Department of Community and Economic Development (DCED) proposed in a report issued yesterday.
The tax hikes were one of the measures that DCED said could help Harrisburg ease its exit from Act 47, a state-run financial oversight program. The proposed increases would affect only the city portion of a property owner’s total property tax burden.
Papenfuse and state Rep. Patty Kim said that the proposal would burden constituents and stifle growth in the city. They agree that Harrisburg can’t afford to lose the $11.8 million in revenue that the city generates under Act 47.
The oversight program enabled Harrisburg City Council to double the earned income tax (EIT) in 2012 and triple the local services tax (LST) in 2016. Unless state law changes, the city will have to lower those tax rates when it leaves Act 47 in 2022.
Kim is co-sponsoring a bill with Republican Rep. Greg Rothman that would codify Harrisburg’s current tax rates, allowing it to leave Act 47 and regain financial independence.
The bill measure would eliminate the longstanding structural deficit that plagued the city before it entered Act 47 – the result of Harrisburg’s small, largely impoverished tax base supporting large swaths of tax-exempt property.
“We can say it until we’re blue in the face, but it’s true,” Kim said. “How can you survive when 50 percent of your tax base is tax-exempt and 30,000 commuters come into the city every day?”
The local services tax, in particular, is essential to Harrisburg’s financial future, Papenfuse said, because it taps revenue from the city’s large commuter class. Property tax hikes would shift the burden of funding the capital city back on to its 49,000 residents, a large portion of whom live at or below the poverty line.
Kim, who served on City Council for seven years, called DCED’s exit plan “dead on arrival.”
Combined with anticipated hikes in Harrisburg’s water/sewer rates and school taxes, property tax increases would likely drive out existing residents, she said.
“Nobody would come to Harrisburg,” Kim said.
Papenfuse said that the state legislature will have 10 working days to pass Harrisburg’s tax provision in September, since council must approve a final recovery plan late that month. He said he would veto any plan that raises property taxes.
If the state fails to act, the mayor believes that the city could find recourse through the state judiciary.
The LST and EIT increases were approved by Commonwealth Court rulings, and Papenfuse said that a judge may uphold the current rates if the city could prove that public safety was in jeopardy.
Among DCED’s proposals for limiting Harrisburg’s expenditures was the consolidation of the Harrisburg Police Bureau into a regional police force. The exit plan also says that the city will unlikely be able to hire new police officers over the next three years.
Papenfuse said both those proposals are untenable, given a lack of regional cooperation and the city’s already-low levels of police manpower.
The mayor also rejected the option of adopting a Home Rule charter, which would allow the city to set its own tax rates. Papenfuse does not believe it would succeed in Harrisburg, or that the city would pass a charter in time to avoid an Act 47 exit plan.
Home Rule would also not allow the city to keep its current LST rate. Home Rule charters only set tax rates for residents of a home rule municipality, but the LST is paid by commuters as well as residents.
Papenfuse urged Harrisburg residents and property owners to comment on the DCED plan through July 24.
“We’d like everyone to say that the plan doesn’t work and we need legislative change,” he said.
Written comments can be submitted through the city website, and residents can also offer oral comments in a public hearing on July 24.