Don’t Spook The Horse

September 13, 2013 | by Paul Barker

Since the Harrisburg Strong Plan was unveiled in late August, after fifteen months of corralling by Receiver William Lynch and his team, its components have moved towards enactment with the momentum of a stampede.

Mayor Thompson, taking credit for seeing the city through receivership, spoke of the plan’s implementation as a foregone conclusion. Eric Papenfuse, the Democratic nominee for mayor, wrote in an op-ed for the Patriot-News that he had “never been more optimistic about our city and more confident that its best days are ahead.” The board of the Lancaster Solid Waste Management Authority rapidly approved the purchase of the Harrisburg incinerator, a key provision of the plan. (This morning the Harrisburg Authority board kept up its end of the bargain, voting to approve the sale.)

But in the chambers of City Council, particularly this week, the pace has momentarily faltered. In four consecutive nights of hours-long hearings, council members questioned the plan’s proponents over virtually every corner of its tangled territory. Meanwhile, a handful of high-profile citizens have come forward with their concerns.

On Tuesday, Nevin Mindlin, the independent mayoral candidate who was struck from the ballot in August, lectured council from the microphone during public comment. “This is a term sheet, not a contract,” Mindlin said, referring to the outline of the proposed long-term lease of the city’s parking assets. “Do not commit yourselves to anything until you see the contract.”

On Wednesday, Dan Miller, the city controller and Republican candidate for mayor, sent council an open letter. Identifying himself as the city’s “elected fiscal watchdog,” Miller asserted that the Harrisburg Strong Plan “dismantles city government” and places the burden “disproportionately on the residents and taxpayers of the city.”

The warnings, it would seem, have reached the ears of an already skittish council. Tuesday night, council voted to retain a consulting firm, Alvarez and Marsal, to conduct an independent review of the parking plan. That night, during the hearing, Councilman Bruce Weber pointedly asked Steven Goldfield, from the receiver’s team, whether he was operating “in the best interest of the city of Harrisburg.” (Goldfield replied with a “two-part” answer: an “unequivocal yes,” and an addendum that he is “technically counsel to the office of the receiver, whose job is to work in favor of a solution.”) By Wednesday, they were cribbing Mindlin’s term-sheets line, insisting they wouldn’t feel assured until they saw a contract.

In short, days before its next legislative session, council has started to behave as though, deep in the recovery plan’s weeds, something was lurking that could sting them. “If you wanna go riding in the tall green grass,” as Neil Young sang, “try to not spook the horse.” The horse, it would appear, is spooked.

At the center of council’s worry is—or should be—the effects of the parking plan. The earned-income hike, as I’ve argued before, is comparatively modest and, besides that, is a long-overdue remedy to the structural deficit concealed by Reed-era borrowing. The water and sewer system transfer, meanwhile, replaces complexity with transparency, and constitutes not only the restoration of a true municipal authority, but also the removal of a substantial (and unaffordable) environmental liability.

But the parking transaction, to abuse a final equine metaphor, is a horse of a different color. Steven Goldfield, the transaction’s chief architect and the receiver’s financial dab hand, spoke advisedly when he said his loyalty was to a “solution,” and not necessarily to Harrisburg. His achievement, in the form of the garage-and-meter transfer, is an ingenious way of eliminating stranded debt. He has also gone to considerable lengths to do right by the city’s long-term needs, engineering an annual $3.3 million payment to Harrisburg from the parking system’s revenues.

None of this should obscure the fact that the agreement is less than ideal. In contrast to the sewer transfer, which pulls the Harrisburg Authority into the sunshine, the parking transfer marches deeper into the labyrinth. The “purchase” of the parking assets—the garages, lots, and meters, along with rights of collection and enforcement—will be funded by the issuance of tax-exempt bonds by PEDFA, a state financing agency. PEDFA, in turn, will enter into agreements with AEW, a multinational real-estate management corporation, and Standard Parking, a national company that, according to its website, manages “more than one million parking spaces in the United States and Canada.”

PEDFA has limited capacity to administer contracts of this scope and complexity. As a result, it will delegate duties to an outside designee, currently slated to be the Capital Region Economic Development Corporation, or CREDC, to the great chagrin of council. (Last December, members of council had a widely publicized spat with CREDC over an imprudent video at the latter’s awards night.)

In other words, control of the city’s parking will be flung far indeed from the clutches of city residents. A consolation prize is that meter and garage rates, along with penalty fines, will be structured in such a way as to force non-residents into garages, effecting a sly commuter tax under a different name. But the transaction’s conditions also require a raft of legislation from council, to lock in hiked initial meter rates and to provide for new Midtown meters.

They also—again, in contrast to the sewer transfer—leave the city with several liabilities. If, for instance, an undetected environmental problem, like asbestos, compromises the use of a garage, the city and the parking authority will be accountable. The same applies if one or another of the garages becomes structurally unsound and needs replacing. (At one time, according to Goldfield’s testimony on Tuesday, this was projected to occur on two garages, in 2027 or 2028 and in 2032, respectively, at a potential cost of $90 million. Recent engineering surveys apparently—and rather conveniently, one might add—reversed this prognosis.)

And the city will also be signing off on an elimination of union labor. The transfer excludes “existing labor agreements,” and though negotiations with the local union council are ongoing, by now the likely outcome is clear. Jobs that once paid $12 to $15 an hour will trend towards minimum wage. I spoke with one current parking employee who said that workers had been offered either a buyout of one year’s unemployment, or continued employment at a lower wage, with no guarantee of a job after one year. (“I’m not sure I can keep going to work, doing the same thing I was doing before, but getting paid less,” the employee said.)

