Tag Archives: Fred Reddig

Harrisburg Council Update: Reddig retiring, vote delayed on riot gear.

June 27, 2017 | by Lawrance Binda

He’s outta here: Fred Reddig announced his retirement tonight from the state and as Harrisburg’s Act 47 coordinator.

Harrisburg soon will have a new recovery supervisor, as the city’s long-time Act 47 coordinator announced his retirement tonight.

Fred Reddig told City Council that he planned to retire from the state Department of Community and Economic Development (DCED) at the end of July, thus ending his 4½-year tenure as Act 47 coordinator.

“You’ve come a long way,” Reddig told council members. “City finances are very stable, but there are still challenges as we exit Act 47.”

Marita Kelley, a DCED deputy director who worked for the city as budget manager from 1988-91, will replace Reddig in the job.

Act 47 is a state program designed to assist and stabilize financially distressed Pennsylvania municipalities. The city has been in the program since 2010, including the three years it spent under state receivership.

Kelley, who has been on Reddig’s team for years, said that she does not plan any major changes.

“We want to stay the course and implement the recovery plan,” she said.

As it stands, Harrisburg is due to exit Act 47 at the end of 2018, though it may seek a three-year extension. Mayor Eric Papenfuse has said that he believes the city can only leave Act 47 responsibly if it’s able to retain the extra taxing authority allowed under the program, which likely means adopting a Home Rule charter.

Council members had nothing but praise for Reddig. President Wanda Williams, who originally opposed Act 47 status, credited Reddig for helping turn “a $683 million deficit to a surplus.”

“Through you, we’ve accomplished a lot,” Williams said. “I’d like to express a sincere ‘thank you.’”

Councilman Ben Allatt, chairman of the city’s budget and finance committee, expressed similar thoughts.

“Your input and expertise have helped us,” he said. “I thank you for your efforts on behalf of the city.”

Also at tonight’s council meeting, Allatt delayed a vote on a budget item that would have reallocated $65,000 for the Harrisburg Police Bureau to buy riot, or protective, gear. Chief Thomas Carter and Capt. Deric Moody brought a sample of the gear to the meeting so that council could see the outfits before voting on the resolution.

However, opponents of the resolution also showed up, asking the council to not approve the transfer that would finance the purchase of 30 “top to toe” riot suits.

“We feel that protesting has been criminalized over the past couple of years,” said activist Chris Siennick, who added that the $65,000 “could be better allocated to social services.”

Police are seeking the gear because, they say, their current equipment is inadequate and outdated, especially since protests, they believe, have become more frequent and more violent.

Council will now discuss the matter further at a July 5 worksession before possibly voting on the budget transfer on July 6, the final legislative session before the council’s six-week summer hiatus.

Author: Lawrance Binda

April News Digest

April 29, 2016 | by Lawrance Binda

Road Plan Revealed

Harrisburg last month unveiled a plan to make major improvements to 6^th, 7^th and Division streets.

City Engineer Wayne Martin, along with consultant Craig Bachik, presented the results of a study to improve traffic flow and safety along those three major city arteries, a plan that includes adding traffic circles, building pedestrian bump-outs and increasing green space.

Martin said the plan was designed with pedestrians, bicyclists and motorists in mind, in that order.

The study was funded by a $27,000 grant from the Harrisburg Area Transportation Study, with an $8,000 matching grant from the Pennsylvania Higher Education Assistance Agency (PHEAA). It came about because PennDOT requested a study before the city proceeds with a plan to return N. 2^nd Street to two-way traffic from Forster to Division streets, said Martin.

The proposed improvements include constructing a series of roundabouts at busy intersections, including at N. 7^th and Division, N. 7^th and Reily and on N. 6^th Street in back of the Broad Street Market. Division Street would be redesigned as a boulevard, with a strip of green space in the middle of the road.

The proposal was created with input from “major impactors” along those roads, such as PHEAA, D&H Distributing and Vartan Group, said Bachik of New Cumberland-based Navarro & Wright Consulting Engineers. Neighborhood groups were not consulted, but the public will be able to have a say once the plan is presented to City Council this month, he said.

The improvements would cost about $30 million, said Martin, though the work likely would be done in pieces as transportation funding was secured.

Besides easing traffic, the improvements would help beautify the corridors, while boosting pedestrian safety, especially on N. 7^th Street near PHEAA, said Martin.

City Nominates 2 for CRW

City Council last month considered two city residents nominated by the Papenfuse administration to the board of Capital Region Water.

Garvey Presley Jr. and Charla J. Plaines appeared before council April 19 to discuss their qualifications to serve on the five-member board.

A confirmation vote was scheduled for April 27, after press time. If confirmed, Presley would fill one open seat while Plaines would fill a seat currently held by Bill Cluck.

Cluck, an environmental attorney whose five-year term expired in January 2015, urged council to think twice before replacing him, pointing to Capital Region Water’s financial turnaround and investment-grade bond rating under his tenure.

His plea seemed to find favor with some council members, such as Westburn Majors, who served with Cluck on the board before taking office this past January. “I think it would be a complete disservice if we don’t keep him,” Majors said.

Yet Mayor Eric Papenfuse, who is empowered to nominate board members with the advice and consent of council, said it was time to add fresh faces to the board to achieve greater diversity in membership and help with community outreach.

Plaines, a reentry coordinator at the Pennsylvania Commission on Crime and Delinquency, said she felt her skills were suited to making sure diverse voices in the community were more fully engaged in the authority’s decisions.

Presley, an equipment operator at the Derry Township wastewater treatment plant, said he had been interested in environmental work for most of his life and that his employment history made him a “natural fit” for the board.

Recovery Plan Brought to Vote

City Council scheduled a major vote on an updated Harrisburg recovery plan last month, setting the stage for the most comprehensive agreement to date on the mix of tax policies, personnel goals and government reforms needed to stabilize the city’s finances.

The state has asked the city to adopt the 115-page update in time for negotiations with its police and municipal employees unions, whose current labor contracts expire at the end of the calendar year.

An affirmative council vote would mark the first time the body has endorsed a comprehensive recovery plan, as opposed to the piecemeal votes for related legislation while the city was under state receivership in 2013.

The updated plan would count on increased revenue from a local services tax hike affecting residents and commuters and would have the city weigh a home rule charter initiative that could make recent earned income tax hikes permanent.

It would also direct a greater portion of any money recovered in lawsuits over incinerator-related borrowings to paying down the city’s current debt load.

The vote was scheduled for April 27, after press time. But Fred Reddig, the city’s coordinator under Act 47, said he was “optimistic that the plan is going to move forward” and that his team would be able to take it to court for approval.

Demolitions Begin

Harrisburg began razing condemned houses last month, vowing to accelerate the pace of demolitions.

The city is on pace to remove about 30 blighted structures this year, far more than in recent years due to a beefed-up sanitation staff. In past years, demolitions were often delayed as workers were pulled off jobs to assist in trash pickup.

