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Thursday, October 27, 2011

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.  
Posted by Joseph N. DiStefano @ 4:31 PM  Permalink | 7 comments
Comments   
  • 0 like this / 0 don't   •   Posted 6:17 PM, 10/27/2011
    "City officials are trying to protect city residents and assets. Suburban and state officials see no reason to share." How can the author fail to see the double standard here? The suburban officials are doing the same thing as the city officials: "protecting [their] residents and assets." Yet, when the city does it, it's just and worthy, but when the suburbs do it, it's unjust, and implicitly racist. Please...
    — whateverman
  • 0 like this / 0 don't   •   Posted 6:55 PM, 10/27/2011
    Rebid the Parking garages - 10 million year right there
    — Ed Sullivan
  • 0 like this / 0 don't   •   Posted 7:08 PM, 10/27/2011
    Someday cities and boroughs all across the state will have to dissolve into their larger, wealthier township neighbors. Cities have no more land to grow jobs and tax revenue, so they're stuck with old stores and homes that few want. They'll eventually collapse. No one likes municipal mergers, but if we don't do something, the social and economic problems will eventually spread to the townships. Poor people can and do move up like the rest of us. If we don't fight the cancer, it will grow.
    — everydayguy
  • 0 like this / 0 don't   •   Posted 7:15 PM, 10/27/2011
    Always gotta make everything a racial issue.
    — Manny Yunker
  • 0 like this / 0 don't   •   Posted 8:02 PM, 10/27/2011
    I spend much time working in various, large state offices, and they are staffed mostly by blacks. Walk down any hallway, and see for yourself. Also, many of the surrounding suburbs are heavily black, the same people who commute to work in the state offices. The suburban governments are fighting for the black residents every bit the same as their white neighbors. The premise of your argument is pure fabrication.
    — Jean Valjean
  • 0 like this / 0 don't   •   Posted 9:07 PM, 10/27/2011
    Taxation without representation?
    — Wilhelm Von Humboldt
  • 0 like this / 0 don't   •   Posted 9:46 PM, 10/27/2011
    Looks like I hit a nerve. Valjean, fabricate on this: Dauphin County, INCLUDING Harrisburg: less than one-fifth black, household income $49,000. Harrisburg ALONE: majority black; household income $26,000. http://quickfacts.census.gov/qfd/states/42/42043.html
    http://en.wikipedia.org/wiki/Harrisburg,_Pennsylvania#Demographics
    WhatEv, you put words in my mouth. I said both groups are acting in their interest. You're the one who raised the cry "Unjust." Humboldt, Everyday, Ed, rock on.
    — Joe D


7 comments
About Joseph N. DiStefano
Joseph N. DiStefano writes this blog to feed his PhillyDeals column in the Philadelphia Inquirer. Joe has been a member of Bloomberg LP’s New York Finance Team, wrote the book “Comcasted,” taught writing at St. Joseph’s University, and studied economics and history at Penn. Reach Joe at 215-854-5194 and JoeD@phillynews.com
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