Greater Harrisburg's Community Magazine

“Turnaround Story”: Harrisburg budget strong but challenges remain.

Harrisburg City Council members listened to a mid-year budget update as part of a lengthy work session tonight.

State officials tonight offered an optimistic forecast for Harrisburg’s 2017 finances, but the city’s ability to maintain a balanced budget through the end of the year remains uncertain.

Members of the city’s Act 47 team appeared before City Council to give a mid-year assessment of the city’s current budget.

Act 47 is a state oversight and assistance program for “economically distressed” municipalities. Harrisburg has been under Act 47 since October 2010.

Praising the “exemplary” leadership of Mayor Eric Papenfuse and City Council, the team summarized the city’s 2017 finances through June and offered recommendations for the second half of the year.

According to Gerald Cross, a representative from the Pennsylvania Economy League, the city received 58 percent of its total projected yearly revenue by June 30 of this year, putting trends slightly higher than they were in 2016. Real estate taxes, earned income taxes and local services taxes all came in at higher rates than last year. Parking revenues, on the other hand, fell short of projections. The city also saw lower revenue trends in its “other sources” category, due in part to the state’s budget crisis delaying the disbursal of state grants.

On the expenditure side, the city exhausted 45 percent of its personnel budget by mid-year, slightly below the 50 percent expected. Officials attributed the savings to vacant jobs and cautious hiring.

Non-personnel expenditures, however, reached 66 percent of full-year capacity by June 30. According to Cross, the city makes several large, one-time payments in the beginning of the year to cover long-term services, so expenditures should level out by January.

Since it collects most of its revenue in the first half of the year, Harrisburg ended June with $21.6 million in cash. City Controller Charlie DeBrunner called that figure “extraordinary” compared to when he took office in 2014.

While Cross and his team commended the city’s financial vigilance, Harrisburg will see some challenges looking into the second half of the year.

For example, the city doesn’t yet know if it can count on its annual payment from the state. In past years, the state has made a single, lump-sum payment to Harrisburg to cover the costs of supporting the state Capitol complex. A $5 million payment to the city is in the commonwealth’s spending plan, but fears are it still could get axed.

“Not getting $5 million from the state is a little concerning,” said Bruce Weber, city finance director. “Even though we may be in good financial position now, it’s tenuous.”

Moreover, expenses will spike when the city makes a “substantial” $3 million debt payment this month, Weber said. He also pointed out that some of city’s savings brings a practical cost, particularly in the police department.

“The city accrues a lot of savings by not having as much law enforcement as we’d like,” Weber said.

He said that recent retirements and a shortage of applicants prevent the force from operating at full compliment.

On the whole, the Act 47 team praised Harrisburg’s financial management amidst tough economic conditions for cities across the state.

“This is really a turnaround story,” Cross said. “You should be happy with your financial picture.”

He explained that the state tax structure places undue burdens on urban areas, where revenue bases have dwindled as residents moved to the suburbs.

“The tax structure we work under was designed when all the wealth was in the cities and everyone else was a farmer,” Cross said. “We operate under a structure assuming cities can provide all the services.”

Weber confirmed that Harrisburg’s revenue base needs to grow for the city to exit Act 47. Though real estate and taxable income have remained stagnant for about 10 years, the city has seen increased revenue from building projects.

“If you get real building going on in the city, you see real dollars that are generated from that,” Weber said.

The Act 47 team will submit its full, mid-year report to council later this week. Council is slated to begin taking up the 2018 budget in November.

Author: Lizzy Hardison

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