Tag Archives: Tom Wolf

Senate passes Harrisburg Act 47 bill, ending city’s financial distress and preserving taxes for five years

October 17, 2018 | by Lizzy Hardison

State senators take their seats just before voting on HB 2557.

A bill passed by the state Senate this evening will preserve Harrisburg’s current tax rates and let it exit Act 47, a state oversight program for financially distressed municipalities.

The Senate voted 48-1 with no discussion to pass House Bill 2557, which will allow Harrisburg to maintain its current local services tax (LST) and earned income tax (EIT) for five years after it exits state oversight. The bill also prohibits the city from enacting a commuter tax and convenes a five-member Intergovernmental Cooperation Authority (ICA) to monitor Harrisburg’s finances.

The legislation will take effect immediately after Gov. Tom Wolf signs the bill into law. The state House of Representatives passed it by a 185-5 vote on Monday.

After tonight’s vote took place, Harrisburg Mayor Eric Papenfuse thanked the lawmakers who supported its passage, including its sponsor, Rep. Greg Rothman, R-Cumberland County, and Harrisburg’s lawmakers in the House and Senate, Rep. Patty Kim and Sen. John DiSanto.

“While I wish we had been able to achieve a permanent solution for the city and the region, Harrisburg’s immediate fiscal crisis has lifted,” Papenfuse said. “I look forward to working with the new members of the Intergovernmental Cooperation Authority – as it’s time to roll up our sleeves and continue to work for the long-term success of Harrisburg and the capital region.”

The bill is the culmination of a 10-month lobbying effort by Harrisburg officials, who have long said the city needs stronger taxing powers to support the capital city. It will allow Harrisburg to preserve about $12 million in annual revenue that would be lost in a traditional Act 47 exit.

Act 47 allows Harrisburg to levy a 2 percent EIT on all residents and a $156 LST, even though state law caps EIT rates at 1 percent and LST at $56 per year. Without HB 2557, Harrisburg would be forced cut its EIT in half and slash its LST by two-thirds when it exits state oversight.

Local officials say those rates are untenable in Harrisburg, which supports large swaths of tax-exempt properties and a daily population of 50,000 commuters. Mayor Eric Papenfuse told lawmakers last month that the city’s emergency services and infrastructure would be in jeopardy if the city had to cut its taxes.

With HB 2557 in place, Harrisburg will also be spared high property tax increases that were prescribed in a three-year Act 47 exit plan.

The city did make one significant sacrifice in the final bill, which was amended last week to put a five-year time limit on the enhanced taxing power.

The original legislation only required Harrisburg to retire its tax rates once its surpluses partially funded a post-retirement benefit fund for its employees. Projections estimated that could take up to 20 years.

The amendment was made by the House Local Government Committee, and state Rep. Kim called it “the best we can do” in a Republican-controlled legislature. She hopes that the five-year timeframe will still give Harrisburg enough time to increase its tax base.

Local officials are cautiously optimistic that will be the case. City Councilman Ben Allatt said that a growing population and pipeline of development projects are already augmenting the city’s tax rolls, albeit slowly. He’s not sure if it will be enough to put the city the city in full financial stability in just five years.

“Any extension of our taxing authority is helpful, but it remains to be seen if this solves the structural deficit,” Allatt said. “My initial knee-jerk reaction is that it does not. It may close the gap, but only time will tell exactly how much.”

He hopes the city can renegotiate debt obligations over the next five years, which could significantly reduce its expenses in the future. Officials have also said that shedding its Act 47 designation will make Harrisburg more attractive to private investors.

Even though the bill passed by a wide margin in both bodies of the General Assembly, it encountered opposition from lawmakers who wanted Harrisburg to cut its tax rates. Others said the bill created a precedent of special treatment for distressed cities.

The Senate’s lone dissenting vote came from state Sen. Judy Schwank, D-Berks County. Schwank’s district includes the city of Reading, which has been in Act 47 since 2009.

Before the vote, Schwank said she couldn’t support a measure that assists one distressed city without addressing problems plaguing other municipalities across the state.

“I don’t begrudge Harrisburg anything. I think it’s a great city, but I object to piecemeal approach that we’re taking,” Schwank said. “If you have enough political capital to enact a process for your own city… it should be universal across the state.”

In a press conference held just after the vote took place, Kim said she sympathized with Schwank’s objection.

“This highlights the fact that we need uniform policy across the state to help third-class cities,” Kim said.

A 2017 report by the Pennsylvania Economy League found that municipal fiscal distress was accelerating across the state, and recommended offering more taxing flexibility to local governments.

