Today could be a historic day for Harrisburg.
The state legislature is scheduled to vote on a measure that would enable the city to exit Act 47, the oversight program for financially distressed cities. A proposed change to the state fiscal code would allow Harrisburg to preserve the augmented taxing authority it gained under Act 47 and spare it from entering receivership for the second time in its history.
If the measure passes, the city will be able to maintain its current revenue streams, preserve its staff and services, and avoid raising taxes indefinitely.
“We are averting a financial catastrophe,” said Mayor Eric Papenfuse. “If the legislature does not act today, we would lose $12 million in revenue that is absolutely necessary to our city.”
Papenfuse was referring to the $12 million of revenue generated by the city’s earned income tax and local services tax, both of which more than doubled when the city entered Act 47. The oversight program allows distressed cities to pass tax hikes beyond what is allowed under state tax code.
If the legislature does not approve the measure, the city would enter receivership and adopt a new financial recovery plan. That would bring an astronomical property tax increase for Harrisburg residents, since the new plan would not necessarily preserve the city’s current EIT and LST rates, Papenfuse explained.
Papenfuse believes there is enough support for the vote to pass.
Last night, Papenfuse reported that he had entered unsuccessful discussions with House Speaker Mike Turzai, who urged the city to reduce its spending or enter receivership. Papenfuse said that he made little headway convincing the Republican that the city has already taken every possible measure to cut costs and privatize assets.
Under its first financial recovery plan, Harrisburg leased its parking assets and sold its trash incinerator. Residents still pay dearly for those services – Papenfuse said today that the city’s trash and parking rates are higher than any neighboring municipality. It also pays high water rates to Capital Region Water, the public authority that controls its water and sewage system.
“The citizens of Harrisburg are taxed enough,” Papenfuse said. “There is nothing left to privatize.”
But in the past 12 hours, Papenfuse said, discussions with House and Senate leadership improved, resulting in a promise to call the measure up for a vote today, the last day before the legislature adjourns summer recess.
Once the acrimony dissolved, Papenfuse cancelled plans for city officials to march to Turzai’s office in the state Capitol complex. The mayor appeared instead in front of city hall with members of the city’s fire and police bureaus, whose jobs would be threatened by the potential $12 million revenue loss.
The mayor wore a tie stamped with coiled rattlesnakes, the insignia of the Revolution-era “Don’t tread on me” flag, to mark the occasion.
The legislative action marks the culmination of a months-long lobbying effort by the city. In January, the administration entered a 12-month, $60,000 contract with Maverick Strategies, a local lobbying firm with ties to Republican leadership. Papenfuse said that he has logged more than 40 meetings in the Capitol to educate lawmakers about Harrisburg’s unique financial plight.
Half of Harrisburg’s property is tax-exempt because it is owned by state agencies or non-profits. Most of the city’s population lives at or below the poverty line, and its median home value sits at $44,000.
Those factors make it difficult for the city to maintain local services and infrastructure that serve more than 40,000 commuters each day.
Turzai could not be immediately reached for comment.