In light of all this, is it any surprise that Council has sought to proceed carefully? There’s a sense in which their objections are mere quibbling: the momentum, in virtually every quarter, is solidly behind the receiver’s plan. Yet their questioning plays a vital role. Besides the mayor, whose position is abundantly clear, council members are the only representatives in the recovery elected by the citizens of Harrisburg. The hearings, more than any other forum since the plan was unveiled, have aired its inner workings for public review.

In the long march to recovery, the electorate, along with the media, has been preoccupied with fairness, in the form of concerns over whether the receiver’s plan represents “shared pain.” But the intricacies of the parking transaction have much less to do with fairness than with necessity.

“Every stream of revenue you can put into the system is a multiplier,” council’s attorney Neil Grover said at Tuesday’s hearing. “It increases the price you can get for leasing the assets.”

Harrisburg’s immediate needs are to shed its debt and to access unreachable capital. Everything in the transfer, from the involvement of PEDFA to the hiking of rates right down to the slash through labor, is a product of that necessity. And the members of City Council, under the pressure of necessity, must weigh whether to sign off on its consequences. No wonder they’re watching their steps.

On the Beat: City to Deploy More Officers to Street

September 11, 2013 | by TheBurg Staff

Police Chief Thomas Carter at Wednesday morning’s press conference in City Hall.

The Harrisburg Police Department will be moving an additional 17 officers to street patrol, according to an announcement by the mayor Wednesday morning.

The boost will help address the high volume of calls that has taxed the existing patrol force, frequently requiring officers to work overtime.

The decision was several months in the making, but the city was waiting until rumors of a “mass exodus” of cops had settled after the unveiling of the recovery plan, Mayor Thompson said Wednesday. The plan, crafted by state-appointed receiver William Lynch and his team, requires that the police force’s labor contracts be renegotiated, which some feared would prompt officers to leave. Now that the plan is public, the rumors have been shown to be unfounded, said Thompson.

“Our police force is stable,” she said. “There has been no mass exodus.”

The 17 officers, along with two administrative positions, will be drawn from specialty units that focus on areas like street crime and housing. The move demonstrates that having sufficient cops on patrol is the department’s top priority, according to Police Chief Thomas Carter.

“The core function of any police department is its patrol unit,” he said. “We had to answer more calls.”

Harrisburg’s police force has steadily declined since the 1990s, when it employed over 170 officers. A spate of early retirements has whittled that number down to 129.

One consequence of having a diminished force is that officers have often been required to work overtime. On Sept. 10, City Council confronted the overtime cost when it reviewed a proposal for budget reallocations. Having already spent more than $300,000 on police overtime so far this year, the city would need to allocate an additional $200,000 to cover anticipated overtime for the rest of 2013, according to Finance Director Robert Kroboth.

Despite the reduction in numbers, Thompson said she is confident that the department is adequately staffed to meet the city’s needs. “It’s all part of the global comprehensive plan for public safety,” she said. “Our cops will be all over the city.”

The department also announced that its K-9 unit has grown to six, after a donation of three additional police dogs in September.

Dear Prudence

September 10, 2013 | by Paul Barker

The legislature giveth, and the legislature taketh away.

On Monday, the Senate Local Government Committee heard testimony on a package of bipartisan bills that seek to still the rough waters of municipal debt. Two of the bills—SB 903, sponsored by Sen. Folmer, and SB 904, sponsored by Sen. Teplitz—impose a statewide ban on interest-rate management agreements, also known, in the sporting parlance of finance, as “swaps.” The ban would reverse a bill, exactly one decade old, whose overriding purpose was to permit them.

Swaps, like fireworks, come in many shapes and colors. In their simplest form, their function is to trade a fixed interest rate on a quantity of debt for a potentially more favorable variable one. (Or vice versa.)

Like fireworks, swaps can explode. When they do, the results can be catastrophic: as former Auditor General Jack Wagner testified on Monday, bad swap agreements have led to the loss of “huge sums of public money”—by SEPTA, the Bethlehem School District, and the Turnpike, to name a few—in the “area of tens of millions of dollars.”

When swaps were first permitted, in 2003, the outlook was sunny. Rick Frimmer, then an attorney at Greenberg Traurig, who helped craft the legislation, described them as a “favorite tool of tax-exempt bond issuers and their advisors.” (Frimmer is now a partner at a firm in Chicago, specializing in, among other things, restructuring troubled public debt.) Variable interest rates tended to be lower than fixed ones; by entering into a swap, a local government (or a school district or authority) could realize substantial savings.

So why the intensified interest in a ban? The immediate spur for the new legislation is Harrisburg’s debt crisis, which produced a pair of hearings last fall to investigate where laws governing municipal debt had failed. In the course of those hearings, legislators learned about inadequate oversight by the Department of Community and Economic Development—whose staff, apparently overworked, was essentially rubber-stamping the debt filings it was supposed to vet—and a semi-incestuous league of elected officials and their legal and financial advisors. Some of the proposed legislation seeks to curb these offenses, by bolstering DCED’s regulatory role and by strengthening conflict-of-interest provisions.

But additionally, during the hearings in 2012, the senators heard testimony explicitly warning against the use of interest-rate swaps. David Unkovic, Harrisburg’s former receiver, referred to their allowance in municipal finance as a “failed experiment.” Swaps, he said, are incompatible with the pressures of public office: too often, they offer enticing upfront gains and push the pain onto future administrations. And their potential for harm extends well past the confines of the capital city, as Wagner detailed in Monday’s litany of losses.