This story was updated to include comments Patty Kim made at a Wednesday night press conference.

Burg View: Let Them Vote

September 25, 2018 | by Lawrance Binda

The Pennsylvania Capitol

Earlier today, a joint House committee held a hearing, one in which Harrisburg’s very future is at stake.

That’s no exaggeration.

PA House bill 2557 would allow Harrisburg to keep its current taxation levels, thus allowing it to exit Act 47, the state’s program for financially distressed municipalities.

If the bill passes, Harrisburg’s decade-long fiscal nightmare would effectively end, and the city could move on confidently toward a brighter future, building on its long, slow redevelopment.

If the bill fails—who knows? The city’s financial storm could continue for another three years, when the state forces Harrisburg out of Act 47 for good.

At that point, the options are grim. The state has proposed vast increases in city property taxes. Harrisburg countered with a commuter tax. Neither option is acceptable or likely to pass. The city also could slash services, though anyone who lives here can tell you that service levels are already too low.

Harrisburg could even end up back in state receivership or do what it failed to do eight years ago—declare bankruptcy. In other words, the city likely would be plunged back into financial crisis.

Meanwhile, a solution—retaining the status quo—is profoundly logical and at hand. The House bill would permit exactly that, so those who work in Harrisburg (residents and commuters alike) would continue to pay an extra $100 a year in local services tax over what’s currently allowed under state law for third-class cities.

Yes, that’s the prevailing issue—an extra $2 a week from workers to help the city pay for supporting and servicing some 50,000 commuters, which doubles Harrisburg’s population each day. One hundred bucks a year so police show up when you call them, so EMTs arrive when your car crashes, so roads are cleared of snow so you can reach your office, so restaurants are inspected, etc., etc.

The bill also would allow the city to keep its 2-percent earned income tax rate, which mostly affects just Harrisburg residents, while nixing any proposal for a dedicated commuter tax.

This solution has been in place for the past few years, and it seems to be working well.

Moreover, it’s the solution favored by most of our area’s representatives, including two Republicans who represent many of the region’s commuters, Sen. John DiSanto and Rep. Greg Rothman. Gov. Tom Wolf also supports the bill.

They all well remember the dark days of 2010-12, when the city, stripped of its workforce and effectively bankrupt, seemed incapable of performing even the most basic municipal functions, when the city’s very survival was at issue.

But time is of the essence. The legislature is in session for only seven more days, giving a limited window for the bill to come up for a vote.

Therefore, we urge Speaker Mike Turzai to allow a vote on House bill 2557.

We understand that he doesn’t like the bill and, if so, he can and should vote against it. But one man, however powerful, should not single-handedly determine the fate of a city so distant from his own Allegheny County home, thwarting the wishes of the local community here and the will of the legislature as a whole.

For the sake of Harrisburg, House bill 2557 must be allowed to come up for a vote.

Lawrance Binda is editor-in-chief of TheBurg.

August News Digest

August 31, 2018 | by Lawrance Binda and Lizzy Hardison

Exit Plan Released

The commonwealth last month released Harrisburg’s newest Act 47 exit plan, which calls for maintaining the city’s current Local Services Tax (LST) and Earned Income Tax (EIT) rates through 2020, as the city concurrently seeks special taxing provisions from the state legislature.

Harrisburg’s Act 47 coordinator had to craft an exit plan based on current state law, which would require Harrisburg to relinquish some of its taxing authority when it leaves Act 47 in three years. The city currently collects $11.8 million in annual revenue from heightened LST and EIT rates permitted under Act 47.

The report encourages Harrisburg officials to continue lobbying for the right to levy those current tax rates indefinitely.

To that end, it offers a four-year budget strategy that would give Harrisburg time to continue its lobbying effort. It would allow the city to maintain its status quo tax rates and expenditures through 2020.

If the city does not secure a legislative victory by 2021, DCED would revise the budget projections in the exit plan and would ask the city to change its revenue structure and cut spending.

If state laws have not changed by 2021, the coordinator recommends that Harrisburg lower its EIT to 1.5 percent, reduce its spending, and begin using its fund balance to reduce any budget deficits.

In 2022, the city would have to reduce its EIT to 1 percent and its LST to $52 per year.

The plan also outlines initiatives that the city can undertake to curb spending and increase revenues while it implements the four-year budget strategy.

They include asking more tax-exempt organizations to make payments in lieu of taxes (PILOTs), performing a cost analysis of its union and non-union represented personnel expenditures, and limiting enhancements in its future collective bargaining agreements.

