A decision by a Commonwealth Court judge could give Harrisburg until the end of October to adopt an Act 47 exit plan and continue a lobbying campaign in the statehouse, Mayor Eric Papenfuse said on Thursday.
The new deadline would allow city officials more time to negotiate with state lawmakers once they return to the Capitol in September. Harrisburg is asking them to pass a bill that would let the city keep its current taxing authority and make a sustainable exit from the Act 47 state oversight program.
“This clears the stage for the legislature to act,” Papenfuse said. “Hopefully, we’ll get the legislative change we want.”
According to Papenfuse, Commonwealth Court Judge Bonnie Leadbetter indicated at an Aug. 14 conference that she would exempt the city from a statute in Pennsylvania’s Municipalities Financial Recovery Act, which says that a city has 45 days to adopt an Act 47 exit plan drafted by a state-appointed coordinator.
Papenfuse said that city officials did not want to adopt a three-year exit plan until lawmakers could consider House Bill 2557, which is co-sponsored by Rep. Patty Kim, D-Dauphin County, and Rep. Greg Rothman, R-Cumberland County. The House finance, local government and urban affairs committees will hold a joint public hearing on the bill on Sept. 25.
The house returns to session on Sept. 5, and the Senate on Sept. 12. The bill, which Papenfuse announced on July 10, is not yet published in the state’s legislation database.
If the bill passes, Harrisburg will be able to keep its current local services tax (LST) and earned income tax (EIT) rates, which bring in a combined $11.8 million of annual revenue. The Act 47 law has allowed Harrisburg to pass provisional hikes on both taxes. Harrisburg doubled its EIT in 2012 and tripled its LST in 2016.
Otherwise, an Act 47 exit would force Harrisburg to lower its tax rates to their former levels. City officials say they can’t provide basic services if they lose almost $12 million in annual revenue.
Harrisburg’s Act 47 designation expires in September. In March, its coordinator, Marita Kelley, recommended the city stay in Act 47 under a one-time, three-year extension.
In order to secure an extension, however, Harrisburg officials must adopt a state-approved exit plan.
Kelley published the first draft plan on July 9. She had a month to collect public comments and make revisions, but Harrisburg officials faced a September deadline for its final approval.
Residents and city officials excoriated the first draft document, which called for doubling property taxes over three years to offset LST and EIT revenue losses. The second draft deferred the property tax raises for three years, but recommended steep hikes in 2022 if the city does not persuade lawmakers to grant it augmented taxing power.
Members of the Papenfuse administration and City Council agree that Harrisburg can’t balance its books under the current state tax code. They say that Harrisburg deserves special taxing provisions as the state capital city, since it supports large swaths of untaxable land and more than 30,000 commuters a day.
Harrisburg began making that argument to lawmakers in January, when it entered a 12-month, $60,000 lobbying contract with local firm Maverick Strategies. Since then, Papenfuse and his staff have convened dozens of meetings with state legislators.
Their effort soured in June, after Papenfuse clashed with house Speaker Mike Turzai. The next day, Turzai blocked a special provision for Harrisburg from coming up to vote.
The general assembly recessed hours later, forcing Harrisburg to begin the months-long Act 47 exit process. Papenfuse is optimistic that there is enough will in the legislature to pass a bill this fall.
If the legislature fails to act this fall, the mayor hopes that the city can develop an agreeable Act 47 exit plan and continue lobbying into the new year.
As of Friday, Leadbetter had not filed a formal response to Harrisburg’s application for relief. Harrisburg Solicitor Neil Grover, who was present at the Aug. 14 conference, declined to comment on Ledbetter’s decision until it was filed.
Want to learn more about Harrisburg’s financial recovery? Check out TheBurg’s guide to Act 47.