Despite this, swaps still have ardent advocates. Charles Linderman, the director of business affairs for Great Valley School District, in Chester County, testified that Great Valley’s swaps over the past eight years have “resulted in positive cash flow.” Noting that there are “many successful swaps,” he urged the legislature to “preserve the flexibility of local government officials to have access to all the tools of the financial markets.”

Nancy Winkler, treasurer for the city of Philadelphia, likewise testified that the swap ban “would harm Philadelphia’s ability to manage effectively its own financial affairs.” Repeating the favored metaphor for utility, she referred to the swaps as “important tools” that “allow the city to generate savings, reduce risks, manage our investments and access the financial markets.”

It may be true that, managed well, swaps can produce savings on government debt. But what’s the guarantee they’ll be managed well?

At various points throughout the hearing, it was observed that swaps present elected officials with decisions they don’t understand. As a result, they’re forced to rely on professional advice. And an important sentiment simmering beneath Monday’s discussion was taxpayers’ lingering distrust of financial professionals.

Folmer, for instance, questioned Lucien Calhoun, the president of Calhoun Baker, Inc., a financial and management consulting firm, over what happens when an advisor “fails.”

“If a swap does go bad, who pays that bill? The taxpayer,” Folmer said. “And it seems like there’s no risk for the investment advisor.”

Judith Dexter and Michele Cann, who served on the board of the Bethlehem Area School District during a period in which it lost millions in swap transactions, spoke about officials’ susceptibility to bad advice. “We wanted to understand the transaction, and we thought we did,” Dexter said. “I do not feel that in Bethlehem we got any truly independent financial advice, because if we had, someone would have unraveled the kind of risks that we could face and the potential devastation to our district.”

Suspicion of high finance, whatever its benefits to rhetoric, is not always a reliable route to good legislation. (“Wall Street never loses,” Teplitz said after the hearing, as he took questions from reporters. “I think what we’re really doing is privatizing the profit and socializing the risk.”) Whether or not the swap ban succeeds, elected officials will continue to be shepherded by financial experts who will collect substantial fees.

But the concern about compromised guidance is relevant here. After all, in the tally of swap transactions, who really stands to gain? When Folmer asked about the cost of swaps to Philadelphia taxpayers, Winkler’s response was that, all told, “it turned out to be about a wash.” For taxpayers, perhaps. But what about for the industry that invented and sold the products that yielded the wash?

The 2003 legislation on swaps included a definition of an “independent financial advisor.” Such an advisor was to be a “person or entity experienced in the financial aspects and risks of interest rate management agreements.” Greenberg Traurig, the law firm that helped shape the bill, announced its passage with an article on its website; at the bottom, they note that their public finance lawyers “are experienced in these sophisticated transactions.” It’s not hard to see why the senators were intent on questioning the impartiality of advisors.

The immediate weakness of the swap-ban bills, judging by much of Monday’s testimony, is that they legislate caution where many would argue caution is already observed. Linderman, with the Great Valley School District, noted that his team has “always proceeded very slowly.” Winkler said that, though swaps come with risk, “we are highly conservative and prudent in using them.”

The trouble with this line is that it addresses the wrong question. The goal is not to ensure care after calamity: it’s to ensure care when calamity is far from everyone’s mind. This legislation would turn temporary prudence into lasting policy.

In so doing, it would mimic existing state law regarding municipal investments, which already prevents the staking of public money on highly speculative risks. The same logic—that stability and transparency are preferable to experimentation, however lucrative it might be—should apply here. Public money is public money, whether it’s spent on debt service or investments. The gains of such an approach may be less spectacular. But the losses will be, too.

The Guns of September

September 9, 2013 | by Lawrance Binda

“Pop. Pop. Pop.”

It had been six months since I’d heard that sound. Last February, if I recall. It was then that the guns were put away for the season, a time that most of us who live along the Susquehanna River welcome as surely as late winter’s first not-so-cold day.

Indeed, it is pleasant to be able to sleep past dawn on a Saturday without being startled awake by the pops and booms of shotguns being fired at passing flocks of geese and ducks. Six months had passed so quietly that I had forgotten all about the annual rush of hunters to Harrisburg’s waters and islands.

Only on Saturday, during a late-afternoon walk in Riverfront Park, did I realize it had begun again. It was a spectacular September day, the river full of small craft, their occupants not hunting, but having fun–drinking, eating, socializing–while anchored in mid-river, when the shooting began. I wondered if they all were aware what was happening and, if they were, if they still were startled, as I was.

With that in mind, I thought I would share a story that I wrote a year ago and that appeared in TheBurg last October, coinciding with the start of last year’s six-month-long waterfowl season. Two hunters kindly took me out with them so that I could experience the sport from their side of the sight. I can’t say that the experience changed my mind, which is that allowing hunting in the middle of a dense urban area may not be the wisest idea. However, I remain appreciative that they shared their day with me.

To update the story: The 2013-14 waterfowl season kicked off Sept. 2 with Canada goose season, which runs until Sept. 25. In the south zone, which includes the Harrisburg area, the more-popular duck season runs Oct. 19-26 and Nov. 15-Jan. 15. The resident goose season is Oct. 26-Nov. 30, Dec. 18-Jan. 15 and Feb. 1-28. You can find all the details, including bag limits, at the Pennsylvania Game Commission website.

Friends Chris Price and James Eirkson hunt on the Susquehanna River, with the Harrisburg skyline in the background.

Susquehanna River: Where City Bustle Meets Country Sport

“Here they come. They’re banking around that building.”

From his skiff, Chris Price sees the familiar V-shape of a flock of Canada geese heading for their overnight grounds shortly before dusk on a warm, late summer evening.

The flock never gets close enough for a shot by Price, who is joined in the boat by friend James Eirkson and Price’s golden retriever, Pearl.