DCED also recommends that the city study its split-rate property tax structure and consider moving to a single-rate system. The report says that the split-rate system benefits homesteads at the expense of landowners.

“As revitalization and property improvements continue within the City, the City’s split rate millage is not fully capitalizing on the growth—the county and school district are,” the report reads.

Councilman Ben Allatt said that the revised exit plan was a marked improvement over the first draft, which suggested huge property tax hikes in excess of 100 percent.

“We’re headed in a much better direction than the initial exit plan,” he said. “I think the strategy is to not force the city to make all these crazy decisions in a 30-day period without the state acting. Because the fact is that if we want to resolve our long-term financial situation, then we need to compel the state to act.”

DCED must now hold a public hearing on the revised exit plan.

Teachers Asked to Return Pay

The Harrisburg School District made a big accounting error when it offered dozens of teachers inflated salaries in 2016, and administrators are now asking them to pay some of it back.

Two years after it violated a collective bargaining agreement by hiring 65 teachers at the wrong salary level, the school district is asking them to take a pay cut and give back the wages they were overpaid.

The recouped wages would total almost $500,000, with individual teachers accountable for amounts ranging from $600 to $12,000, according to Harrisburg Education Association leaders.

HEA says the offer violates the contracts of the teachers being asked to take a pay cut and insults 79 longtime teachers who are currently being underpaid. They fear it will lead more teachers to resign from the district.

“It’s ridiculous,” said union President Jody Barksdale. “We’re in a position where we will lose dedicated people because of the lack of promise. When you say you’ll pay someone a certain amount of money, they budget their life around that amount of money.”

HEA filed a grievance against the district in 2016, asking administrators to either reduce the new teacher salaries or promote HEA teachers who had been frozen on the salary schedule. They put forth a $320,000 proposal to bring 79 underpaid employees up to their rightful pay grade, Barksdale said.

Now, the district is fulfilling one of their requests. They’ll cut the new salaries to match HEA pay levels, but they want the teachers they overpaid to give back their wages.

The proposal would bring in half-a-million dollars for the district, even though administrators set aside $1.9 million for the grievance settlement in the 2018-19 budget that was approved by the board in June.

Barksdale said that HEA wants underpaid teachers to be brought up to step instead. She also said the whole fiasco could have been avoided if the district’s Human Resources Department had worked with them in 2016.

“Our counsel tried to explain the language in the bargaining agreement to new personnel in the HR office,” Barksdale said. “It’s like they didn’t believe us or trust us.”

A visibly frustrated Barksdale said that the district’s administration is driving away talented teachers and hurting children.

“The only way this district will move forward is if the district sits down and has honest, transparent conversations with us,” Barksdale said.

Bridge Work Ahead

Harrisburg drivers should brace themselves for some short-term pain, as PennDOT is replacing a small, but well-traveled bridge over Paxton Creek.

Preliminary work began last month to remove and replace the rust-marred Herr Street Bridge that passes over the creek between N. Cameron and N. 9th streets near the Subway Café. That portion of Herr Street averages more than 12,300 vehicles a day, according to the state Department of Transportation.

In August, work began with single-lane restrictions, as crews drove in micro-pilings to prepare for the actual replacement of the 98-year-old single-span, steel-girder bridge.

Then, on Sept. 7, weather permitting, Herr Street, between Cameron and N. 7th streets, will close entirely for as many as 10 days so that crews can remove the existing bridge, replace it with a precast concrete superstructure and rebuild the roadway.

A detour will route motorists around the work zone using Cameron, Maclay and N. 7th streets, said PennDOT.

Atglen, Pa.-based J.D. Eckman is performing the design and construction work under a $3.2 million contract, which includes building the precast superstructure in a nearby lot along Herr Street.

PennDOT said that it expects the entire project, which also includes utility, pavement and signage work, to be finished by mid-October.

State Grant for Office Building

A new downtown Harrisburg office building is a bit closer to reality, as the 2nd Street project last month received a $1 million state grant.

Gov. Tom Wolf’s office announced that Second Street Associates, a partnership headed up by Harristown Development, will receive the funds through the state’s Redevelopment Assistance Capital Program (RACP), which aids projects deemed economically, culturally or historically important.

The money will go towards constructing a new, six-story office building at 21 S. 2nd Street, with retail on the ground floor, along with the rehabilitation of the historic, six-story structure next door at 17 S. 2nd St., which houses the SkarlatosZonarich law firm. The two buildings then would be joined inside to form a single, interconnected structure.

