Familiar themes emerged at today’s “State of Our Cities” event in Harrisburg, including the need for municipal pension reform, the abundance of tax-exempt real estate in core cities and limited options to generate new revenue.
The mayors of Harrisburg, Lancaster and York were on the panel assembled by the Harrisburg Regional Chamber and Capital Region Economic Development Corp. at the Hilton Harrisburg.
All three — Harrisburg Mayor Eric Papenfuse, Lancaster’s Rick Gray and York’s Kim Bracey — agreed that the municipal government structure in Pennsylvania, which counts more than 2,500 local governments, was set up to fail.
Less would be more, they said, with Gray suggesting there should be county-level school districts to level the playing field for educational opportunities and to keep more people living in cities. A much bigger financial burden is placed on larger cities because they are at the center of many social services, which attract more people living in poverty and the homeless.
And cities can’t annex land and expand their boundaries to generate more revenue, Gray said, an idea Papenfuse floated recently regarding the former Harrisburg State Hospital grounds.
A lot of new development projects are being done just outside of the city, which doesn’t benefit the city’s tax base. Gray referenced new Manheim Township shopping centers that will be anchored by Wegmans and Whole Foods.
“Lancaster won’t get anything other than a traffic jam,” he said.
These government hubs tax-exempt properties making up anywhere from 35 percent to more than half of the total. Harrisburg has the highest percentage of tax-exempt properties locally.
The capital city has increased the local services tax paid by people who work in the city, and it raised earned income taxes under the state’s Act 47 distressed municipalities program, Papenfuse noted.
York is looking to again reduce property taxes in 2017, Bracey said, but added that the city also is looking to monetize its wastewater system as many local governments have done to reduce their costs.
Property-tax reforms to reduce the reliance on real estate taxes are still needed, Papenfuse said.
The property-tax revenue that is coming in to cities goes largely to support police and fire services. Attached to those needed services are pension obligations for personnel, which continue to increase, officials said.
Gray expressed optimism that a municipal pension fix is in the works within the Wolf administration. Municipal pension bills often play second fiddle to public-sector reforms at the state level.
While concerned about their cities’ long-term fiscal health, the mayors also highlighted a few positive trends, including more office-to-apartment conversion projects, which are slowly increasing the number of residents. Downtown mixed-use redevelopment projects have been picking up and there are projects on the horizon, including a new federal courthouse in Midtown Harrisburg, that could drive other development.
Opening up the state’s City Revitalization and Improvement Zone economic development program to all third-class cities also could spark new investment, Gray said.
The CRIZ gives municipalities the opportunity to revitalize vacant, blighted and/or abandoned properties. Lancaster already has the CRIZ designation.
Government needs to level the playing field for economic development and then “get the hell out of the way,” he said.