Instead, the young men look on with disappointment as the geese fly past, high above City Island, with the state Capitol in the background, toward the shore in Shipoke.

Yes, City Island, the Capitol, Shipoke.

The friends are not hunting out in the country or in some remote swamp, but in the busy, densely populated city of Harrisburg.

From the boat in the middle of the Susquehanna River, one can see streams of traffic on Front Street, joggers along the river walk. Pleasure craft drift close by.

And it’s all completely legal.

To the surprise of many newcomers on both the east and west shores, the state allows waterfowl hunting in these Harrisburg waters, as long as hunters don’t shoot into the safety zone, defined as 150 yards from occupied structures on shore.

This situation is perfect for local hunters, as geese and ducks both flock to the numerous little islands and grassy patches that span the mile-wide river. In addition, the stretch of river is easy to navigate and, with numerous boat launches, convenient to reach.

Price and Eirkson, for instance, both live in Riverview Manor, the condominium on Front Street in Midtown Harrisburg. So they can put in practically from their front door.

Some people who live near the river, however, have a different take.

The waterfowl season is long. In the Harrisburg area, a three-week resident Canada goose season began Sept. 1, and geese can be hunted throughout much of the fall and winter until Feb. 28.

The even more popular duck season runs Oct. 13 to 20, then again Nov. 15 to Jan. 15.

Therefore, for about six months, volleys of gunfire often start at dawn, startling hard-working people who would rather not be jolted awake at 6 a.m. on a Saturday.

“It’s an annoyance,” said one Midtown resident who asked not be named. “People who don’t like to be woken up in the morning consider it an annoyance.”

In addition, over the years, some people new to the area have called 9-1-1 with reports of gunshots.

Just last year, one Olde Uptown resident put in a frantic call to police and then reported on Facebook that an all-out gun battle had broken out in her neighborhood.

In a way, this story is an old one, as hunters and homeowners long have had disputes about noise and safety on and near hunting grounds.

However, the situation here is unique, as the sheer density of the population on both sides of the river makes this truly an urban hunting experience—with its own set of benefits and challenges.

Even hunters Price and Eirkson expressed surprise that they’re able to hunt within eyeshot of downtown Harrisburg, with traffic streaming over the bridges that span the river.

“The first time I was out here, I was almost waiting for a police officer to come out because it just didn’t seem right,” said Eirkson. “You have the Capitol and the governor’s mansion and people walking around.”

Other than some noise complaints, there have been few problems between hunters and residents over the years, said Jerry Feaser, spokesman for the Pennsylvania Game Commission.

He believes that the far majority of hunters know and respect the law—that they don’t shoot into the safety zone, don’t shoot when it’s dark out, keep off of privately owned islands and respect bag limits.

To enforce the law, conservation officers patrol the river and cite hunters for unlawful practices, he said.

“You always have somebody who is going to go against the rules,” he added.

Kermit Henning, an avid local outdoorsman, offered some perspective.

He said that waterfowl hunting in Harrisburg goes back a long time, but has become more popular recently due to the decline in the area’s pheasant population, once a preferred prey, and because the river north of Harrisburg can be difficult to access.

“Hunting has really grown here,” he said. “Almost every island now has a hunter on it.”

In addition, in the 1960s and ’70s, Harrisburg police often chased hunters from the river, but the state intervened to stop the practice.

With the increased popularity of the sport, some problems have arisen, Henning said, including shotgun pellets that have fallen on cars and bridges. He said he personally has witnessed conservation officers arresting hunters charged with rules violations.

But, for the most part, the lengthy season proceeds without much incident. Even residents who, at first, are surprised—even shocked—that hunting is allowed in this congested area eventually seem to accept the loud wake-up calls at dawn as just another inconvenience of living in this always-challenging capital city.

“It’s strange that this presumably rural activity is allowed here,” said a Midtown resident. “But, given the menu of problems involved with living in this city, it probably doesn’t rise to the level of major concern.”

Harrisburg Strong Meetings Set

September 6, 2013 | by Lawrance Binda

It’s been a busy week for Harrisburg City Council, which has begun discussing elements of the “Harrisburg Strong” recovery plan. Next week will be even busier, as the debate continues and the voting starts.

The following lists the remainder of the committee meetings related to the plan, as well as special legislative sessions on Sept. 10 (note early start) and on Sept. 16. The legislative meetings will include votes on such key elements of the plan as the incinerator sale, the parking lease and the earned income tax hike.

Administration Committee: Monday, Sept. 9, 5:30 p.m. (union-related legislation)
Special Legislative Session: Tuesday, Sept. 10, 5:15 p.m. (Council will vote)
Administration Committee: Tuesday, Sept. 10, 5:30 p.m (parking-related legislation)
Administration Committee: Wednesday, Sept. 11, 5:30 p.m. (water/sewer-related legislation)
Administration Committee: Thursday, Sept. 12, 5:30 p.m. (incinerator–related legislation)
Special Legislative Session: Monday, Sept. 16, 6 p.m. (Council will vote)

In case of an overflow crowd, the meetings will be aired live in the City Hall atrium, with additional seating available.

Back Taxes

September 6, 2013 | by Paul Barker

Fred Reddig and Neil Grover before members of City Council Wanda Williams, Eugenia Smith, and Brad Koplinski Wednesday night.

“Someone suggested that we think of the citizens of Harrisburg,” said former Mayor Stephen Reed, during a public meeting of the Harrisburg Parking Authority board in May of 2008. “Well, I can tell you that we have.”