“I am proud to support the construction of this new office and retail tower in downtown Harrisburg,” Wolf said in a statement. “This investment supports the efforts of the region to create more jobs, bolster shopping and retail opportunities, and will strengthen the city’s tax base and local economy.”

Last year, Harristown bought and then razed the dilapidated, three-story, 19th-century structure that once housed the Coronet Restaurant. The building had been largely empty since a fire destroyed the restaurant several decades ago.

Harristown had requested $3 million for the building project. Most RACP applicants are denied funding and, when granted, awards typically are significantly lower than amounts requested.

So far, in the 2018 round of funding, the only other RACP award in Dauphin County has gone to the city of Harrisburg, a $2 million grant to begin the Paxton Creek reclamation project. In 2017, the Harrisburg Midtown Arts Center (HMAC) received $1 million to complete its build out, the Salvation Army Harrisburg received $500,000 for its new building on Rudy Road and Hershey Towne Square received $750,000 towards a three-story parking garage.

So Noted

Harrisburg University last month introduced the 15 full-scholarship members of its new varsity e-sports team and unveiled their uniform, logo and team name, The Storm. The season begins this month with competition in the team-based, multiplayer game, Overwatch, and continues next semester with the games League of Legends and Hearthstone.

Higher Information Group last month announced that it had acquired Pennsylvania Telephone Products Co. The Harrisburg-based business-to-business company said that PTP would be folded into its IT division.

Lola Lawson was appointed last month to the Harrisburg school board, filling a seat vacated by Tyrell Spradley, who resigned after just four months. The board voted 5-3 to appoint Lawson, a school board veteran, during a contentious, crowded meeting at which many residents supported other candidates for the seat.

Changing Hands

Brookwood St., 2200: K. Reinoso to F. DeJesus, $62,500

Camp St., 633: Amtwo Investors LLC to J. Addison, $44,900

Chestnut St., 316: G. & M. Peck to D. Pedroza, $117,000

Derry St., 2436: M. & I. Collins to B. Wolfe, $75,000

Derry St., 2615: S. Mejia to S. Salleb & M. Aiz, $42,500

Green St., 801: Bricker Boys Partnership to Capitol River LLC, $264,900

Forster St., 217 & 222 Briggs St.: G. Rothman c/o RSR Realtors to M. Three Properties, $525,000

