As 2017 draws to a close and Harrisburg officials negotiate next year’s budget, they’ve already set their sights on another deadline: the end of 2018, when the city’s Act 47 status expires.
The city recently enlisted the help of a lobbying firm to craft an exit strategy, which might include new laws specific to the capital city.
Harrisburg entered Act 47 in 2011. Cities and townships under Act 47 are designated as “financially distressed” by the state Department of Community and Economic Development and given special provisions for consolidating debt and setting tax rates.
Without those provisions, city officials say, it would be impossible to balance Harrisburg’s budget and maintain basic local services. Exiting the program would require them to lower current tax rates – unless legislators amend state laws.
“My general gut tells me unless there’s legislative change, I don’t think it’s possible for us to leave Act 47,” said Ben Allatt, a City Council member and chair of the budget and finance committee.
The need for new tax laws led the city to hire local lobbying firm Maverick Strategies, which they will pay $60,000 for services in 2018. While the deal won’t guarantee a specific legislative outcome, officials hope that Maverick will convey to lawmakers the unique challenges of funding a capital city.
“I don’t think that the leaders in the House fully understand what it means for a city to be in and leave Act 47,” said Allatt. “We think if they are fully informed, it could lead to legislative change that could affect Harrisburg or other cities across the commonwealth.”
Harrisburg’s status as the state capital simultaneously drives up its expenditures and reduces its revenue base. The daily influx of commuters means that the city infrastructure serves a large population of commuters who do not pay income or property taxes. What’s more, the city cannot tax state land.
Act 47 allowed Harrisburg officials to set earned income tax and local services tax rates higher than what is allowed under the state’s constitution.
Currently, Harrisburg taxes every individual working in the city $156 a year, or $3 a week, for local services such as police, road and traffic signals, and utilities.
The $8 million annual revenue from the local services tax helps maintain the city’s infrastructure and emergency services. If Harrisburg exited Act 47 today, it would have to adjust its tax rates according to the state constitution and third-class city code.
Harrisburg finance director Bruce Weber said lowering the rates would be impossible.
“It’d mean massive layoffs,” Weber said. “We wouldn’t balance the budget.”
Mayor Eric Papenfuse said that the city will seek an exemption from these tax codes due to its capital city status.
“We’re certainly in solidarity with other third-class cities across the commonwealth that are struggling, but we’re a third-class city that is also the state capital city,” he said.
Papenfuse could not say whether the lobbyists would seek amendments to the third-class city code or the creation of new laws entirely. He did add that legislative changes could provide Harrisburg an alternative to a home rule charter, which would let the city create set its own rates on income and property taxes.
Papenfuse also confirmed that one objective of the lobbyists will be annualizing the state’s yearly payment to Harrisburg. Since the city cannot collect taxes on state property, the state has routinely made an appropriation to Harrisburg for emergency fire and police services, which, in recent years, has amounted to $5 million.
That payment is subject to debate in each round of state budget negotiations and has fluctuated in size. Papenfuse hopes that legislators, with prodding from Maverick lobbyists, will make the $5 million appropriation a requirement by state law.