Most demolitions are slated for properties in the Allison Hill and Uptown neighborhoods. In all, Harrisburg has several hundred condemned properties.

March Home Sales

The spring real estate market was off to a solid start in March, as sales ticked up compared to last year.

Regionally, sales totaled 647 units in March, 10 more than in the year-ago period, according to the Greater Harrisburg Association of Realtors (GHAR). The median price was down slightly to $155,000, but average days on the market plummeted to 86 from 106 last year.

Sales rose to 233 units from 202 on a year-over-year basis in Dauphin County. They fell slightly in Cumberland and Perry counties.

The median sales price in Dauphin County fell a bit compared to last March, to $136,000 from $139,000, though rose by about $5,000 per unit in both Cumberland and Perry counties, to $179,950 and $139,950, respectively, said GHAR.

So Noted

Harrisburg last month was awarded a $155,522 federal grant to help reduce crime in the Camp Curtin neighborhood. The Byrne Criminal Justice Innovation Grant will allow the city and several community partners to launch an initiative to lessen crime as part of a larger revitalization effort in the area, according to Tri County Community Action.

Harrisburg Area YMCA has purchased the historic Millers Mutual Group building at Forster and Front streets for $750,000. The Y made the purchase mostly to acquire land for more parking for the East Shore Y next door, but also plans to move its headquarters into the building, according to a joint press release. Millers Mutual stated that it will lease back the building from the Y until it can relocate to larger offices.

Park Harrisburg began booting vehicles last month to better enforce parking penalties on motorists with three or more outstanding warrants. The parking operator long planned to start a booting program, but was delayed until it could develop technology that would allow it to access city parking records, said the company.

Journal Multimedia, a homegrown, Harrisburg-based company that publishes the Central Penn Business Journal, was purchased last month by industry behemoth GateHouse Media, the owner of hundreds of daily, weekly and specialty newspapers. In addition to its flagship publication, Journal Multimedia publishes Central Penn Parent, Lehigh Valley Business and several other titles. It also has related custom publishing and events businesses.

Changing Hands

Briggs St., 225: S. & C. Aichele to B. Brock, $179,500

Brookwood St., 2619: R. Santangelo to B. Sweger, $57,500

Derry St., 1323 & 1325: U. Patel to T. & K. Yameogo, $85,000

Duke St., 2435: J. Smith to F. Zeray, $45,000

Fulton St., 1738: Secretary of Housing & Urban Development & Information Systems Network Corp. to PA Deals LLC, $65,250

Green St., 1925: W. Gonzalez to B. & A. Christensen, $216,500

Green St., 2416: F. Seidlich to J. & P. Manjon, $150,000

Green St., 3113: C. & B. Stone to B. Baker, $159,900

Green St., 3121: J. Meadowa to 8219 Ventures, $70,000

Logan St., 1619: L. Blanton & R. Parr to C. Grim, $89,000

Manada St., 1924: B. Vazquez to P. & T. O’Connell, $36,000

Market St., 1912: Secretary of Housing & Urban Development to Rogue Enterprises, $36,500

N. 2^nd St., 2215: V. & J. Books to T. & J. Whye, $229,500

N. 2^nd St., 2615: Secretary of Housing & Urban Development to TBF Properties LLC, $75,000

N. 2^nd St., 2842: Arthur A. Kusic Real Estate Investments to T. Cook, $60,000

N. 3^rd St., 3005: D. Bartolet to G. Dutson, $40,000

N. 4^th St., 3015: D. Travitz to F. Gresson, $86,000

N. 5^th St., 1738: CNC Realty Group to M. Meads, $85,000

N. 6^th St., 3138: M. Naranjo to J. Crossett & M. Hochstetler, $50,000

N. 15^th St., 1328: L. Mitchell to A. Rodriguez, $38,000

N. Front St., 805: Millers Capital Insurance Co. to Harrisburg Area YMCA, $750,000

N. Front St., 1013: M. Santalucia to B. Rota, $148,000

N. Front St., 1525, Unit 206: J. Feather to C. Wilson & K. Thompson, $85,000

N. Front St., 1525, Unit 604: Riverview Manor Association LP & Brickbox Enterprises Ltd. To D. Baker, $230,000

Paxton St., 1000: Sutliff Enterprises & K. Damitha to PinnacleHealth System, $3,600,000

Rose St., 933: F. Clark to GKX LLC, $235,000

Showers St., 581: R. Ross to M. Terry, $97,000

Showers St., 624: K. Hood to K. Kearn, $86,000

S. 13^th St., 243: E. & A. Martinez to N. Srayi, $32,000

S. 18^th St., 1117: Vanderbilt Mortgage & Finance Inc. to J. Frias, $30,535

S. 29^th St., 630: P. Over to J. Guzman, $46,600

State St., 124: C. Smith to TKP Investments LLC, $175,000

State St., 1520: Federal National Mortgage Association to A. Moore, $31,000

Susquehanna St., 2136: Secretary of Housing & Urban Development to L. Marrazzo, $31,125

Swatara St., 2142: G. & J. Trump to R. Chowdhury & A. Nasrin, $49,500

Verbeke St., 232: K. Bentzel to Afterkey Property Solutions LLC, $60,000

Wyeth St., 1406: PA Deals LLC to J. & Y. Oskam, $113,900

Harrisburg property sales for March 2016, greater than $30,000. Source: Dauphin County. Data is assumed to be accurate.

Council Schedules Vote on Updated Recovery Plan

April 20, 2016 | by Paul Barker

Finance director Bruce Weber, left, and Act 47 coordinator Fred Reddig at a Harrisburg City Council meeting last August.

City Council scheduled a major vote on updates to the Harrisburg Strong Plan Tuesday night, setting the stage for the most comprehensive agreement to date on the mix of tax policies, personnel goals and government reforms needed to stabilize the city’s finances.

The state has asked the city to adopt the 115-page update in time for negotiations with its police and municipal employee unions, whose current labor contracts expire at the end of the calendar year.

An affirmative council vote later this month would mark the first time the body has endorsed a comprehensive recovery plan, as opposed to the piecemeal votes for related legislation while the city was under state receivership in 2013.

It would also direct a greater portion of any money recovered in lawsuits over incinerator-related borrowings to paying down the city’s current debt load.

At a committee hearing Tuesday night, council members expressed some reservations over the updated plan. Ben Allatt, the budget and finance committee chair, said he would like to see more contributions from the state and less reliance on local taxes, while Council President Wanda Williams said she would prefer to have the home rule charter suggestion removed entirely.

But Fred Reddig, the city’s coordinator under the state program for financially distressed municipalities, said he was “optimistic that the plan is going to move forward” and that his team would be able to take it to court for approval.

The vote is scheduled for April 27.