Green St., 1729: A. Toberman to P. Lee & S. Willard, $145,000

Green St., 1830: J. Becknauld to Berlin Group LLC, $76,000

Green St., 2345: J. Chirdon to J. Marsh, $83,700

Green St., 3236: D. Conner to C. Devaney, $71,500

Harris St., 212: R. Evanchak to G. Rhone, $138,000

Harris St., 235: M. Barrette to T. Kline, $80,900

Harris St., 429: S. Rao to McClellan Development Group LLC, $76,000

Herr St., 315: J. Montgomery to P. Shaughnessy, $124,500

Holly St., 1837: Skye Holdings LLC to E. Torres, $30,000

Hudson St., 1256: M. Shatto to Marsico Realty LLC, $105,000

Kelker St., 236: D. Zurick to E. Strobel & M. Bragers, $185,500

Kensington St., 2213: P. Flores to S. & A. Popoola, $63,500

Kensington St., 2266: D. Selvey to A. Tilghman, $66,240

Kittatinny St., 1215: A. & R. Apa to S&P Property Holdings LLC, $285,000

Maclay St., 318: Skye Holdings LLC to A. Nebbou & C. Myers, $30,000

Market St., 1920: G. Norman to F. Grooms, $99,000

Nagle St., 123: K. Snyder & C. Kaufman to L. & C. Jerome, $152,500

N. 2^nd St., 1829: M. Nolt to E. & G. Stailey, $134,900

N. 2^nd St., 1935: R. & A. Apa to G. & J. Geiges, $70,000

N. 2^nd St., 2904: F. & B. Pinto to J. Hamley & M. Nolt, $315,000

N. 2^nd St., 3007: A. Harris to E. Kotz & S. Wissler, $168,000

N. 3^rd St., 1700, L57: J. Cody to PA Deals LLC, $63,500

N. 3^rd St., 2201 & 2205: A. & R. Apa to S&P Property Holdings LLC, $275,000

N. 3^rd St., 2333: R. Oberton Sr. to 2333 N. 3^rd Street LLC, $115,000

N. 4^th St., 2225: P. Yoder & E. Murphy-Yoder to 2225 4^th LLC, $45,000

N. 5^th St., 2403: Skye Holdings LLC to A. Nebbou & C. Myers, $34,900

N. 5^th St., 2409: 2409 N. 5^th St. LLC to Harrisburg Homes Investment LLC, $31,480

N. 5^th St., 2605: 42 5^th St. LLC to Harrisburg Homes Investment LLC, $37,690

N. 14^th St., 1216: L. Dodd to S. Mejia, $30,000

N. 15^th St., 1625: C. Cade to Ma Ambashakti LLC, $30,000

N. Front St., 1525, Unit 406: Z. Fogel to J. Davis, $98,900

N. Front St., 2837, Unit 201: R. & L. Barry to H. Witte, $128,750

Penn St., 1622: S. Simon to E. & J. Mallory, $102,000

Penn St., 2232: N. & J. Weaver to T. Cook, $53,000

Pennwood Rd., 3207: C. Gaither to M. Katzman, $125,000

Pine St., 224: Pennsylvania Retailers to PSREU LLC, $110,000

Race St., 604: S. Cairns to A. Heinzel, $165,000

Reel St., 2605: J. Clark to A. Winter, $42,599

Reily St., 255: E. Harman to R. Wodele, $142,500

S. 13^th St., 333: Eastern Mennonite Mission to Herman International Ministries, $132,000

S. 14^th St., 1400: M. Vargas to City of Harrisburg, $59,000

S. 14^th St., 1405: M. Allsup to City of Harrisburg, $39,000

S. 17^th St., 1111: Federal National Mortgage Assoc. to V. Ceballos, $40,000

S. 19^th St., 1117: C. Runne to F. Payero, $93,000

S. 20^th St., 25: P. Morton to C. Arnold, $55,000

S. 20^th St., 631: F. & R. Rivera to E. & D. Cortes, $92,000

S. 20^th St., 1226: W. & M. Branche to W. & J. Venable, $143,900

S. 22^nd St., 713: A. Sahovic to EGG Gourmet Solutions LLC, $820,000

S. 25^th St., 725: K. Brown to G. & L. Davis, $130,000

S. 25^th St., 729: 729 25^th Street LLC to Y. Suero & N. Richard, $183,000

S. Cameron St., 1327: E. & R. Kehr to J. Swigart, $44,500

S. Front St., 811: Bank of New York Mellon Trustee & NationStar Mortgage LLC to R. Shokes Jr., $52,000

State St., 1502: R. & A. Sharp to S. Kochis, $73,820

State awards $1 million grant for downtown Harrisburg office building

August 8, 2018 | by Lawrance Binda

This site on S. 2nd Street near Market Square is slated for a new office building.

A new downtown Harrisburg office building is a bit closer to reality today, as the 2nd Street project has received a $1 million state grant.

Gov. Tom Wolf’s office today announced that Second Street Associates, a partnership headed up by Harristown Development, will receive the funds through the state’s Redevelopment Assistance Capital Program (RACP), which aids projects deemed economically, culturally or historically important.

Last year, Harristown Development bought and then razed the dilapidated, three-story, 19th-century structure that once housed the Coronet Restaurant. The building had been empty since a fire destroyed the restaurant several decades ago.

Harristown had requested $3 million for the building project. Most RACP applicants are denied funding and, when granted, awards typically are significantly lower than amounts requested.

Brad Jones, the CEO of Harristown Development, could not be reached immediately for comment.

Hamilton Health receives state grant, gets closer to breaking ground on expansion

July 19, 2018 | by Lawrance Binda

Artist’s rendering of Hamilton Health Center’s future campus, with the planned expansion at the left side of the image.

Hamilton Health Center is a step closer to breaking ground on its long-anticipated expansion, as it has received a state grant to remediate the once-industrial construction site.

Gov. Tom Wolf today announced that Harrisburg-based Hamilton Health is the recipient of a $911,113 grant from the state’s Industrial Sites Reuse Program. The grant, along with 25 percent in matching funds, will provide soil remediation for the 2.3-acre site next to the center’s S. 17^th Street facility on Allison Hill.

“We’re very excited about this grant,” said CEO Jeanine Peterson. “We couldn’t go any farther until we received funding to get this done.”

The site long housed an automotive operation, which leeched lead into the ground. The remediation project will remove soil from the site and replace it with clean soil, in addition to other protective measures, Peterson said.

She said that this portion of the project now can proceed and that Hamilton Health hopes to break ground on the new, two-story, 30,000-square-foot building and parking lot this fall. She expects construction to take 10 months to one year.

