With three months left in 2014, a year that included two on-time debt payments and the end of state receivership, Harrisburg is on course to meet projections of a balanced budget, according to a quarterly status report filed this week by the state-appointed coordinator of the city’s recovery plan.
In his report, Fred Reddig, of the Department of Community and Economic Development, projects the capital city will end the year with a surplus of $43,297 out of total revenues of $58,820,013.
The projection reflects about a $1.2 million increase over revenues projected in the revised budget City Council approved in February, offset by a nearly equivalent increase in projected expenses to $58,776,716.
Steve Goldfield, a financial advisor working closely on the recovery plan, said Friday that the report represents “very positive news” for Harrisburg, though he also described the surplus as “slight” and the city’s finances as “still in the fragile stage.”
“I wouldn’t want anyone to think that an urban municipality can be fixed and then you wouldn’t have to worry about it,” he said.
The projections in the report, which DCED filed with the Commonwealth Court on Sept. 30, assume a significant decline in revenues in the final quarter of the year, with the city having already collected most of its taxes and all of the $5 million pledged by the state this year for public safety services.
The projections also assume relatively constant expenditures, including an average bi-weekly payroll of around $900,000, which will spend down the city’s cash through the remainder of the year.
As of Sept. 30, the city had a cash balance of $7.3 million, the report says.
The report also notes that, although the city closed on a $2 million tax and revenue anticipation note in March, officials have “effectively managed their cash flow” and did not need to draw on it, thereby allowing the note to expire without incurring interest costs.
The note, a short-term line of credit that would have helped cover operational expenses in the event of a cash shortfall, represented the city’s first successful financing since a 2012 parking revenue bond transaction and was a “very positive step in its recovery,” the report says.
Additionally, the report notes, Harrisburg made both of its 2014 general obligation bond payments on time, with the second payment, $3 million to the Bank of New York Mellon, being made earlier than the Sept. 15 due date.
The balanced budget required restraint from the administration of Mayor Eric Papenfuse, as the revised 2014 budget included several positions which, if filled, would have increased the year’s expenses to around $2.5 million in excess of revenues.
The positions were among several potential costs offset by a $3.9 million “negative expenditure,” a line item that Goldfield acknowledged at the time was an “unconventional” method for matching revenues to expenditures.
But the current administration, Goldfield said Friday, had done a “pretty good job” managing the budget month to month to avoid a deficit, in part by leaving these positions vacant. He said he did not expect the city to use a “negative expenditure” to balance the budget in future years.
Reddig was appointed coordinator of Harrisburg’s recovery plan on March 1 of this year, following a Feb. 25 court order to end the period of receivership under Maj. Gen. William B. Lynch.
As coordinator, Reddig continues to meet regularly with city officials as well as a team of professional advisors that had consulted the receiver, including the Novak Consulting Group, the Pennsylvania Economy League, Public Resource Advisory Group and the law firms of Stevens & Lee and McKenna, Long & Aldridge, according to the report.
The full text of the coordinator’s report can be downloaded here.