March News Digest

March 31, 2016 | by Lawrance Binda

Pot Hearings Held

Harrisburg last month held two hearings on proposed legislation to reduce penalties for possession of small amounts of marijuana.

City officials, including the mayor, police chief and several council members, listened attentively as dozens of residents testified for and against a proposal to change simple possession from a misdemeanor to a less-serious summary offense and ease penalties to $100 for a first conviction and $200 for a second. After a third offense, possession again would be considered a misdemeanor crime.

Several opponents claimed that marijuana served as a gateway drug to harsher drugs or that prolonged use could be harmful. Supporters said that marijuana is mostly benign, less dangerous even than alcohol use. Some speakers advocated making cannabis a legal substance, though state law currently prohibits that.

City council’s Public Safety Committee sponsored the hearings, which were held at the HACC Midtown 2 building on Reily Street and then, two weeks later, at the Public Works Department facility on Paxton Street. A final council vote on changes to the law is expected this month.

Strong Plan Revisions Debated

Harrisburg held several workshops and a hearing last month on proposed changes to the city’s financial recovery plan.

The city’s Act 47 recovery team is urging the modifications, which notably would include adopting a Home Rule Charter, which would empower the city to make changes to its governmental structure.

Mayor Eric Papenfuse and Act 47 coordinator Fred Reddig told council that, if the city didn’t adopt Home Rule, it could not retain hikes to its earned income and local services taxes once it exited Act 47, potentially leading to large property tax increases.

Several council members seemed cold to the idea of Home Rule and argued that, instead, the state should make a larger contribution to the city for services rendered.

Separately, city council also is considering a tripling of the local services tax to $3 per week for all city workers.

Report Splits Local Officials

An independent review of the Harrisburg treasurer’s office has split elected city officials, after City Controller Charles DeBrunner last month released a preliminary internal report on the findings over objections by the city solicitor and mayor.

The review, which encompassed the treasury’s general practices as well as specific activity during the 2014 calendar year, found the office lacked certain written policies and that aspects of its operations left it more vulnerable to fraud.

DeBrunner said that the 20-page report, by the New York consulting firm Alvarez & Marsal, found “numerous serious accounting problems” encompassing both the treasury and the city’s finance bureau, as well as a “culture at the city where errors are accepted and expected.”

But Mayor Eric Papenfuse sharply critiqued that characterization, saying it was politically motivated and misquoted the report’s actual findings. He further accused DeBrunner, who published a redacted version of the report on his official website, of “short-circuiting” an ongoing investigation that was still in its early stages.

In its report, Alvarez & Marsal found that a lack of internal controls in the treasury in that period and perhaps earlier resulted in “an environment where the opportunity for fraudulent activity exists.”

The report also said that the deputy treasurer, Celia Spicher, performs “too many” functions, including both initiating and approving outgoing wire transfers and reconciling monthly bank accounts, a practice that “weakens checks and balances and negatively affects operations of the office.”

Though the review found no specific instances of suspicious activity, DeBrunner said, the state of the city’s controls and records made it “less likely” that such activity would be detected by the firm’s limited review.

Conservation Plan Proposed

Harrisburg’s water and sewer authority announced plans last month for a $9 million conservation agreement that would permanently restrict development on its 8,200-acre property in Clarks Valley, a pristine, forested watershed in northern Dauphin County that supplies the city’s drinking water.

The agreement would involve a partnership with the Nature Conservancy, the Ward Burton Wildlife Foundation and Fort Indiantown Gap, a National Guard training facility that neighbors the property. The agreement would keep the land in authority hands while restricting how Capital Region Water could use it.

Under the proposal, such protections would be enshrined in a conservation easement, a legally binding agreement that attaches to a property and restricts how it can be used by current and future owners.

The easement would seek to preserve the watershed property “predominantly in its natural, scenic, forested and open space condition,” maintaining water quality and protecting rare plants and animals while preventing further development, according to a summary provided by Capital Region Water.

Equipment Authorized

A few new pieces of heavy machinery are headed Harrisburg’s way after City Council last month approved nearly $600,000 in equipment purchases.

Public Works Director Aaron Johnson made a successful plea before council for two loaders, two skid steers and a tow truck. Johnson told council members that his department’s ability to handle January’s blizzard was hampered by a lack of equipment to tow cars and move snow.

Harrisburg long has depended on an independent towing company to move cars that are blocking access for city vehicles. The new tow truck will help the city handle its towing more quickly and efficiently, Johnson said.

In addition to snow, the loaders will help Public Works employees remove other types of debris, Johnson said.

Youth Program Expanded

More young people will get jobs this summer, as Harrisburg City Council last month agreed to expand the city’s youth employment program.

Under the revised program, the Harrisburg Housing Authority will employ 75 young people, compared to 50 teens last year. Moreover, participants will get paid a stipend of $1,500 for the six-week program, up from $1,000 last year.

To pay for the expansion, Council doubled the budget for the program to $127,500. The money will come from the host fee, funding that the city receives from LCSWMA for hosting a regional waste facility.

So Noted

Capital Area Transit last month launched “Find My CAT Bus,” a GPS-based mobile website to help transit riders locate CAT routes, stops, bus locations and estimated arrival times. Riders can access this information on their smartphones and other devices via www.findmycatbus.com.

The Millworks has announced that it is building a brewery at the rear of its building in Midtown Harrisburg. Using a 15-barrel system, brewmaster Jeff Musselman will oversee the 2,000-square-foot facility, which will produce beer for the restaurant and bar.

MX Cocina debuted its second restaurant in the Campus Square building at N. 3^rd and Reily streets in Midtown Harrisburg. Brothers Varonio and Carlos Hernandez opened their first location last year outside of Linglestown. The snug Midtown eatery features Tex-Mex fare such as burritos, burrito bowls and tacos.

PinnacleHealth Express has relocated from Harrisburg Hospital to 805 Sir Thomas Court in Progress. PinnacleHealth Express offers non-emergency primary care for patients without an appointment.

Changing Hands

Bellevue Rd., 2022: PA Deals LLC to Equity Trust Co. Custodian FBO Ramesh Narinesingh IRA, $67,000

Berryhill St., 2435: J. Luevano & J. Pacchioli to N. Downey, $64,900

Berryhill St., 2438: JP Morgan Chase Bank NA to T. Hoang, $50,220

Boas St., 418: PA Deals LLC to D. & L. Engelhardt, $123,200

Briggs St., 2030: Kings Investment Co. LP to D. King, $35,000

Calder St., 508: Bank of New York Mellon Trust Co. to PA Deals LLC, $69,900

Charles St., 232: R. Gosnell to D. Fukton, $145,900

Green St., 3215: M. & C. Bornstein to All Nations Evangelistic Church Inc., $131,000

Greenwood St., 2714: A. Aponte to P. Smith, $70,000

Jefferson St., 2900: K. Gilmer to R. Raoof & A. Kokoiy, $148,000

Kelker St., 217, L2: AJ Fedore & Co. Inc. to T. Smith, $110,250

Kensington St., 2231: Donald Pong Trust K. & L. Johnson, $42,500

Market St., 1638: C. McMullen to E. Patry, $75,000

N. 2^nd St., 310: 310 North Second Street LLC to VMV Creations LLC, $630,000

N. 2^nd St., 2517: AXL Realty Group Inc. to J. Swope, $49,000

N. 2^nd St., 2940: A. Baley & R. Baker to C. Markley & T. Magilton, $239,900

N. 2^nd St., 2965: Deutsche Bank National Trust Co. to R. Finck, $160,000

N. 3^rd St., 1408: GreenWorks Development to Zecharya International Inc., $130,000

N. 3^rd St., 1720: A & A. Campoverde to R. Metzger, $115,000

N. 3^rd St., 2530: D. & N. Schertz to K. & A. Bryan, $139,900

N. 6^th St., 1336: F. Brewington to G. Wright, $100,000

N. 6^th St., 1741, 611 Kelker St., 631 Hamilton St. & 638 Hamilton St.: Dobson Family Limited Partnership to Buonarroti Trust, $192,500

N. Front St., 2921: J. Krafsig Jr. to D. & D. Schankweiler, $300,000

Norwood St., 947: PA Deals LLC to Equity Trust Company FBO Ramesh Narinesingh IRA, $62,000

Peffer St., 621½, 610 Muench St. & 1609 N. 6^th St.: P. Dobson to Buonarroti Trust, $130,000

Pennwood Rd., 3208: Secretary of Housing & Urban Development & Information Systems Network Corp. to L. Harrisburg, $62,000

Pennwood Rd., 3243: G. Irwin to Consolidated Holdings International LLC, $235,000

Rumson Dr., 2644: Secretary of Housing & Urban Development & Information Systems Networks Corp. to M. De Cayamcela, $45,000

S. 25^th St., 346: Wells Fargo Financial Pennsylvania Inc. to T. Vu, $36,500

Swatara St., 1522: Tri County HDC Ltd to C. Rae, $64,900

Woodbine St., 239: J. Morgenstern to D. Hoffman, $60,000

Harrisburg property sales for February 2016, greater than $30,000. Source: Dauphin County. Data is assumed to be accurate.

Mayor, Defending Budget, Defies Council to Find Cuts

December 9, 2015 | by Paul Barker

City Council at the budget hearing Tuesday night.

Reiterating his plea to grow his government’s annual budget, Mayor Eric Papenfuse on Tuesday night gave City Council essentially two options: either approve a tax hike, or pick up the knife and make the cuts yourself.

In the first of two hearings on his 2016 budget, the mayor renewed his claim that the city needed $3 million in new taxes both to cover shortfalls in expected revenues and to fund essential services like firefighters, police and paved roads.

Papenfuse defended his plan against an often skeptical council, defying them to find proposed expenses that “wouldn’t cripple essential services” if cut. “You’re not going to find $3 million,” he said. In fact, he added, “I wish we could spend more.”

The $60 million general fund budget, which represents an increase of $5 million over the projected actual expenses for the current year, has ballooned in part due to unexpected jumps in health care and pension costs, each set to grow by $1 million.

It also includes $660,000 in new hires, although the mayor said most of those would pay for themselves. For instance, new firefighters would continue to reduce overtime expenses, while an extra tax administrator would improve collections.

Papenfuse also proposes to hire 18 new workers under a separate “neighborhood services” division, to be funded out of city trash bills. The new division will absorb many expenses previously funded by taxes, including some road and parks maintenance and bill collecting, as recommended by consultants last year.

Some council members challenged the new expenses. “We need an austerity budget,” said Councilman Brad Koplinski. “This seems like a prosperity budget.”

Councilwoman Sandra Reid told the mayor to scale up his budgets more gradually, suggesting he was raising taxes to cover costs he wanted but did not really need. Council President Wanda Williams disagreed, saying the expenses were justified, but that she wished there were another option to raise revenue.

But Papenfuse, clicking through a slideshow of proposed spending, asked council to identify what could be cut without hurting residents’ quality of life. And he defended his tax hike, a $2 weekly increase on both residents and commuters who work in the city, as the “least painful” option of the possible ways to raise money.

An increase in the local services tax, as the tax is known, became available to the city under recent amendments to Act 47, the state program that assists distressed municipalities. Fred Reddig, Harrisburg’s coordinator under that program, told council Tuesday that the hike would expire when the city leaves Act 47.

Reddig also reviewed suggested amendments to the Harrisburg Strong Plan, the state’s 2013 recovery plan for the cash-strapped capital. Among the amendments were recommendations that the city take the first steps towards adopting a home rule charter and that it come up with a plan for leaving the program by 2018.

Papenfuse has persistently attacked the Strong Plan in recent months. In particular, he has faulted its estimates of income and real estate taxes—both have fallen short of expectations—and its projections of proceeds from a lease of downtown parking.

Reddig acknowledged the parking shortfalls Tuesday, saying he agreed with the mayor’s estimate that the city would receive $1 million less than anticipated next year. But he also defended the plan, saying it provided the city more parking money than it used to receive and that it was based on the best available information at the time.

A second hearing is scheduled for Wednesday at 5:30 before a final vote on the budget Dec. 15.

This story has been corrected to say that the city’s 2016 budget represents a $5 million increase over the current year’s “projected actual expenses,” not its “projected actual budget.”

In Harrisburg Recovery, Fairness Remains Matter of Debate at City Hall

October 9, 2015 | by Paul Barker

Finance director Bruce Weber, left, and Act 47 coordinator Fred Reddig at a Harrisburg City Council meeting in August.

It was a raw deal, paying off reckless financiers out of the pockets of the common man. Or it was a fair shake, calling for shared pain on the road to stability. Or it was a best bet after years of acrimony, and a hedge against bankruptcy’s unknowns.

These are competing views of the Harrisburg Strong Plan, the 2013 blueprint for Harrisburg’s financial recovery. And two years in, they are still held, and vigorously debated, by the city’s top officials.

Harrisburg Mayor Eric Papenfuse, who supported the plan as a “window of opportunity” during his campaign for office, said in an annual address in September that it wasn’t producing enough revenue and should be revised.

And as recently as Thursday night, during a meeting of the city’s audit committee, Harrisburg’s controller, top lawyer and state overseer aired fundamental disagreements about the fiscal plan’s merits and fairness.

“When I look at this plan, I don’t see anybody caring about me, Vince, Alex, any of these guys,” said Controller Charlie DeBrunner, referring to audit committee members Vince Fogarty and Alex Reber. “And I would really like somebody, when they sit down at the next plan, to go through the plan and say, ‘What do we need to live here?’”

DeBrunner’s remarks came nearly an hour into a meeting that, up til that point, had been focused on the city’s annual audit, which was completed in a timely fashion—though still not as early as some would like—for the first time since 2008.

They were prompted, DeBrunner said, by the city’s recent request that residents bag their own leaves to assist a short-staffed public works department. That request, which might appear minor in itself, nevertheless hinted at the long shadow of Harrisburg’s financial collapse, felt in high taxes and inadequate city services.

“I think I’ve contributed my fair share—what I pay to park, my taxes,” DeBrunner said. “And now the city wants me to rake my own leaves, because they don’t have the money.”

Harrisburg’s recovery plan, drafted in a period of intense state oversight, was ultimately the state’s bid—vetted by local officials and a state court—to work out a deal between the city and its creditors that could avert bankruptcy.

It paid off hundreds of millions in debt, and restructured tens of millions in other obligations, in part with concessions from the city’s creditors. But it came at a bitter cost to residents, whose local income taxes and parking rates and fines doubled.

That has left residents like DeBrunner angry at the prospect of paying more for less. “We’re a relatively calm and decent people, frustrated beyond belief,” he said of neighbors unhappy at the prospect of bagging leaves in his tree-lined neighborhood. “Somebody needs to begin to consider the quality of lives we’re living in the city.”

And it has left many asking, again, whether the city’s creditors, like bond insurers Ambac and Assured Guaranty Municipal, have taken their fair share of the pain.

“They invested here,” DeBrunner said. “It seems to me, as an investor myself, I have to assume some risk sometimes when I invest. And I don’t see any of that.”

Yet others, like Fred Reddig of the state Department of Community and Economic Development, the coordinator overseeing the city’s recovery plan, point to the sacrifices it required from creditors. Soon after DeBrunner spoke, Reddig, who was at Thursday’s meeting to present a quarterly progress report, weighed in.

“The creditors already have shouldered a portion of the responsibility,” he said. He cited the $36 million carved out of the state’s debt fix—a long-term lease of city parking, largely backed by the boosted rates and fines—and set aside to pay city bills and fund some infrastructure improvements and employee retirement benefits.

“If you look at Rhode Island,” Reddig added, referring to a 2012 bankruptcy fix for that state’s tiny city of Central Falls, “their state gave creditors deference over everybody else. I disagree with that, but that’s what they did.”

“Well, it feels like that’s what’s happened here, Fred,” DeBrunner interrupted. “I live here. I’m not looking at this as a consultant on the outside.”

At the reference to bankruptcy, city solicitor Neil Grover chimed in with a reminder about the Pennsylvania Constitution. Under one interpretation of state law, he said, government promises to bondholders are sacrosanct, and bankruptcy amounted to a gamble over whether state law or federal bankruptcy code would prevail.

“No one has tested that,” Grover said. “Anyone that tells you they can predict what the other side of it is is kidding you.”

In that context, the recovery plan was its own kind of bet—namely, that negotiating some amount of shared pain from creditors was better than risking a judicial decision that the city must pay creditors every dime it owed them.

The discussion reached at least one point of accord, with all three agreeing the city ultimately needed more taxpayers. But a discouraged DeBrunner noted it would be hard to attract them when taxes were so high and services so hard to provide.

After a few minutes, Reddig returned to his quarterly report, and the audit committee went back to its business. The debate over the recovery plan’s legacy, in that room as elsewhere in the city, was left unresolved.

September News Digest

September 30, 2015 | by Lawrance Binda

Tax Hike Suggested

Harrisburg Mayor Eric Papenfuse last month proposed tripling the local services tax to help close an estimated $6 million budget gap for the year.

Papenfuse introduced the idea during the annual State of the City address, saying that the Harrisburg Strong financial recovery plan needed to be amended because some revenues, including parking revenues due to enforcement snags, have fallen short of projections.

Under this plan, the local services tax would increase from $1 to $3 per worker per week. The increase would generate about $4 million a year, according to the administration.

The increase must be passed by City Council and approved by the Commonwealth Court. Papenfuse later said that Fred Reddig, a state official and the city’s Act 47 coordinator, supports the idea.

During his speech, Papenfuse also urged Harrisburg-based businesses to help the city financially by ceasing to use private haulers for trash collection. In addition, he floated the idea that the city should consider Home Rule, which would allow it to have greater control in its own affairs.

Papenfuse said that Home Rule was the “only real way out” of Act 47 financial oversight. Many municipalities in Pennsylvania, including Carlisle, have Home Rule charters, but achieving Home Rule would take years.

Reed to Stand Trial

The criminal case against former Harrisburg Mayor Steve Reed will go to trial, a judge determined last month.

Following a daylong preliminary hearing, Senior Magisterial District Judge Richard Cashman said the state could proceed with a case against Reed on all 485 counts against him, covering a wide range of alleged corruption.

At the hearing, the prosecution presented evidence that Reed had violated numerous laws, including that he had kept in his possession hundreds of artifacts purchased with city money. Reed allegedly bought the artifacts for several museums that he had proposed building in the city.

The defense team, led by Henry Hockheimer of the Philadelphia-based firm of Ballard Spahr, refuted those charges, stating that the property rightfully belonged to Reed.

Separately, Reed’s attorneys last month filed a motion asking the court to dismiss more than 300 counts against him, claiming they were not valid because the statute of limitations had expired.

Sinkhole Application Favored

The state has ranked Harrisburg first in Pennsylvania to receive federal sinkhole mitigation funds, the city learned last month.

The Pennsylvania Emergency Management Agency sent a letter to Harrisburg saying its application for a federal Pre-Disaster Mitigation Grant for sinkhole remediation had been ranked No. 1 in the state.

The city is seeking grants for sinkhole repair and home demolition and buyouts in a hard-hit area of S. 14^th Street.

The state support, while positive, does not guarantee that Harrisburg will receive the award, said Mayor Eric Papenfuse. Only state emergency management agencies are eligible to apply for grants under the program, but awards are not allocated on a state-by-state basis.

LED Project Gets Green Light

Harrisburg’s plan to upgrade all of its streetlights with long-lasting LED lights is set to begin this month after the City Council approved funding for the project.

Council last month voted unanimously to borrow $3.2 million from M&T Bank for the LED conversion project, the city’s first major borrowing since the financial crisis shut it off from the credit markets. Council then voted unanimously to contract with The Efficiency Network, based in Pittsburgh, to perform the citywide installation of about 6,000 lights.

The administration estimates that the upgrade will save the city about $500,000 annually in energy costs, which should cover the cost of the financing. As part of its contract, The Efficiency Network guarantees the savings for a 10-year period.

Mayor Eric Papenfuse said much of the work would be done this fall, but probably would not be completed until early next year.

Council also authorized the administration to apply for a $3.6 million grant from Impact Harrisburg, a nonprofit set up as part of the city’s financial recovery plan to assist its infrastructure and economic development efforts. Impact Harrisburg is in the process of hiring an executive director, which it must do before considering applications for grants.