“This new funding is great news for the city of Harrisburg because it will transform a vacant part of the property into a new expansion for Hamilton Health Center, which means even better health and social services for Harrisburg residents,” said Wolf, in a statement. “Investments like these provide a significant boost to the area.”

Last September, Harrisburg City Council gave Hamilton Health approval for the project. At the time, it was anticipated that Capital Area Head Start would rent a substantial portion of the space for its expansion.

However, the project delay caused Capital Area Head Start, which first approached Hamilton Health about a partnership in 2015, to seek other space. So, Peterson said, Hamilton will occupy the building itself, using it for medical and social services.

“The demand for our services has escalated over the last two years,” she said.

In the process, Hamilton will continue to remake what once was a heavily industrial—then largely abandoned—part of Harrisburg.

“We take blight away and help bring the community back to what it should be,” Peterson said.

To learn more about Hamilton Health Center, visit their website.

“Worst Municipal Finance Disaster”: Commonwealth files lawsuit against actors in HBG incinerator debacle.

May 21, 2018 | by Lawrance Binda

Inside the Harrisburg incinerator, just before its sale in 2013.

The commonwealth of Pennsylvania filed a civil lawsuit on Monday against numerous companies involved in Harrisburg’s disastrous incinerator retrofit, seeking compensation for some of the $360 million in debt that the project piled up.

The lawsuit, filed in Commonwealth Court, names many of the law firms, finance companies and consultants familiar to those who have followed the 25-year saga of the incinerator, which nearly bankrupted Harrisburg and led the commonwealth to impose a receiver to help set the city’s finances straight.

“It is time to hold those responsible for the failed incinerator debt scheme accountable and recoup the taxpayer dollars wasted by their negligence and deception,” said Gov. Tom Wolf, in a statement. “This project, started in 2003, represents the worst of how lobbyists and special interests bilk taxpayers for their own gain. My administration is standing up to these interests on behalf of the taxpayers, and we will continue to fight to stop anyone that uses deception or fraud to take advantage of taxpayers.”

The incinerator dates from the late 1960s. However, much of the facility’s crippling debt began to accumulate with its 1993 “sale” from the city to the city’s own utility authority, the Harrisburg Authority. The state’s lawsuit mostly concerns itself with the period starting in 2003, when under the administration of former Mayor Steve Reed, the authority made the disastrous decision to “retrofit,” or upgrade, the facility using largely untested technology from Minnesota-based Barlow Projects. (Click here for a detailed history of the Harrisburg incinerator.)

In its lawsuit, the commonwealth calls the Harrisburg incinerator debacle, “. . . the worst municipal finance disaster in the history of the commonwealth of Pennsylvania.”

The respondents named in the suit include RBC Capital Markets Corp.; Obermayer, Rebmann, Maxwell & Hippel LLP; Buchanan Ingersoll & Rooney PC; Eckert, Seamans, Cherin & Mellot LLC; Public Financial Management, Inc.; Buchart Horn Inc.; and Foreman and Caraciolo PC.

The lawsuit charges that members of these firms formed a “working group” that allegedly did not act in the best interests of the city. Among the allegations, the lawsuit states that:

“The Working Group’s dual representation of the [Harrisburg] Authority and the city created destructive conflicts of interest.”
“In their efforts to close the debt transaction and collect their compensation, the Working Group’s members provided the city with false and misleading information, concealed material facts and aided others in breaching their duties to taxpaying citizens. Consequently, the city signed onto imprudent and illegal debt guarantees that rendered it insolvent.”

Because of this insolvency, former Gov. Tom Corbett declared a fiscal state of emergency and placed the city into receivership.

The lawsuit also alleges that:

The working group convinced Harrisburg City Council to guarantee $130 million in debt that the city could not afford.
The working group’s disclosures understated the financial burden of the reconstruction project and its financing.
The working group did not disclose to council or to residents the “unreasonable assumptions” supporting its financial analysis.
The engineering consultant failed to identify “key defects” in the original incinerator retrofit design by Barlow Projects.
The working group “falsely” advised the city that the incinerator debt complied with laws meant to prevent excessive municipal debt.
The working group told the city to classify debt as self-liquidating (able to pay for itself out of revenue), “even as the incinerator is about to shut down.”
The working group advised the city to classify new incinerator debt as self-liquidating “based on unreasonable assumptions and despite contrary evidence.”
The working group submitted “incomplete and inaccurate information” to obtain state approval of city debt guarantees.
The working group “violated” laws requiring contractors to post financial security.

In the end, the lawsuit charges that the working group was responsible for adding some $60 million to the incinerator’s debt.

