Just a few weeks ago, the residents of our city and region were witness to a remarkable display of bi-partisan cooperation and compromise among local and state officials. It was an example of putting aside the destructive politics of personal grievances and ideological commitments in the service of crafting a solution that makes a real difference to the people and the place our officials were elected to represent. It was an example of politics at its best—so often missing at the national level—that has made the residents of our city and region much better off.
Led by the bi-partisan efforts of state Reps. Greg Rothman (R), Patty Kim (D) and Tom Mehaffie (R), as well as state Sens. John DiSanto (R) and Jake Corman (R), and bolstered by the tireless advocacy of Mayor Eric Papenfuse (D), the state House and Senate passed, with overwhelming support, legislation that allows the city of Harrisburg to exit its distressed municipal status (known as “Act 47”) and retain its expanded taxing authority of a 2-percent earned income tax (EIT) and a $156 annual local services tax (LST) for five more years. Gov. Tom Wolf (D) also supported the effort and indicated he would immediately sign the legislation.
Combined, these two taxes provide about $12 million a year in annual operating revenues to the city’s budget (nearly 20 percent) and are crucial to enabling it to continue on a path of fiscal sustainability. Without the continued LST and EIT in place, the city would have been forced to exit Act 47 within three years and face the prospect of drastically cutting services, spending down its surplus reserves, canceling capital improvement projects, and raising property taxes by nearly 100 percent, as proposed by the original Act 47 Exit Plan.
Needless to say, such dire fiscal circumstances would have had devastating effects on residents and businesses—not just within the city but within our entire region. Thankfully, our local and state officials—urban and suburban, liberal and conservative, Democrat and Republican alike—recognized that what happens here in the city doesn’t stay here, and that our region and state are stronger and more prosperous when our capital city is stronger and more prosperous, as well.
This is the logic behind the local services tax. It broadens the tax base while the keeping the burden low (to just 43 cents a day) on a wide swath of users who enjoy the benefits and value that our capital creates every day for the region and state. In many ways, the LST is the embodiment of what economists refer to as an “efficient” (read “ideal”) tax that delivers large, important benefits such as fire and police protection and funds for infrastructure maintenance, while imposing a relatively small burden on a large population that benefits directly from those services.
This is why a large coalition of civic and business leaders, including the Harrisburg Regional Chamber and CREDC, the Greater Harrisburg Association of Realtors and the Downtown Improvement District (DID), stood together in support of the Rothman-Kim bill. They recognize that all residents, business owners and political and civic leaders throughout the region have a deep, vested interest in maintaining a vibrant and fiscally strong capital city.
There has been a lot of good news recently in Harrisburg, as readers of TheBurg know well. The city has made great strides in attracting many new residents and businesses, and it is poised to receive large amounts of new investment (upwards of $750 million, according to estimates) from various private and public projects over the next several years. By supporting and passing this legislation, our local and state officials have enabled the city to harness these positive trends and continue on a strong upward trajectory.
To be sure, much more work needs to be done in building the city’s tax base and shoring up its finances over the coming years, particularly with more permanent sources of revenue. This is why, as part of the legislation, an Intergovernmental Cooperation Authority (ICA) was created. Its five-member, bi-partisan-appointed board and executive director will assist the city in managing its budget and building long-term solutions for continued fiscal success.
With this legislation passed and the ICA in place, we can be confident that our local and state officials will continue to work together across the partisan divide to achieve long-term solutions for the city in the same cooperative spirit that got us to this point. Thanks to their efforts so far, the city will continue to grow and prosper, serve as a beacon of urban recovery and further strengthen our region and state.
Alex Hartzler is publisher of TheBurg.
Dave Butcher is president of WCI Partners LP.