More time: Harrisburg's revised Act 47 exit plan looks to maintain special taxing authority
No big property tax hikes are coming right now for Harrisburg residents. Commuters also appear to be off the hook.
At least that's the indication from Harrisburg's new Act 47 exit plan, which was released Wednesday night by the city's state-appointed Act 47 coordinator.
The coordinator, who works in the state Department of Community and Economic Development, said she supports Harrisburg's push to secure legislative approval to indefinitely maintain the city's special taxing provisions allowed under the state program for distressed municipalities.
Harrisburg is slated to exit Act 47 in 2021. Normally once a municipality exits, it loses special tax rates. Act 47 and the city's debt-recovery plan allowed Harrisburg to double its earned-income tax on residents to 2 percent and triple its local services tax, paid by people who work in the city, to $156 per year. The higher taxes provide about $12 million per year to the city.
In the new plan, the coordinator said Harrisburg would be able to maintain the higher rates through 2020 as it lobbies state officials to change the law.
If the city gets the OK from the state, sizable property tax increases presented in a draft of the coordinator's Act 47 exit plan last month could be avoided. Mayor Eric Papenfuse also raised the idea of adding a commuter tax to generate new revenue to help balance the city's budget if the capital is unable to preserve the other taxes.
A bill being developed by state Reps. Greg Rothman (R-Cumberland) and Patty Kim (D-Dauphin) would allow Harrisburg to keep its special taxing authority. The General Assembly is expected to consider that legislation in September.
If the state laws have not been changed by 2021, the coordinator has recommended in the plan that Harrisburg reduce its earned income tax rate to 1.5 percent. The city also would need to reduce its expenses and tap into reserves to help reduce any budget deficits.
From there, the city would have to curb the EIT to 1 percent in 2022 and the LST would revert back to $52.
The coordinator said she does not believe a commuter tax, or earned income tax on non-residents who work in the city, would yield substantially more revenue than the LST currently brings into Harrisburg.
"The coordinator will keep an open mind as to the potential for a commuter tax, but cannot now support an increase unless it has an overall beneficial financial impact for the city," the coordinator's new plan states.
Property tax increases could still come into play for Harrisburg as part of future budgets, the coordinator acknowledged, as municipal personnel costs between wages, health care benefits and pension obligations are all growing for local governments.
Most of the public comments received on the draft plan were in opposition to property tax hikes, which was said could double over three years to offset the loss of the heightened EIT and LST revenue under Act 47.
The new plan recommends that the city study a home rule charter, which would allow city officials to write a new tax code.
The coordinator also believes the city should be asking more tax-exempt organizations to make payments in lieu of taxes (PILOTs), which would generate more revenue, as well as study its split-rate property tax structure. Moving to a single-rate system could benefit the city as revitalization and property improvements continue, according to the plan.
Mayor Eric Papenfuse has called for the state legislature to allow the City to immediately exit from Act 47 with its current taxing authority, and the legislature is slated to take up the issue in September following summer recess.
City council is scheduled to meet again on Aug. 28. Officials could consider the exit plan at that meeting.
Papenfuse said Thursday he also is reviewing the plan.
"My goal remains for a path to exit Act 47 in a way that secures the city's financial future — sooner rather than later," he said in a statement. "Anything short of this will not be acceptable to the hard-working people of Harrisburg, who have categorically rejected any plan that burdens them with more taxes.”
Read the full plan below: