The state-appointed body tasked with overseeing Harrisburg’s finances today approved the city’s five-year financial plan, getting Harrisburg a step closer to exiting Act 47.
The Intergovernmental Cooperation Authority (ICA) unanimously endorsed the city’s long-term financial plan, following some tweaks and updates from an earlier draft plan.
“I believe that working on this will allow us to take a first necessary step for the city of Harrisburg,” said ICA board member Kathy Speaker MacNett.
Next, the ICA and the city need to draft an Intergovernmental Cooperation Agreement, which will formally set the terms and conditions of the intergovernmental relationship. A draft should be ready by mid-June, said ICA Chairman David Schankweiler.
Mayor Eric Papenfuse said that he hopes the final agreement will be approved by the ICA and City Council before council goes on summer hiatus in early July. At that point, with Commonwealth Court approval, the city can formally exit Act 47, the state’s program for distressed municipalities. The city has been in the program since 2010.
The financial plan approved today had some good news in it.
Since the May 1 draft, the city’s financial picture has brightened considerably. Real estate taxes, earned income taxes, local services taxes and interest income have all been stronger than projected, adding about $1.1 million in projected revenue for 2019.
Meanwhile, projected medical expenses for this year were reduced by $750,000.
As a result, the city expects to be able to pay down its debt faster than it projected just a month ago. It also expects to have to use less of its fund balance over the five-year period.
Nonetheless, Papenfuse remained concerned over what will happen when the five-year plan period expires in 2023. At that point, the city would lose some $12 million in extra taxing authority granted by the state legislature.
If, in the interim, the state does not allow Harrisburg to continue its elevated earned income and local services taxes, the city’s options would be to slash expenses, raise property taxes or perhaps pass a home rule charter, which could allow it to recoup some of the lost taxes.
Several ICA members voiced one reservation about the five-year financial plan. They noted that projected revenues were expected to be basically flat over the period, prompting several members to advocate a strong economic development policy for the city.
“There’s a lot to be done on the economic development front,” said ICA board member Audry Carter.
Following the meeting, Papenfuse said that he welcomed all ideas and proposals from the ICA to spur economic development in the city. He also said his administration is proposing transferring money that was used to fund a city communications director to hiring an economic development director.
The communications director position has been vacant for several months after Joyce Davis left to join PennLive. The economic development director job, which had been funded by the Harrisburg Regional Chamber, has been vacant since last year when then-director Jackie Parker left.