“The professionals involved in these transactions reaped rewards at the taxpayers’ expense,” the lawsuit alleges.

The lawsuit further makes charges against some of the respondents, including allegations of fraud, negligent misrepresentation, breach of fiduciary duty, aiding and abetting breach of fiduciary duty, legal malpractice, aiding and abetting fraud, professional malpractice and unjust enrichment.

In its suit, the state is requesting both actual and punitive damages, as well as a jury trial.

“The action taken today by Governor Wolf is welcome news for the city of Harrisburg,” said Harrisburg Mayor Eric Papenfuse in a statement. “I’m thrilled the governor is taking the necessary step to hold accountable those responsible for the failed incinerator debt scheme. Our residents also are pleased the commonwealth is continuing to fight to secure revenues for the city.”

In 2013, the Lancaster County Solid Waste Management Authority agreed to purchase the Harrisburg incinerator, relieving about half of the outstanding debt on the facility. Tax increases and the long-term lease of the city parking system covered much of the rest of the debt.

The state exited its receivership in early 2014, though the city remains in the state’s Act 47 program for financially distressed municipalities.

In 2015, the commonwealth filed almost 500 criminal counts against Reed, many in relation to incinerator financings. However, many of the counts were eventually dismissed because a judge ruled that the statute of limitations had expired. Last year, Reed pleaded guilty to 20 theft-related counts arising from city-owned museum artifacts that were found in his possession, and he was given probation.

“I thank Gov. Wolf for his willingness to take tackle the tough issues and take on special interests to do what’s right for Harrisburg residents and Pennsylvania taxpayers,” Papenfuse said.

Six Harrisburg tracts nominated for federal tax incentive program

April 27, 2018 | by Lizzy Hardison

The census tracts nominated for Harrisburg’s Qualified Opportunity Zones

Six census tracts in Harrisburg have been nominated as potential investment sites under a new federal program aimed at spurring development in low-income communities.

Gov. Tom Wolf announced this week that he nominated 300 low-income census tracts across the state as Qualified Opportunity Zones, a status created under the 2017 federal tax reform bill. The U.S. Department of Treasury is expected to approve all QOZ designations by May, according to a statement from the governor’s office.

Six of Harrisburg’s 14 census tracts were included in Wolf’s submission. The potential investment zones encompass the city’s downtown area south of Forster Street, South Harrisburg, South and Central Allison Hill and the neighborhoods along the city’s Cameron Street industrial corridor.

The QOZ program aims to stimulate investment in low-income communities by providing tax breaks to private investors.

The program, which is still under development by the U.S. Department of the Treasury and the Internal Revenue Service, will defer or reduce capital gains taxes to anyone who invests in funds supporting businesses, real estate and other ventures in Opportunity Zones.

Mayor Eric Papenfuse was cautiously optimistic about the incentive program on Tuesday, when he announced to City Council that Harrisburg tracts had been included in the governor’s submission.

“It’s an interesting concept,” Papenfuse said. “We don’t quite know what it will mean yet. The [federal government] needs to determine benefits, but it’s exciting.”

Papenfuse said that the recommended zones aligned with the city’s current development efforts, including the MulDer Square revitalization project and the Paxton Creek reclamation in the industrial corridor.

To qualify for QOZ status, a census tract must either have at least a 20-percent poverty rate or a median family income less than 80 percent of the statewide or regional median income. Papenfuse said that all of Harrisburg’s eligible tracts made Wolf’s list.

In total, almost 1,200 tracts across the state qualified for the program.

“We are hopeful this new incentive will bring much-needed investment to many distressed areas across the commonwealth,” Wolf said in a statement.

Burg View: End the Road Carnage Now

April 16, 2018 | by Lawrance Binda

One of the many crashes last year on Forster Street in Harrisburg.

Harrisburg’s collective patience has been exhausted.

Last week, a video went viral showing a pedestrian getting mowed down by an SUV as she ventured into the crosswalk at the intersection of Front and Herr streets.

Moreover, an epidemic of crashes continues along Forster Street from the bridge past 3rd Street. Up on Allison Hill, four pedestrians and a bicyclist have been killed on State Street over the past 18 months, according to the city.

What is the one thing these streets—Front, Forster and State—have in common? They are all state roads. In addition, they’ve all been widened over the years to accommodate the army of state workers who zip in and out of the capital city every day from the suburbs, as Harrisburg’s erstwhile neighborhood streets have been turned into multi-lane highways.

In other words, the commonwealth holds a unique responsibility for these roads and their safety. And it is failing that responsibility in the most profound and deadly way.

