Harrisburg mayor confident city will win approval to exit Act 47

Harrisburg Mayor Eric Papenfuse is confident that Friday is the day the city will secure the legislative approval it needs to exit Act 47, the state program for distressed municipalities.

Papenfuse was planning a march to House Speaker Mike Turzai’s office this morning to demand Harrisburg’s release from state oversight under Act 47. But he held a news conference instead to say he believes a resolution has been worked out.

The mayor has been meeting with leadership in the Republican-controlled General Assembly, including last evening, to hash out a deal.

“Let’s get this done,” the mayor said.

The city’s exit still depends on legislative action later today. Harrisburg’s Act 47 exit is slated to be included as part of an amendment to the state budget’s fiscal code bill, according to the mayor. Code bills are separate from the state budget and guide how certain dollars should be spent by the state each year. 

Spokesmen for Turzai and House Republicans were not immediately available for comment. A spokeswoman for Senate Republicans said they are supportive of the city’s exit.

Turzai has been Papenfuse’s main obstacle to the exit plan. He has said Harrisburg should remain in the recovery program for three more years and exit Act 47 only when it is able to give up the increased taxes allowed under the program. Turzai also believes the city could do more to rein in its spending and privatize assets.

But that three-year Act 47 extension would lead to a new debt-recovery plan, which may not allow Harrisburg to keep higher rates for the earned-income tax and local services tax. Papenfuse said the city desperately needs to maintain that taxing structure to avoid going back into receivership, so he wants out now.

Under its Act 47 recovery plan, known as the Harrisburg Strong Plan, Harrisburg was allowed to double its earned-income tax to 2 percent and triple its local services tax to $156 per year. The extra revenue provides about $12 million per year for the city, Papenfuse said, or about 20 percent of the budget.

If the city loses that extra income, Papenfuse believes officials will be forced to make big cuts to police and fire services, threatening public safety. To offset that revenue hit, Harrisburg would have to double property taxes or pass a commuter tax, he said.

Revenue from the city’s relatively high property taxes has been slowly declining due to stagnant population growth and an abundance of tax-exempt properties. A commuter tax would apply to people who work in the city but live elsewhere. It would be in addition to earned income taxes people already pay to their home municipalities.

With the 2013 Strong Plan set to expire in September, the mayor said legislative action is needed before the summer recess to allow Harrisburg to exit Act 47 by the end of the year and avoid having to craft a new recovery plan.

Lawmakers say it is possible they could act on separate legislation to deal with Harrisburg.

Rep. Greg Rothman (R-Cumberland), who supports the city’s exit, said he believes it will work out “one way or another.”

Rothman, who is concerned about a potential commuter tax on his constituents, said the state should grant Harrisburg an exception on the taxing authority due to the extent of tax-exempt property within its borders. 

“Harrisburg is very unique with 50 percent of its real estate tax exempt,” he said. “The city has gotten rid of virtually all of its assets and it doesn’t have the population or the industry.”

Papenfuse made a similar argument this morning. He said Harrisburg has privatized its trash services, its parking and its water systems. Residents can’t afford massive property tax hikes, he said.

Lawmakers passed a state budget this week. Rothman said he believes there is enough good will left to tackle Harrisburg’s exit from Act 47.

Jason Scott
Jason Scott covers state government, real estate and construction, media and marketing, and Dauphin and Cumberland counties. Have a tip or question for him? Email him at jscott@cpbj.com.

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