If Harrisburg receives the money, the city would pay off the loan early and use the savings from reduced energy costs for other purposes, Papenfuse said. The loan carries a prepayment penalty of 3 percent.

The city already has received a grant of $500,000 to offset some of the cost of the LED project.

Campbell Gets Probation

Former Harrisburg Treasurer John Campbell last month was sentenced to three years of probation for stealing money from three nonprofit organizations.

As part of his sentence, Campbell turned over a restitution check for $26,230, which will repay Historic Harrisburg Association, the Capital Region Stonewall Democrats and Lighten Up Harrisburg for the thefts.

In all, Campbell pled guilty to one misdemeanor and two felony counts.

Campbell was executive director of Historic Harrisburg and a volunteer treasurer for both Lighten Up Harrisburg and the Stonewall Democrats when the thefts occurred. He was not charged with any crimes in his capacity as city treasurer.

Dauphin County Common Pleas Judge Scott A. Evans is allowing Campbell to serve his probation in the Washington, D.C., area, where he now lives.

Bar Loses Appeal

A Midtown Harrisburg bar targeted for closure by the city has lost its appeal, and now has taken its case to court.

The city’s License and Tax Appeal Review Board rejected the effort by the Third Street Café (formerly Club 1400) to retain its business license and continue operating from its building at the corner of N. 3rd and Calder streets.

The three-person appeals board unanimously sided with the city, which alleges that the bar attracts criminal behavior, especially drug activity.

“The owners and operators of the Third Street Café consented to or allowed behavior on and around the premises that constituted crimes under federal, state and local laws,” concluded the board in its Aug. 28 decision.

The city has tried for months to revoke the bar’s business license. In late March, it sent owner Tony Paliometros a letter stating it planned to revoke the license, giving him 30 days to cease operations. Paliometros appealed the revocation, and a one-day appeals hearing was held in late May.

After losing the appeal, Paliometros immediately appealed that decision to the Dauphin County Court of Common Pleas and was granted a stay to remain open. The court appeal is scheduled for Oct. 9.

Housing Market Stable

Housing sales and prices were relatively stable in August, compared to the same period last year.

Throughout the region, 783 houses sold at a median sales price of $165,000, according to the Greater Harrisburg Association of Realtors. In August 2014, 781 houses sold for a median price of $165,000.

In Dauphin County, 265 houses sold at a median price of $144,900. In Cumberland County, 268 houses sold for a median price of $179,900 and, in Perry County, 27 houses sold for a median price of $165,000.

So Noted

The Harrisburg Downtown Improvement District and Recycle Bicycle last month launched a Downtown Bike Library, which allows people to borrow and then return a bike, a helmet and a lock at no cost from the HDID office at 22 N. 2^nd St. This program is considered a pilot program to the Bike Share Harrisburg initiative that is in the works to bring a bike share program to the city.

The Millworks last month started a lunch service, which begins at 11 a.m. Tuesday to Friday. The Midtown Harrisburg restaurant and art space opened in March for dinner, Tuesday through Sunday. It then added weekend brunch hours.

Bricco halted its lunch service last month in favor of expanding its catering business with Ciao! Bakery, in an endeavor now called Bricco-Ciao! Catering. The menu consists of both Ciao’s sandwiches and Bricco’s Mediterranean-inspired dishes. Bricco, at the corner of S. 3^rd and Chestnut streets, remains open for dinner.

The Kitchen at H*MAC last month announced new lunch and brunch hours. The restaurant, located at 1110 N. 3^rd St., Harrisburg, now is open for lunch on Monday to Friday beginning at 11 a.m. and for brunch on Saturday and Sunday beginning at 10 a.m.

Arepa City, which specialized in the Venezuelan sandwich called the arepa, closed last month after more than six years in downtown Harrisburg. Owner Daniel Farias said customers didn’t follow the restaurant after it moved into larger space further down N. 2^nd Street. Farias said he plans to continue his catering business.

Frederic Loraschi Chocolate opened a retail location and production facility at 4615 Hillcrest St. in Colonial Park. For years, the chocolatier has made his high-end confections from a converted kitchen in the basement of his Hummelstown home. The new shop allows consumers to buy directly from him.

Changing Hands

Berryhill St., 2101: R. Pickles to D. Maxwell, $96,500

Calder St., 116: M. DePhilip to D. Goldman, $150,000

Chestnut St., 2100: W. & K. Richards to H. Trauffer, $65,000

Curtin St., 543, 2135 N. 4^th St., 1949 Berryhill St., 545 Benton St. & 2314 N. 4^th St.: Susquehanna Bank to MBHH RE LLC, $107,000

Graham St., 118: B. & K. Elgart & Cartus Financial Corp. to P. Furlong, $219,900

Green St., 1924: D. Miller & R. Finley to G. O’Loughlin, $214,900

Hale Ave., 428: Metro Bank to T. & K. Vu, $42,500

Herr St., 409: W. & F. Moore to D. Jordan, $106,000

Industrial Rd., 3360: Conewago Contractors Inc. to Norfolk Southern Railway Co., $7,500,000

Kelker St., 319: K. Hancock to J. Marks, $60,000

N. 2^nd St., 1311: J. Feldman to T. Gray, $78,700

N. 2^nd St., 1406: F. Magaro to C. Albers, $149,000

N. 2^nd St., 1520: E. Spaar to N. & R. Masterson, $94,000

N. 2^nd St., 1708: D. Shreve to J. Seigle, $171,300

N. 2^nd St., 1829: E. Stuckey to M. Nolt, $126,000

N. 2^nd St., 3206: R. & P. Kotz to S. Margut, $178,000

N. 3^rd St., 1606: Fannie Mae to Anselmo Brothers Partnership, $52,500

N. 3^rd St., 2243: Kusic Financial Services LLC to A. & M. Collins, $58,000

N. Front St., 2609: Supreme Forest of Tall Cedars to A. Hartzler, $225,000

Penn St., 1820: Bayview Loan Servicing LLC to PA Deals LLC, $50,250

Penn St., 1917: S. Stauffer to S. Cline & J. Lemon, $118,500

Penn St., 1920: WCI Partners LP to C. Clabaugh, $159,900

Rudy Rd., 2141: A. McKenna to M. McNelis, $142,900

Rumson Dr., 2586: Beneficial Consumer Discount Co. to PA Deals LLC, $43,299

Schuykill St., 518 & 522: M. & A. Parsons to J. & B. Readinger, $37,500

S. 15^th St., 347, 1529 Catherine St., 1615 Naudain St., 30 Balm St., 1822 Park St. & 22 Balm St.: I. Colon to C. Harp, $30,000

S. Front St., 555: Ashbury Foundation to D. Ogg, $82,500

State St., 115: Pennsylvania Bar Association to Commonwealth Strategic Solutions LLC, $172,000

State St., 231, Unit 504: LUX 1 LP to M. & K. Lastrina, $144,900

State St., 231, Unit 505: LUX 1 LP to M & K. Lastrina, $154,900

State St., 1336: D. Pinnock to D. Vining, $37,000

Susquehanna St., 1833: G. & K. Ender to J. Secrest, $42,500

Swatara St., 2416: M. Gaston et al to D. & E. Davenport, $129,600

Thompson St., 1257: Jamil Karim LLC to Harrisburg Housing Authority, $80,000

Woodbine St., 502: K. Bethea to C. Guerrier, $40,000

Harrisburg property sales for August 2015, greater than $30,000. Source: Dauphin County. Data is assumed to be accurate.