Over the past two years, TheBurg has written repeatedly about the dangers of Front, Forster and State streets. We’ve even offered suggestions on how to reduce speeds and improve safety on the Harvey Taylor Bridge and on Front and Forster streets. So far, nothing has happened.

This isn’t rocket science. Many other states and cities have implemented traffic-calming measures that include more signage, flashing lights and altered road services. Of course, better traffic enforcement also would help, as, currently, there is precious little.

We appeal to Gov. Tom Wolf and the Pennsylvania Department of Transportation to make road safety a priority in Harrisburg. The state must act now before another person is injured or a life is lost. The carnage must end along the dangerous, deadly roads that the state controls within the city’s limits.

Lawrance Binda is editor-in-chief of TheBurg.

Better Late than Never: Wolf lets delayed contributions flow to schools and nonprofits

October 13, 2017 | by Lizzy Hardison

Local schools and nonprofits this week were relieved to hear that they could soon receive millions of dollars in corporate donations, which had been put on hold in the state’s ongoing budget impasse.

Gov. Tom Wolf’s office confirmed on Thursday that it authorized approvals for Educational Improvement Tax Credits, which awards businesses tax credits if they donate up to $750,000 to a scholarship fund or educational initiative. Both businesses and beneficiaries must apply to participate in the program.

The state Department of Community and Economic Development previously said that the tax credit applications would not be approved until the state passes its final budget. TheBurg reported that the delay was jeopardizing programs at local nonprofits and schools.

Letters notifying organizations of their approvals will be mailed by the end of the week, said J.J. Abbott, Wolf’s press secretary. Businesses have 60 days from the date on the letter to make their donations.

The private funding distributed through EITC is not a state appropriation, and Kirk Hallatt, director of the Harrisburg-based nonprofit Joshua Group, told TheBurg that lawmakers had no good reason to withhold it from beneficiaries. He accused lawmakers of using it as a “political toy” in their budget dispute.

Seventy-nine members of the House Republicans apparently agreed and petitioned Wolf last week to release the funds, according to a press release.

The Salvation Army of Harrisburg was approved to receive funding for its annual Summer Youth Enrichment Program. Kathy Anderson-Martin said Wolf’s decision to authorize EITC approvals makes it easier for them to plan ahead.

“The number of kids we are able to serve is dependent on available resources, so the prospect of donations through the EITC greatly improves our outlook for serving 400 local children next summer,” Anderson-Martin said.

Burg View: The state must regularize its annual payment to Harrisburg.

June 30, 2017 | by Lawrance Binda

Where state and city meet.

Bruce Weber isn’t typically known for his serenity.

By his own admission, he’s a worrier, which is probably the correct disposition when you’re Harrisburg’s budget and finance director.

However, even by a calmer standard, the recent struggle over the state’s annual payment to Harrisburg was a nail-biter.

When asked recently what would happen without the state payment, which, in recent years, has represented about 8 percent of the city’s general fund, Weber thrust his hands into the air, making a “who knows” gesture. Without it, Harrisburg’s budget would have a massive hole in it.

How would it be filled? Who knows?

Back in February, Gov. Tom Wolf’s proposed 2017-18 budget contained $5 million to Harrisburg for services in lieu of taxes. Then it was stripped out, in its entirety, by the state Senate. At the last minute (i.e. this week), the money suddenly reappeared, thanks to the Herculean efforts of state Rep. Patty Kim and Sen. John DiSanto. This is no way to run a city—or a state.

I’m not going to address the issue of exactly how much the payment should be. Is $5 million a year a fair figure for an entity that owns 42 percent of Harrisburg’s land yet pays no taxes, but still needs 50 buildings and 30,000-plus workers and visitors served and protected each day?

It’s probably in the ballpark, although city Councilman Ben Allatt, citing New York’s greater payment to its capital of Albany, argues it should be much more.

Whatever the figure, it’s time for the state to own up to the fact that it depends upon Harrisburg for fire protection and other services—and that those services cost money to provide. Moreover, Harrisburg, still financially fragile, cannot afford to wait until halfway into its own fiscal year to learn whether or not it’s going to receive a state payment—and, if so, how much.

Therefore, we call upon the state to enter into a long-term agreement with the city to provide a knowable, mutually agreed-upon annual payment, which would not be subject to the vagaries of partisan politics and the whims of politicians.

Doing so would allow the city to budget responsibly, while fostering a more respectful and beneficial bond between city and state. It also might help calm Weber’s nerves—and ours.

Author: Lawrance Binda

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