Harrisburg’s Receiver William Lynch and Mayor Eric Papenfuse at the advisory committee meeting Wednesday morning, Feb. 26.
Pennsylvania Gov. Tom Corbett will appear in Harrisburg’s city hall Wednesday afternoon at 2:30 p.m. to announce the end of receivership, the period of direct state oversight of city finances that began in December of 2011.
Judge Bonnie Brigance Leadbetter, of the Commonwealth Court, issued the termination order on Feb. 25, following a petition from the state on Jan. 16 and a concurring answer from the city on Feb. 4.
The termination, which is effective March 1, will transfer oversight of the city to a coordinator under Pennsylvania’s Act 47, the law governing state intervention in distressed municipalities. Harrisburg’s coordinator will initially be Fred Reddig, of the state Department of Community and Economic Development. Reddig has worked closely with the office of the receiver since its inception, making regular appearances on behalf of DCED, including at the receiver’s early-morning advisory meetings in Harrisburg’s city hall.
On Wednesday morning, during the last of such meetings under receivership, Reddig made a final presentation on the progress of the recovery plan, dubbed the Harrisburg Strong Plan upon its filing in September. He concluded his report by thanking Lynch, whom he described as a “very effective negotiator with key creditors,” for his “superb guidance and direction” in the 21 months since his appointment.
Before that, though, Reddig detailed the ongoing efforts in the city’s recovery, among them the filling of several city positions and relocation of the public works depot from the grounds of the incinerator. His presentation, and the public comment that followed, also raised critical issues facing Harrisburg in the next phase of recovery.
Among the remaining issues are:
1. Cash Flow.
Harrisburg must make a number of significant payments before March 15, including two payroll check-runs of around $1 million each and close to $5 million in debt service. The city has about $4.4 million cash on hand, and could transfer $700,000 in hotel taxes for debt payment, according to Bruce Weber, the budget and finance director. But the timing and size of the impending payments has led City Council, under the recommendation of the receiver’s office, to authorize a $2 million tax and revenue anticipation note, or TRAN—a short-term line of credit, expiring in June, that the city could draw upon if necessary to cover any budget shortfalls.
TRANs are a routine form of borrowing in many municipalities, which often face cash-flow problems in the weeks before real estate taxes start rolling in. Harrisburg typically receives the bulk of real estate taxes before March 31, when the window for early payment, which comes with the incentive of a 2-percent discount for property owners, closes. The city’s debt service payment, meanwhile, is due March 15. Reddig said Wednesday that the receiver sees the TRAN, which will be issued by Metro Bank, as “critical” to ensuring stable cash flow.
If none of the TRAN funds wind up being used, the total cost of the borrowing will be $15,000, which includes $10,000 in fees for Metro Bank and $5,000 in lawyers’ fees. If the city does draw upon some portion of the $2 million, it will also owe interest on whatever it spends, at an effective annual rate of 3.67 percent.
2. Accountability.
During public comment, Bill Cluck, a local environmental attorney and citizen activist, strongly urged the Act 47 coordinator to continue the forensic investigation of the debt deals that led to Harrisburg’s fiscal emergency. The Strong Plan, he said, promised residents that professionals and former officials who created Harrisburg’s historic incinerator debt would be held accountable. He added that the state attorney general, who announced a criminal investigation into the debt deals last fall, should “at a minimum” issue a public report about its findings. “Tell people what really happened,” Cluck said.
The possibility of civil claims related to the incinerator received a treatment of just under two pages in the 65-page Strong Plan. The plan cited the forensic report, commissioned by the Harrisburg Authority and released in January 2012, that “raised myriad concerns” about the incinerator financings. “The public expects that there be a means to obtain redress for these ill-fated decisions if there is evidence to support the allegation that highly imprudent actions were taken by those charged with protecting the City and its taxpayers against these very types of circumstances,” the receiver wrote at the time.
The plan also acknowledges, however, that any financial redress would likely be small. It also acknowledges the possibility that such claims would take longer than the receiver’s term of office to resolve, in which case oversight of the claims would be passed to the Act 47 coordinator or to someone else specially authorized by the court to pursue them. Neither Reddig nor Lynch brought up the topic of civil claims during Wednesday’s meeting, though Lynch did conclude public comment by saying he “agree[d] with all the sentiments expressed.”
3. Floods.
Cluck also raised the topic of flood insurance rates, which have already begun to climb under the terms of the federal Biggert-Waters Flood Insurance Reform Act of 2012. The higher rates, he said, threaten property values, tax revenues and neighborhood stability, not just in Harrisburg but across Pennsylvania.
Cluck lauded the recent efforts of elected officials, including the Dauphin County commissioners, to bring attention to the issue. He then asked Lynch to talk to Gov. Tom Corbett about taking a stance, in an unofficial post-receivership position of “lobbyist to the governor on flood insurance” for the city. “If we don’t repeal this law,” Cluck said, referring to Biggert-Waters, “the Harrisburg Strong Plan fails.”
