Harrisburg city coffers on empty

Seeking Act 47 state protection

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Harrisburg, a city whose economy turns on the seemingly recession-proof industry of government, is headed to state receivership, a victim of a declining tax base and, say its current leaders, longtime fiscal irrationality.

"The city's financial consultants predicted late last year that the city of Harrisburg would run out of money at some point around this time of year. And it has," said Chuck Ardo, a spokesman for Harrisburg Mayor Linda Thompson.

Earlier this week, the city barely made its $900,000 payroll, and experts believe it won't be able to meet payroll after the year's end without a bridge loan.

The problem, say experts, is that the bridge would take them only into the next round of debt.

The prospect of a state capital city in bankruptcy sent Ms. Thompson and council to the Pennsylvania Department of Community and Economic Development to seek status under the state's Act 47. The law is designed to help cities avoid credit-shattering Chapter 9 municipal bankruptcy and put fiscal affairs in order.

Fred Reddig, executive director of DCED's local government unit, said Harrisburg's problem is threefold.

First, with so much state-owned real estate in its limits, nearly half of the land is off the tax rolls. Second, the city's average income rate and poverty rate combine for a low-yield wage and earned income tax revenue. Finally, a massive loss on a renovated city incinerator -- a joint Harrisburg-Dauphin County bond project -- has driven up the monthly debt service for the city.

That third issue, which grew under the tenure of former Mayor Steve Reed, who was voted out of office after 28 years, has left the city with an additional $288 million in debt.

The fiscal crisis has posed a first-term challenge to Ms. Thompson, who displaced Mr. Reed in the last Democratic primary. Mr. Ardo, a former spokesman for Gov. Ed Rendell, took pains to distance his new boss from the Reed administration.

"It's just indicative of the way the folks that ran this city ran this city," Mr. Ardo said of the crisis. "It appears that they found a whole series of one-time fixes over the course of the past several years that covered up the true extent of the fiscal crisis. That didn't become evident until this administration took over."

DCED has not yet ruled on whether Harrisburg will join the 25 other Pennsylvania municipalities to seek shelter under Act 47 since the law was passed in 1987. Among cities that sought and received Act 47 protection is Pittsburgh, which came to the brink of fiscal collapse in the final year of Mayor Tom Murphy's third term.

The act would give Harrisburg breathing room in three ways -- one of them unlikely to please the city's unions.

First, Act 47 would lay boundaries for the next round of municipal labor contracts, meaning a clear limit would be set on what the city's employees could get under collective bargaining. While the act would not permit the city to renege on existing contracts, it could mean no raises for the city's police officers, firemen and maintenance crews.

The act also would grant the city extraordinary authority to raise real estate and wage taxes to a level that would make up for the financial shortfall. The law also allows the state to prioritize Harrisburg on the list of communities due for certain revitalization and community developments that could revitalize its sagging tax base.

Whether those measures work, Mr. Ardo said the time to act was, in a sense, yesterday.

"They needed to address this issue years ago," he said of the city, "and they didn't."

Dennis B. Roddy: droddy@post-gazette.com or 412-263-1965.


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