The room was crowded, and the atmosphere was tense. The issue before the board was the long-term lease of the city’s parking garages, to the developer Jacob Frydman, in exchange for $215 million. Frydman had already given his talk, promising—unpersuasively, judging by the tone of Reed’s speech, which was half entreaty, half rebuke—that the authority’s union employees, many of whom were present, would not lose their jobs.

Reed spoke for ten minutes. Public approval of the proposal was waning, and his plea grew increasingly strained. “I’d have to be out of my mind to come to a press conference, to a public meeting of the parking authority, in front of all of you, and offer a transaction here that was bad for the city of Harrisburg,” he said towards the end. “Why would I do that? Why would any mayor of any city do that?”

In hindsight, it’s hard not to see that night’s speech as a prelude to Reed’s unraveling. Though the board narrowly voted for the deal, City Council would ultimately reject it; a year later, Reed would lose the Democratic primary. But at the time, it seemed almost possible that the lease would buy the mayor a fresh start. The Frydman deal, he pledged, would wipe out both the parking authority’s and the city’s debt. And best of all, it would mean lower taxes—including a 100% rebate to homeowners making less than $40,000 a year, and, starting in 2009, “an across-the-board rate reduction that becomes permanent.”

Five years later, another long-term lease of the city’s parking assets is taking shape. After months of delicate brokering behind closed doors, the state-appointed receiver’s roadmap for recovery, alias Harrisburg Strong, has surfaced for public review. A major component is the 40-year lease of the city’s lots and garages and on-street meters, in exchange for which, as promised before, the parking authority’s debt and much of the city’s debt—particularly debt related to the retrofitted incinerator, which will be sold—will be wiped clean.

The difference, this time, is what happens with the taxes. As one of the plan’s many legislative conditions, City Council must pass an extension of the hike to the earned-income tax, or EIT, to 2%.

Last night, at a three-hour committee meeting, members of City Council reviewed three bills linked to the implementation of Harrisburg Strong. Two of them pertained to the parking assets: one would add 88 meters in Midtown, and the other would raise on-street hourly rates. The third was the EIT ordinance. When it came time to discuss it, the reaction from most council members was predictably cranky.

Council President Wanda Williams observed that, when council voted to raise the EIT to 2% last October, they did so on the understanding that the increase would only last a year. “We’re still putting the burden on the citizens of Harrisburg who had nothing to do with this financial debacle,” she said.

Councilwoman Sandra Reid harped on the continued absence of a so-called commuter tax. Recalling that the state legislature expressly forbade Harrisburg from implementing a tax on nonresidents who work in town, she complained that the city was “not taking every revenue stream available.”

Resentment towards commuters, a time-honored tradition among urban voters, is a reliable whipping post for elected officials. (Reed, at the 2008 meeting, flogged it twice, at one point referring to the garages as “facilities that are largely used by non-residents who come into Harrisburg and at the end of the business day go out to the suburbs.”) Sympathizing with voter pain is likewise a standby. Even the council members who approved of the hike, like Bruce Weber, were keen to show that they understood the frustration. Throughout the night, a frequent refrain was that comments were “just for the record” or “just so residents know.”

This posturing on taxpayer pain—that it afflicts the blameless, per Williams, or that it’s unequally shared, per Reid—distorts reality. Nobody likes higher taxes, of course. But an increasingly common perception is that the ignominious incinerator debt, whipped up by a handful of politicians and professionals, is being settled on the backs of city residents by way of the EIT. As Neil Grover, an attorney for City Council who worked closely with the receiver’s team, explained at Wednesday’s meeting, this isn’t the case.

Though the EIT hike is included in the recovery plan, it’s only indirectly related to the debt solution. Even if there were no debt, the city would still face a structural deficit—that is, the rise in the cost of city services would still outpace, as it has for years, any growth in the city’s revenues. It would seem that the answer is to trim the services, but the city, having already gouged its payroll, can’t go much deeper without disrupting essential functions. “We’ve had cuts as close to the bone as you can get, and yet we’re still short on our budget,” Grover said.

The reason it’s a part of Harrisburg Strong, according to Grover, is that it’s a critical signal to creditors and investors that the city is willing to work “in good faith” towards a solution. When council adopted the hike for one year, he said, it “got creditors to come to the table and put their skin in the game.” Part of the continuing negotiation towards recovery depends on Harrisburg’s enduring effort to balance its own books. “Everyone has come to believe the city is capable of righting its own ship,” Grover said.

Beyond that, the increase to 2% would make Harrisburg’s rate comparable to other distressed cities. As Fred Reddig, with the state Department of Community and Economic Development, explained at the meeting, many other municipalities under Act 47 have EIT rates even higher than Harrisburg’s. (Reading is at 3.6%; Scranton is at 3.4%.) Deciding that further city services can be cut, of course, is one matter. But if residents want to keep the services they’re getting, the cash has to come from somewhere. And as Grover explained, there are virtually “no other legal means of raising revenue.”

Since the recovery plan was made public, many have rather cynically remarked—including here on the blog—that tax hikes, once passed, are never repealed. That’s true, and the idea that this one will actually expire at the end of 2016, as it’s supposed to under the ordinance, is probably fantasy.

But it’s nothing compared to the much worse fantasy that was peddled for years under Reed: that the city could somehow provide more and better services while its revenues stagnated. “Each of Reed’s deals,” the receiver recently said in an interview, “if you peel it back, was to fix a $5, $6, $7 million hole in the general fund.”

By 2008, when Reed promised a tax cut, people saw it for what it was. At the end of his speech, he remarked, sourly, that throughout almost everything he’d said, two members of the public at the back had been shaking their heads. “You just rejected out of hand—you don’t want to hear anything,” he said. “God help us if that’s how we’re thinking about the future of Harrisburg.”