As Harrisburg Parking Fines Back Up, A Budget Falls Out of Balance

July 3, 2015 | by Paul Barker

Mayor Eric Papenfuse, holding scissors, at a ribbon-cutting for Pango mobile parking app last year. (File photo.)

Last January, as Harrisburg made its final budget tallies for 2014, Mayor Eric Papenfuse pointed proudly to a major achievement of his first year—a budget so tightly managed that the city, so recently on the brink of bankruptcy, had paid nearly all its bills and still had $5 million in the bank to spare.

He achieved the surplus by spending millions less than authorized in the budget, a feat he is on track to repeat this year, with the latest projections showing the city is on target to spend $57.5 million out of a budgeted $59.5 million.

The same projections, however, show that a balanced budget may elude him. The reason, as reported in a court filing this week by the state coordinator of the city’s recovery, can be summed up in one word: parking.

Revenue from parking is down by an estimated $1.4 million, wrote Fred Reddig, the city’s coordinator under the state program for distressed municipalities, in a July 1 report to the Commonwealth Court judge overseeing the recovery process.

In particular, revenue from tickets is down due to a backlog in the courts. As of early May, there were around 20,000 unpaid tickets outstanding, Reddig wrote. Each month produces about 1,400 new delinquent tickets, but in the same period the sole district justice appointed to process them can only move through 250.

The result has been a steep departure from projected revenues that has in turn cut off the flow of money to the city, which is entitled to receive certain payments from the parking system under a 40-year lease signed in late 2013.

Over the year, the city is supposed to receive $2.5 million in these so-called “waterfall” payments, but it has so far only received a few hundred thousand dollars. In short, the parking revenues are “way, way, way off,” Papenfuse said.

And the consequence for city finances is that Harrisburg is now poised to end the year with a deficit of around $1 million, despite the continued penny-pinching.

“The budget is over-performing in all other areas, in terms of controlling expenses,” Papenfuse said. “The deficit is entirely due to shortfalls in parking.”

A remaining question is the cause of the ticket backlog, a point over which the mayor’s office and the state coordinator sharply diverge.

Reddig, in his report, pins the slowdown partly on the city’s own failure to pass a required parking ordinance in 2014, the year to which three-fourths of the backlogged tickets can be attributed.

Papenfuse dismisses this explanation, however, saying the ordinances have nothing to do with this year’s projected revenues. Instead, he points to the inadequate court processing and says he would like more help from the state.

“The city is doing everything in its power,” he said.

Nonetheless, both the mayor and the coordinator agree that the city is still on the track towards recovery. The city is current on its debt payments, Reddig wrote, and “would be able to weather an operating deficit of $1 million this year.”

Aside from the decline in parking revenues, “we’re feeling pretty good,” Papenfuse said. And the city should eventually get the money it’s owed. The question is when.

Harrisburg Mayor OKs State’s Verizon Workout, Reluctantly

January 30, 2015 | by Paul Barker

On Tuesday night, Harrisburg City Council voted 6-0 in favor of an agreement with Assured Guaranty Municipal Corp., the bond insurer familiarly known as AGM, to help the city avoid default on a $41.6 million debt that starts coming due in 2016.

The settlement represents a last, critical piece in a complex negotiation to resolve the debt in a way that would keep Harrisburg’s finances stable, a year and a half after the city adopted a state-sponsored plan to avert bankruptcy.

Council’s vote, however, passed the settlement to Mayor Eric Papenfuse, who on Friday had a message for the folks who brokered it: he’ll sign, but he isn’t happy.

In a 770-word open letter to Fred Reddig, Harrisburg’s coordinator under the state oversight program for distressed municipalities, Papenfuse critiqued what he saw as the deal’s numerous flaws, saying Reddig’s team had put “enormous pressure” on him to sign the documents before he had time to review them thoroughly.

The mayor attacked the city’s share of the proceeds from the deal, saying they ranged from “anemic” to “disappointing.” He accused the coordinator of having failed to consider the city’s best interest, and blasted an energy contract that wasn’t publicly bid. And he claimed he’d been threatened with the loss of $5 million in annual state funding if he didn’t sign off on the deal.

Several of the involved parties did not return calls on Friday. But a few who did stuck up for the arrangement. Steven Goldfield, a financial advisor to Reddig, said the state Department of General Services, whose 17-year downtown lease is a key piece of the transaction, “bent over backwards” to make things work for the city.

And Brad Jones, the CEO of Harristown Development Corporation, the manager of the downtown properties involved, said he and his colleagues “really feel like we’ve been thrown under the bus.”

Under the arrangement, Harristown had assumed the risk of a new loan and had waived its customary management fee, Jones said. The deal was difficult, he added, but “we did the best we could.”

The deal is the culmination of two years of negotiations to resolve an outstanding debt burden from a city-backed borrowing in 1998.

That year, the city sold three office towers in Strawberry Square to the Harrisburg Redevelopment Authority, at the same time guaranteeing around $24 million in bonds the authority issued to finance the purchase.

Some of the bonds were secured by rent payments from the Commonwealth, which is under contract to lease office space in two of the towers through 2025.

But about $7 million of the original debt was secured by the rent in a separate tower, whose primary tenant, Verizon, was set to depart in 2016.

Under the terms of the original debt issue, the only security for the bonds beyond tenant payments was city tax revenues, meaning that the empty office building would leave Harrisburg on the hook for the full principal and interest on the original debt, for a total of $41.6 million.

In September, the state Department of General Services agreed to pick up where Verizon lets off, with a 17-year lease that will pay off a portion of the city’s obligation each year, for a total of around $11 million through 2033.

As a condition of that lease, however, the Commonwealth required renovation of all three buildings, which Harristown agreed to undertake by way of a $16 million retrofit, financed with a guaranteed energy savings contract with Siemens.

In turn, the lender for the retrofit, First National Bank, required the settlement agreement with AGM that council voted for Tuesday, which would provide some assurance that the Strawberry Square assets wouldn’t get tied up in litigation in the event of a city default.

