Greater Harrisburg's Community Magazine

Harrisburg readies 5-year financial plan in critical step to exit Act 47

Harrisburg City Council chambers on Tuesday night

Harrisburg officials tonight dug into the details of a proposed, five-year financial plan for the city, a critical step to fulfill a state mandate and ultimately exit Act 47.

Mayor Eric Papenfuse made a presentation of what he called a “responsible” long-range budget, which assumes “no significant growth” in the city’s tax base, yielding a flat operating budget of about $64 million through 2023.

“This is, in my opinion, a fiscally responsible plan,” he said. “It doesn’t call for the raising of taxes.”

The commonwealth required Harrisburg to draft a five-year financial plan as part of legislation passed last year that allowed the city to retain its elevated local services and earned income tax rates for another five years.

That plan must be approved by the Intergovernmental Cooperation Authority (ICA), the state-created body tasked with overseeing the city’s financial recovery.

After the budget plan passes muster, both the ICA and City Council must approve an Intergovernmental Cooperation Agreement. Papenfuse said that he hoped that step would occur by early July, before council takes its traditional six-week summer recess.

At that point, the city would be able to exit Act 47, the state’s program for financially distressed municipalities, Papenfuse said. The city has been in the program since 2010.

While revenues are assumed to remain mostly flat over the five-year period, expenses are expected to increase by several million dollars per year, with the gap made up by tapping the city’s substantial fund balance.

Over the next five years, the fund balance is projected to decrease from the current $21 million to about $3.3 million, leveling out at about 5 percent of the operating budget, which, according to Papenfuse, is the city’s target level.

In recent years, the city has built up a large fund balance mostly by under-spending its budget over successive years.

Councilman Ben Allatt said he was concerned about reducing the fund balance so greatly, considering that the city may well lose its enhanced taxing authority after the five-year period.

“I am concerned about going down to 5 percent, losing sources of revenue, then worrying about the scenarios that we can’t see right now,” he said.

Papenfuse responded that he expected that the city would continue to under-spend its budget, meaning that the fund balance may be higher. In addition, the five-year plan, he said, is a “living document” that will be amended annually.

“When all is said and done, the plan will change a lot from year to year,” he said.

In addition to the annual operating budget, the five-year plan also addressed the city’s capital improvement needs.

The plan divided capital projects into several buckets: critical projects that must be funded, less critical projects and lower-priority projects.

To that end, over the next five years, the city expects to spend $7.8 million on what it deems its most critical capital needs, which includes upgrades to 2nd Street, IT hardware and software, police patrol vehicles, police body cameras, fire apparatus and vehicles for public works.

Another 50 projects, costing some $8.4 million, are seen as important, but less critical. They include many park projects. Park projects also take up much of the third-tier priority list.

The administration also addressed the issue of what might happen after the five-year plan period expires in 2023.

Papenfuse said that, ideally, the legislature would agree to allow Harrisburg to continue to levy its higher taxation levels, revenue that makes up about 18 percent of the city’s operating budget.

However, if that doesn’t happen, the city should consider a Home Rule charter, which would free it from the strictures of the state’s third-class city code, he said. Harrisburg, then, would be able to recoup much of that lost revenue by retaining its current 2-percent earned income tax rate.

“I’m not here to debate Home Rule now,” he said. “But it is something we should debate as a city.”

In the end, the city needs to emerge from the five-year period with enough revenue to operate and, ultimately, have its credit rating restored, he said.

“The reality is that the city cannot survive without the taxing authority we currently have,” he said.

The city’s baseline financial forecast through 2023, as currently drafted



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