Friday, November 27, 2015

Update: What the Harrisburg finance war is really about

The city is black, poor and mostly tax-exempt. No wonder its leaders think the state, suburbs and bankers who 'segregated' them should share in its bond bailout

Update: What the Harrisburg finance war is really about


UPDATE: Reuters on Harrisburg's struggle, Bond Buyer on all-sides meeting

EARLIER: The fight over Harrisburg's city finances isn't hard to figure out.

The city, small, poor and predominantly African-American, is stuck with monster debt from a previous administration's expensive trash incinerator project, which its current officials can't pay without big service cuts, tax cuts or asset sales.

It should be no surprise to hear what most Harrisburg elected officials want: a solution that shares the burden with their middle-income white neighbors in Dauphin County, whose government also funded and agreed to back and use the troubled incinerator.

So here's Harrisburg City Council's plan: Boost the current city income tax from the current 1% to 2% on all workers, including (mostly white, state worker) suburban commuters.

Many commuters wouldn't pay the full amount, since they already pay a lower tax to their current townships, which would be deducted from Harrisburg's levy. The plan would bring in $22 million a year, "which fills our gap," the city's elected controller, Dan Miller, told me.

Harrisburg officials have made other suggestions. Dauphin County, which joined Harrisburg in backing the incinerator, or its bond insurer, could shoulder part of the incinerator debt, like they promised. To pay it, they could agree to higher trash-disposal fees; Harrisburg's have already tripled. Or the county might push its bond insurer to make good. Or it could impose a 1 percent sales tax, like debt-laden Philadelphia and Pittsburgh have. That would bring in an estimated $38 million a year, Miller said, citing data from the Pennsylvania Economy League.

But the lawmakers elected to represent the suburbs don't want any of that, and neither does Gov. Tom Corbett. Instead, the state's plan calls for the sale of Harrisburg parks and utilities, and breaking labor and vendor contracts to cut costs, while continuing payments on the incinerator bonds, under a newly beefed-up Act 47, the 1980s state law that provides state financial supervision as an alternative to city bankruptcy.

Rebuffed by the state and county, city officials figure they have a better chance of succeeding in federal bankruptcy reorganization. They believe bankruptcy  would give them a better shot at negotiating down the debt with bondholders and guarantors (as Birmingham, Alabama's cash-strapped county government recently managed to do, partly by threatening bankruptcy).

Why does the city think it has any claim on suburban or state resources? Not just because the incinerator was a regional project. Also because most of Harrisburg's commercial land is tax-exempt, under state ownership. Its workforce is largely state and state-dependent employees, from the suburbs, for whom it must provide basic services. 

Should little ex-industrial cities like Harrisburg continue to exist? Some officials believe the city's plight would be eased if services were regionalized across town lines. "The problem is they've segregated the citizens of Harrisburg in this little zone," Miller told me. "It would make very good sense if we had a county school district. Young people like it here, but as soon as they have a child they look to move out. The middle and upper class people care about their children's education." If they could choose suburban schools, and help pay for them, whlie still living in the city, they would, Miller says.

It's a simple story: City officials are trying to protect city residents and assets. Suburban and state officials see no reason to share. So the city is appealing for federal court protection for their own repayment plan.

Where you stand, depends on where you sit.  

We encourage respectful comments but reserve the right to delete anything that doesn't contribute to an engaging dialogue.
Help us moderate this thread by flagging comments that violate our guidelines.

Comment policy: comments are intended to be civil, friendly conversations. Please treat other participants with respect and in a way that you would want to be treated. You are responsible for what you say. And please, stay on topic. If you see an objectionable post, please report it to us using the "Report Abuse" option.

Please note that comments are monitored by staff. We reserve the right at all times to remove any information or materials that are unlawful, threatening, abusive, libelous, defamatory, obscene, vulgar, pornographic, profane, indecent or otherwise objectionable. Personal attacks, especially on other participants, are not permitted. We reserve the right to permanently block any user who violates these terms and conditions.

Additionally comments that are long, have multiple paragraph breaks, include code, or include hyperlinks may not be posted.

Read 0 comments
comments powered by Disqus
About this blog

PhillyDeals posts interviews, drafts and updates that Joseph N. DiStefano writes alongside his Sunday and Monday columns and ongoing articles about Philadelphia-area business.

DiStefano studied economics, history and a little engineering at Penn. He taught writing and research at St. Joe’s. He has written for the Inquirer since 1989, except when he left a few times to work at Bloomberg and elsewhere. He wrote the book Comcasted, and raised six kids with his wife, who is a saint.

Reach Joseph N. at, 215.854.5194, @PhillyJoeD. Read his blog posts at and his Inquirer columns at Bloomberg posts his items at NH BLG_PHILLYDEAL.

Reach Joseph at or 215 854 5194.

Joseph DiStefano
Also on
letter icon Newsletter