He was right, at least, that the city’s prospects depended on a change in thought. The recovery plan seeks to replace wishful thinking with long-overdue accounting. Citizens enjoyed a cheap ride for years—and voted, against their better judgment, to keep it going. Painful as it may be, it’s time to pony up.

Gamut Theatre Purchases, Will Relocate to Historic Downtown Church

September 4, 2013 | by Lawrance Binda

Come next year, Harrisburg theater-goers will have a new venue to experience some of the area’s finest children’s and classical theater, as Gamut Theatre Group announced plans today to relocate to an historic downtown church on N. 4th St.

Gamut last week finalized its $435,000 purchase of the First Church of God, constructed in 1854, which was long the home parish of the Harrisburg-based Church of God. It now will renovate the 12,000-square-foot church to accommodate its two troupes: the Popcorn Hat Players Children’s Theatre and Harrisburg Shakespeare Company.

Plans for the new theater space include a renovation of the 12,000-square-foot church building to create mainstage and children’s theaters, classrooms, offices, a reception lobby, a scene shop, costume shop, dressing rooms, storage and more, said Gamut. Renovation will also include facilities improvements such as installation of an air conditioning system, ADA-compliant entrances and upgrades to electrical and plumbing systems.

The renovation will proceed in two phases, said Gamut’s Executive Director Melissa Nicholson. Phase one, estimated to cost $700,000, will include construction of a mainstage and a complete upgrade of the building’s physical infrastructure, she said. Phase two will include a second theater for children’s productions, as well as classrooms and other supporting spaces. It will cost about $400,000, said Nicholson.

“It’s a beautiful building,” said Clark Nicholson, Gamut’s artistic director, “and although there will be some cosmetic changes, we are very excited that we will be preserving much of the original architecture, including the lovely stained glass windows. There is a feeling of history here, a love and respect for those things that have come before, that lends itself nicely to the telling of classic stories.”

The building at 15 N. 4th St. is located directly across the street from Strawberry Square, which has been Gamut’s home for 20 years.

Gamut has kicked off a fundraising campaign to raise the $1.6 million needed to complete the property’s renovations, which are projected to be completed by fall 2014. The company will continue to produce plays at his current location on the third floor of Strawberry Square through its 2013-14 season.

Last year, Gamut announced plans to relocate to a former fitness center in Lemoyne, but ultimately decided against the move amid uncertainties over parking, among other issues. For its new location, Gamut hopes to reach agreements to provide spaces in area parking garages, said Melissa Nicholson.

Harristown Enterprises, Gamut’s current landlord in Strawberry Square, represented the theater in the purchase and helped finance it, said Nicholson.

“We have been working cooperatively with Gamut to help them acquire and renovate their new property into a long-term theater asset,” said Brad Jones, vice president, community development for Harristown. “We are very supportive of this new project and are pleased that Gamut has chosen to remain part of the downtown community.”

Nicholson said that Harristown knew Gamut was looking to purchase its own, permanent home and wanted to ensure that the theater group stayed in downtown Harrisburg.

The purchase marks yet another conversion of an historic downtown property in Harrisburg. Brickbox Enterprises, for one, has bought and renovated several century-old office buildings for residential use in recent years. It currently is transforming the Barto Building at N. 3rd and State streets into condominiums.

The Church of God is a native Harrisburg denomination formed following a break by the evangelical Rev. John Winebrenner with the German Reformed Church in 1825. After 160 years at the location, the church put the building on the market several months ago after its congregation became too small to support the large church building. It now meets at the United Methodist Church in Midtown.

“By having Gamut go into the building, it preserves a lot of the history,” said Melissa Nicholson. “We’ll be good custodians of the building.”

For more information about the project or how to donate to Gamut Theatre Group, contact Melissa Nicholson, executive director, at 717-238-4111.

Note: This story has been updated to include the purchase price, renovation costs and other information.

Harrisburg Strong, Once Again

August 30, 2013 | by J. Alex Hartzler

Something very important happened in our political system recently in Harrisburg.

Led by Receiver Bill Lynch, officials across the political spectrum came together to solve a very difficult fiscal problem for the city. In doing so, they demonstrated that our political system still works and that seemingly intractable problems can be solved through hard work, persistence and a willingness to trust and cooperate – the essence of leadership. This is the best that we can ask from any of our elected and unelected public officials.

Hard as it may be to believe on the surface, Democratic Mayor Thompson worked cooperatively with Republican Gov. Corbett and a bi-partisan team of Dauphin County commissioners to put together a negotiated plan to solve the Harrisburg debt crisis while avoiding the crushing prospect of bankruptcy. All of those leaders deserve our thanks and appreciation.

Is the plan perfect? Of course not. By its very nature, a negotiated solution will leave every party wanting, as is the case with this plan. All parties are taking a “haircut,” so to speak, to make the deal work. No doubt there is shared pain required by the city’s residents. The extension of the 1 percent increase in the EIT will cost the median family making $30,000 a year an extra $300 annually. However, if a tax increase had to happen, which under any scenario it certainly would, this is the fairest tax and far preferable to any increase in already-high real estate taxes.

But look what also happened: the bond insurance company (AGM) took an $89 million haircut, as well they should. And the commonwealth will have to contribute $5 million a year to the city budget (a dramatic increase over every year prior and one that they will be under tremendous pressure to continue) and has helped to guarantee the parking revenue and price for the sale of the incinerator. Yes, parking rates will go up about 15 percent (or $23 per month for a space in a public garage), but even this is a good thing from the perspective of Harrisburg citizens. This is one of the few ways that we have to raise money from people who do not actually live in our town (in other words, a commuter tax). A few more people may carpool or take the bus instead—for the sake of the environment I hope so—but the rest will pay their small part.