The mayor’s complaint about the no-bid contract was a reference to Siemens, which Jones acknowledged was awarded the contract without a bid. But, Jones added, Harristown was not a government entity and was not required to seek bids.

Additionally, Jones said, Harristown chose Siemens because the company had already done no-fee work auditing the energy consumption of the Strawberry Square facility, which he described as having high maintenance costs and being badly in need of upgrades.

The mayor ultimately signed the agreement around noon on Friday, he said. But in his released statement, and again at a press conference in the afternoon, he explained he did so “not because I think it is a good enough deal for the residents of Harrisburg, but because I feel the consequences could be worse.”

Reached by phone Friday, City Councilman Ben Allatt, the budget and finance committee chair, said he sympathized with the mayor’s remarks, describing the ultimate arrangement as “the lesser of two evils.”

Allatt pointed to some of the expected benefits of the state lease, including the parking and restaurant revenues that should be realized from the addition of around 900 workers to the downtown scene.

He also expressed frustration over feeling that many negotiations have been “forced on the city” in the course of the state’s intervention, saying Papenfuse “is always right to push back” on contracts that may not be the best deal for the city.

“Are we really getting the best deal? At the end of the day, it’s hard to say,” Allatt said. But, he added of the coordinator’s team, “I don’t think they were negotiating in bad faith for the city. I think there was no easy scenario.”

Council Weighs Debt Settlement For Downtown Verizon Building

January 23, 2015 | by Paul Barker

The so-called Verizon Tower in downtown Harrisburg, which the telecommunications company will vacate in early 2016.

Harrisburg City Council considered for the first time publicly Thursday night the details of a proposed settlement with Assured Guaranty Municipal Corp., the insurer of a $41.6 million bond debt that the city must begin repaying in 2016.

The debt is tied to the so-called Verizon building, a 12-story office tower in downtown’s Strawberry Square, where the broadband and telecommunications giant, formerly the Bell Atlantic Company, has leased space since 1975.

The total debt, representing principal and interest on a 1998 bond issue of $6.9 million, starts coming due on Nov. 1, 2016, with payments ranging between $930,000 and $1,175,000 due every May and November thereafter through 2033.

A final payment of $6,175,000 is due on Nov. 1, 2033.

The city is obligated to make the payments under the terms of a guarantee agreement, which pledged the full faith and credit of city taxpayers as added security on the bonds at the time they were issued.

Under the proposed settlement, AGM will advance up to 20 percent of the annual debt service to bondholders each year through 2025, with the city later paying back any advances at a 6.07-percent interest rate.

The settlement also contains a forbearance agreement, so that as long as the city does not exceed a 20-percent advance each year or an aggregate $2.7 million through 2025, AGM will not declare the city in default under its insurance policy.

The city is not obligated to rely on AGM for a cash advance in any year, and any unused advance can be rolled over into the next year.

Steven Goldfield, a financial advisor to the state officials overseeing Harrisburg’s recovery, said the city should regard the advances from AGM as a “line of credit” to be drawn upon if the city can’t afford its full debt payments in a given year.

The settlement is the result of many months of work and will help the city realize “significant benefits,” said Fred Reddig, Harrisburg’s coordinator under Act 47, the state program for distressed municipalities.

Most of those benefits depend on the building’s expected new tenant, the state Department of General Services, which signed a 17-year lease in late September to locate around 900 workers in Strawberry Square.

The state will rent 765 parking spaces, which should produce around $600,000 in new parking taxes each year for the city, though Goldfield later acknowledged that may be offset slightly by the loss of Verizon employees who parked downtown.

The state’s rent payments are also projected to eat up about $12.8 million of the debt obligation from the 1998 bonds, reducing the city’s burden.

The settlement with AGM is a critical last piece of the negotiations towards the state lease, Goldfield explained, because it clears the way for a $17 million investment in the Strawberry Square property.

The investment, to be spent on an energy retrofit of the office towers and on fitting out the space for DGS’s use, depends in part on financing from First National Bank.

But the bank wants some assurance that the Strawberry Square assets won’t be tied up in litigation over the city’s debt payments, which the forbearance agreement with AGM would provide, Goldfield explained.

The deal is a major step in a long and complex chapter of the city’s involvement in the downtown real estate business.

In 1975, the city, the Harrisburg Redevelopment Authority and the Harristown Development Corporation embarked on an urban renewal project that included the development of the site at Strawberry Square.

Included in the development was the 12-story, concrete-and-steel structure that would come to be the Verizon building, comprising 239,841 square feet out of Strawberry Square’s more than 1 million square feet of total space.

The 1998 bond issue financed the redevelopment authority’s purchase of the land and facilities from the city, which had received fee title to the property in 1976 under the terms of the urban renewal project agreement.

The proceeds from the deal helped cover a deficit in the city’s 1999 budget, which then Mayor Stephen Reed celebrated for including “no tax increases of any kind” and “no layoffs of existing staff.”

He made the remarks at a November 1998 legislative session, on the same night council would vote in favor of the Strawberry Square property sale.

In theory, debt service on the bonds would never touch the city’s guarantee, as rent payments from tenants was supposed to cover the necessary payments.

But documents from the financing suggest that officials involved in the deal were aware of the city’s exposure.

The lease with Verizon, for example, was set at the time to terminate on Feb. 1, 2016, nine months before the first debt payment was due.

And at various points in the official statement for the bonds, investors were reminded of the downtown real estate market’s volatility, with the statement at one point stipulating that there was “no assurance that the authority will be able to lease the facilities to future tenants at rent levels sufficient to pay the 1998 bonds.”

Nonetheless, Standard & Poor’s rated the bonds ‘AAA,’ the highest possible rating.

During an interview in early January, Harrisburg Mayor Eric Papenfuse characterized the Verizon building debt as a “horribly bitter pill” for the city to swallow. He said he was reviewing documents from the deal, but that it was his current belief the city was obligated to repay the debt in its entirety.

Council members echoed the mayor’s sentiments Thursday night. Councilman Ben Allatt, the budget and finance committee chair, described the debt as “one of the worst deals the city ever entered into.”

He added that he was working with city officials on adopting a debt policy to ensure Harrisburg would never enter such deals again, which he expected to be one of council’s legislative initiatives this year.

Council President Wanda Williams concurred with Allatt’s statements, and then expressed her gratitude for the work of Reddig’s team on negotiating a solution. “I commend you both for what you’ve done, and I thank you,” she said.

City Solicitor Neil Grover told council he was still in talks with AGM over the terms of the agreement, and that there was a specific clause he wanted amended before he would recommend an affirmative vote from council.

If the matter was not resolved to his satisfaction, Grover said, he would urge council to reject the agreement.

Williams said that, so long as Grover addressed the issue, she would put the agreement on council’s agenda for next Tuesday’s legislative session for a vote.

This story has been updated with information about the bills council voted on at a November 1998 legislative session, which approved the sale of the city’s Strawberry Square properties.

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