Workers leaving state offices Tuesday afternoon in downtown Harrisburg’s Strawberry Square.
When Mayor Eric Papenfuse proposed his 2016 budget for Harrisburg Tuesday night, he justified its millions of dollars in new expenses in part by saying they would be “building critical capacity” at a pared-down city hall.
To help cover those costs, he is asking for a $3 million hike in the local services tax, a flat-rate levy on people who work in the city that would increase from $52 to $156 per year.
It’s a tax with a lot of tradeoffs. It affects both residents and commuters, in a city where a huge portion of the workforce lives outside town. That means it hits the wallets of people who rely on city services, but who also can’t vote against it.
It’s regressive, eating up a larger portion of your income the poorer you are, though it also has exemptions for retirees and people earning below $15,600 per year.
It’s temporary, meaning Papenfuse or his successor will have to find a replacement for it or else slash the budget again, in at most five years. That’s the latest the proposed hike could be authorized under current rules for cities like Harrisburg in the state’s financial distress program.
And if passed, the hike will represent yet another cost borne by residents of Harrisburg and its commuters, in a recovery that has paired austerity in city services with higher income and real estate taxes and increased parking fees.
“It’s painful thinking about it,” said Councilman Ben Allatt, chair of the budget and finance committee. “We’d like to see what other options are there. I wish we could do it another way.”
Council has yet to fully vet the mayor’s proposal, which will be revisited in more detail during budget hearings on Dec. 8 and 9 before a final vote Dec. 15.
But, both as a matter of practicality and of state law, the city has few other means of raising revenue. A tax on earned income is already maxed out under the law, and money from the parking system has come in below expectations. In December council will likely face a choice: either approve the hike, or cut the budget.
To take effect, the local services tax hike would first have to be authorized by the Commonwealth Court, which still has jurisdiction over the state plan guiding the city’s recovery. It’s not clear how soon court approval will be sought or granted, although Papenfuse’s budget estimates assume full enactment by March or April.
A spokesman for Fred Reddig, who oversees the plan as its coordinator at the state Department of Community and Economic Development, said Wednesday that the local services tax hike will be “an element of the modifications” being considered for the city’s recovery plan. He would not say whether Reddig supports it.
Papenfuse, in his presentation Tuesday night, described the tax hike as the “least painful” of the city’s options for raising what he says is essential revenue. That met with mixed reactions from elected officials—Councilman Brad Koplinski, for example, has questioned its necessity—as well as from residents and commuters.
Zach Monnier, a self-described “rare bird” who both works and lives downtown, said he supports the hike because he believes it is the necessary cost of fixing the city’s decaying infrastructure. “The only way to do that is to pay more money,” he said. “The city is looking for revenue streams, and this is a viable one.”
A legal assistant at the state Department of Banking and Securities, Monnier said he felt confident that the city really did need the additional tax revenues and would not squander them. “It doesn’t look like anyone’s trying to waste money,” he said. “It looks like they’re trying to improve services.”
Another state worker, standing apart from the flow of commuters from offices downtown on Tuesday afternoon, said she had learned about the tax increase that morning and opposed it, though she didn’t know all the details.
“That’s a big jump,” said the worker, who declined to give her name, saying she was not supposed to speak to media without authorization from her employer. “Me, as a single mom, that’s a lot,” she added, referring to the $104 increase in annual taxes.
The worker said she commuted from Tower City, in northern Dauphin County. “We work here, but we don’t live here,” she said, noting that she and many neighbors came to the city to work because there were few job opportunities closer to home.
A pair of valets at the downtown Hilton, Cameron Clarke and Justin Weber, had slightly different takes on the tax hike, when asked about it late Tuesday afternoon.
Clarke, who commutes from New Cumberland across the river, opposed it, saying non-residents contributed plenty to the city economy already. “This mayor needs to keep in mind, all the revenue is coming from commuters,” he said. “I hate to say it, but not much is coming from the residents. I think everyone should be against this.”
Weber, who lives in the city’s Midtown neighborhood, mostly agreed, though he said he was open to hearing the mayor’s position. “If he has a reasonable justification for it, I’d be OK with it,” he said. “Not necessarily happy about it, but I’d be OK with it.”