Despite this favorable progress, not all city leaders are willing to demonstrate the spirit of good faith, cooperation and optimism required to get things like this done. An example is the call by Controller Dan Miller for an “independent” review— whatever that means. A review has already been conducted at the local, county and state levels, with further review coming from a commonwealth judge. What is Miller now suggesting? That the officials involved are not to be trusted in representing and negotiating for each party’s best interests? Or that they are to be trusted, but it is still not the outcome he wants? In which case, he needs to explain how an independent review and the costs and delays associated with it will somehow result in a better outcome for the city’s residents. And he needs to tells us who exactly will pay for that review. What exactly would this independent reviewer have the authority to do?

As much as Miller wishes it were so, we are not Detroit, and we are not going bankrupt if this plan is carried through. The only thing that further delay and dithering will do (after four long years) is cost us more money while preserving Miller’s central campaign theme of bankruptcy. But anyone who knows anything about business knows that all the parties have to agree to a deal, and, if one backs out, the entire deal falls apart. While Miller may want that in order to somehow prove he was “right,” the rest of us should reject it wholeheartedly. His attempt at a delay in disguised hope that the deal will fall apart in the meantime is exactly what is wrong with our political system. And it shows why Harrisburg voters rejected Miller’s failed candidacy for mayor in the recent Democratic primary. I suspect that Republican and independent voters who tend to understand business and how a deal comes together will see through this personally motivated charade, joining with the Democrats to vote for change.

Let’s move Harrisburg forward and not waste one more day or one more dollar of our citizens’ hard-earned money on personally motivated delay and obfuscation. There are many more issues the city has to deal with, including finding ways to attract more residents and businesses so that we can turn our city around and begin to grow our population base. Issues of safety, economic competitiveness, infrastructure and schools are high on the list of our problems to solve, but we can solve them if we finally get this crisis behind us.

Nearly 100,000 people lived in Harrisburg a half-century ago, almost twice as many as today. However, if we get back to work and focus on growth and opportunity for jobs, housing and investment, I believe that Harrisburg has the potential to rediscover its former glory and rightful spot as a leading capital city. This plan will help us become Harrisburg Strong.

Alex Hartzler is publisher of TheBurg.

The Great Divorce

August 29, 2013 | by Paul Barker

Shannon Williams, Executive Director of the Harrisburg Authority, and Mayor Linda Thompson.

Last November, David Unkovic—the city’s former receiver, who resigned in March of 2012 with a single page of urgent, tilting scrawl—sat before the Pennsylvania Senate Local Government Committee and talked about a failed experiment.

The experiment was a 2003 amendment to the state law governing municipal debt. It permitted local governments to enter into interest-rate swaps, the bedeviling financial instruments that, through their potent mix of opacity and risk, helped multiply the pain of the Great Recession. Unkovic advised that the amendment be reversed, and that entering into swap agreements by local governments be banned.

“They’re incompatible with the way public officials and elected officials operate,” he said. He meant that the pressure to do what’s politically expedient often makes it impossible to do what’s financially sound. (As an example, he described a Pennsylvania municipality whose officials, unwilling to take a loss in the limelight, delayed in terminating a swap gone sour, until the toll had grown from $4 million to $24 million.)

Today, at a press conference in City Hall, Mayor Thompson announced a plan to sever political expedience from a major piece of the city’s operations: the sewer and water systems, currently run under a tangled partnership between the city and the Harrisburg Authority. Joining her were the new receiver, William Lynch, whose recovery plan sketches out the general terms of separation, and Shannon Williams, the Authority’s executive director.

The split, for all its merits, is messy. This is partly because of the dizzying complexity of the existing arrangement. The wastewater collection system—the pipes under the streets, the inlets and manholes—is owned by the city, operated by the city’s Department of Public Works, and serves only the city of Harrisburg. The infrastructure for the conveyance and treatment of wastewater, including “interceptor” sewers, pumping stations, and the sewage treatment plant, is owned by the Authority, leased to the city, operated by the city’s Bureau of Sewage, and serves Harrisburg along with several outlying townships and boroughs. The water system is owned by the Authority, leased to the city, operated by the city’s Bureau of Water—you get the idea.

Under the terms of the transition agreement, the city will relinquish every piece of both systems to the Authority. The Authority will take over operations, assuming the city’s current employees under a collective bargaining agreement, adopted Wednesday night by the Authority board. It will also acquire the collection assets (pipes, inlets, manholes) that the city currently owns. It will cease to be the money-printing enterprise it had become through the machinations of former Mayor Stephen Reed, whose compulsive exploitation of its power to issue debt was written about at length by Nick Malawskey, in an investigative report for the Patriot-News.

“It used to be a financing authority. It’s now transitioning to an operating authority,” Bill Cluck, chairman of the Authority’s board of directors, said.

For everything it’s giving up, what will the city receive in exchange? At the press conference, the mayor was at pains to define the primary gain as freedom. “This action removes the city’s liability for antiquated infrastructure,” she said. The agreement was about “liberation,” she added later; the Authority would have to “stand on its own, on its own borrowing,” allowing taxpayers “to be free from these types of convoluted deals.” When someone asked whether the change would result in a rate hike, she sounded almost gleeful. “The Harrisburg Authority will be completely independent,” she said. “As an elected official, that won’t be my concern.”

One needn’t look far to find the reasons for Thompson’s relief. The historic abuse of the Authority, particularly in the form of the staggering incinerator debt, backed by the city’s guarantee, was a profound betrayal of Harrisburg residents. (It was also, incidentally, a reversal of one of the Authority’s original purposes, which was to insulate taxpayers from the cost of capital utility projects by tying them to user rates instead of city budgets.) In addition, the impending tally of system improvements, required for compliance with state and federal environmental law, would likely have been too high for the city to absorb.

But the claim of complete extrication is a bit misleading. In the first place, the Authority and the city remain intricately linked. As part of the agreement, the Authority has pledged to pay for future green infrastructure improvements undertaken by the city, under terms that have yet to be decided. The city has committed to street-cleaning services essential to the sewers’ smooth function. And the Authority, recognizing the city’s solicitor couldn’t navigate the specialized legal matters involved, is paying for the city to retain a separate lawyer.

Second, the idea that the city is now “free” puts the reality rather backwards. The benefits to the Authority extend far beyond the acquisition of the city’s wastewater assets. The agreement has granted the Authority access to $26 million from PennVEST, the state’s infrastructure investment program, whose first condition was that the Authority shed its connection to the city. Williams also said that the Authority would seek to repair its credit rating, which dissipated largely because of dysfunction in city government. (Moody’s downgraded the Authority’s bond rating, and ultimately de-rated the Authority, as a direct consequence of the city’s failing to submit financial audits on time.)

In short, the Authority, in severing its operations from the city, has removed itself from the toxic reach of political maneuvering. “They appear to like and trust us at the Authority,” Cluck said, referring to the EPA and the Justice Department, with whom his board has been in negotiations. “We aren’t subject to political pressures.”

Perhaps the question of who is liberated from whom puts matters in the wrong frame. We’re still speaking, after all, of the city’s authority, with a board appointed by the city’s mayor, and approved by City Council. The Authority’s customers are the city’s voters; the city’s streets perch above the Authority’s pipes. What requires separation is not only water and politics—it’s also the city’s aspirations for recovery and its sordid financial past, to which it is still unfortunately bound. “Like a bird on a wire,” as the Leonard Cohen song goes. We will try, in our way, to be free.

Beyond Their Control

August 29, 2013 | by Lawrance Binda

In the course of a long political season, outside events sometimes monkey with candidates’ best efforts to keep their campaigns on message and tightly controlled.

An extreme example is in New York, where another round of below-the-belt selfies seems finally to have sunk the campaign of Anthony Weiner, perhaps the Big Apple’s least camera-shy person.

On Monday, Harrisburg had its own major outside event, one that may override every other issue leading up to the Nov. 5 general election. Receiver William Lynch issued the “Harrisburg Strong Plan,” a comprehensive solution to the city’s financial crisis.

For months, Lynch had telegraphed that his plan was about to be filed with the Commonwealth Court, which is slated to hold a hearing on it on Sept. 19. However, the plan’s contents and creativity took many people by surprise, including, it seems, the city’s mayoral hopefuls.

At first, both Democrat Eric Papenfuse and Republican Dan Miller issued rather brief statements on the plan, but later expanded on their comments. Not surprisingly, Papenfuse gave it a qualified thumbs up, while Miller gave it a qualified thumbs down (here, here and here). Both men say they’d like more information as the process plays out, but the trend seems pretty clear and in keeping with their stances during the primary (Papenfuse, pro-receiver, anti-bankruptcy; Miller, anti-receiver, pro-bankruptcy).

When people step into a voting booth, many things cross their minds. Some vote on whether or not they like a person, which is a fair criteria, particularly in a small place like Harrisburg, where many voters know the candidates personally.

Other people may be influenced by what they’ve read in a newspaper or heard during a debate. In the mayoral debates to come, it will be interesting to see how the candidates respond to the inevitable charges that will be hurled at them. For instance, Papenfuse better have a good answer to the charge that he’s a lackey of big money, while Miller should brush up on his response that he’s a liberal Democrat opportunistically running as a Republican.

But, in the end, I suspect that the race will be won or lost on how the people of Harrisburg feel about the receiver’s plan come the first week of November. By then, the Commonwealth Court, almost certainly, will have approved it, and City Council likely will have passed a rash of enabling legislation. The plan should be well on its way to implementation.

If the general spirit has been uplifted by the plan, and it seems workable, Papenfuse should have a clear advantage in the general. On the other hand, Miller, who I believe starts this campaign at a disadvantage by losing in the primary and needing to run as a Republican, might be able to make up ground if the complex plan begins to unravel.

In the interim, Papenfuse will need to speak convincingly about why city residents will have to endure a multi-year increase in the earned income tax rate and a head-spinning parking meter fee hike. Miller will have to explain how municipal bankruptcy (a black box of unknowables that could take years to resolve at great cost) is a better deal for Harrisburg. He also needs to state clearly what, if anything, he could and would do to change Harrisburg Strong upon becoming mayor in January.

At the moment, my sense is that most residents are willing to give Lynch the benefit of the doubt. They’re tired of the dysfunction of the city and the disorder to their lives. Meanwhile, they’ve largely become (unhappily) accustomed to higher taxes as a price to resolve the years-long financial crisis. More than anything, they want a new beginning, a new era for the city and for themselves. That feeling, though, could change fast. If the plan gets bogged down or, worse, begins to fall apart, hope quickly could turn to anger and despair.

The candidates are staking their positions in this battle, giving voters a distinct choice. However, events beyond their control ultimately may decide who is right — and may well determine who will be the next mayor of Harrisburg.

Note: Independent Nevin Mindlin also expects to run for Harrisburg mayor. You can read his position on the Harrisburg Strong Plan here. His status as a candidate is unclear after a Dauphin County judge recently threw out his nominating petition. The hearing on his appeal is slated for Sept. 12 in Commonwealth Court. If he does not succeed in his appeal, he has said he may mount a write-in campaign.

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