Doing the Right Thing is Not Always Easy

 

BY JACQUELINE G. GOODWIN, Ed.D.

 

 

In the past weeks and months, it has become increasingly obvious that the City of Harrisburg is in serious financial trouble. While many have suspected this for some time, the facts are now emerging, confirming our worst fears.

 

According to Management Partners, the independent consulting firm retained by the city, Harrisburg faces an immediate budget shortfall of $3.8 million. Over the next five years, that budget gap is projected to reach almost $165 million, a 4000 percent increase from today’s shortfall. 

 

With unemployment at its highest rate in more than 25 years, government services are facing rising demand while tax revenues fall precipitously. Harrisburg’s residents have been among the hardest hit by the recent economic downturn. Given this stark reality, now is the time for sensible solutions and sound fiscal management. 

 

In the quest for solutions, one recent proposal by Management Partners, and adopted by Mayor Linda Thompson, is to raise property taxes and water rates. While projected to generate revenue to help cover the shortfalls, one question must be asked: at what cost?

 

Raising taxes and fees on services, such as water, places a difficult burden on residents. The people of Harrisburg, many of whom are struggling themselves, simply cannot bear the cost of large-scale fee hikes and tax increases. 

 

Alternatively, some suggest that the city should declare bankruptcy. This would be catastrophic for Harrisburg. Such a move would completely destroy the city’s already substandard credit rating, thus crippling Harrisburg’s ability to borrow in the foreseeable future. A city unable to borrow cannot fund infrastructure projects such as schools and roads, nor can it address unforeseen emergencies or unexpected cost-overruns. A bankrupt Harrisburg will be considered an undesirable place to live, work and invest – thereby even further reducing tax revenue in an already cash-strapped city. 

 

Some have suggested that Harrisburg go into Act 47, a last resort for cities in dire financial straits. Should Harrisburg go into Act 47, a team of state experts would take control of the city’s finances, leaving Harrisburg exposed to the invalidation of union contracts, employee layoffs, wage freezes and the increase of municipal taxes and fees. This could also be disastrous for Harrisburg and its residents, and Act 47 should also be avoided. 

 

However, there is a fourth option. In the Management Partners’ report, there is a sensible alternative that would provide immediate cash to the city to pay off some of its debt and get back on its financial feet. This option involves the leveraging-leasing or selling-of certain city assets. Selling or leasing assets would give the City of Harrisburg much needed cash and allow it to avoid massive tax increases that ultimately do more harm than good by driving city residents and businesses elsewhere – thus, reducing the tax base and placing greater burden on those that remain. Among those listed are the Parking Authority, City Island and the Harrisburg Incinerator. 

 

While the sale or lease of each of these assets has merit, the parking portion stands out. The lease of the Parking Authority has been available to the city for some time.  Several years ago after an open and transparent bidding process, a lease agreement was obtained, which could inject $215 million into the city coffers, with $100 million available to meet its short and long-term needs. That deal appears to still be on the table.

With this money, the City of Harrisburg could meet all of its debt obligations, restore its beleaguered credit rating and set up a rainy day fund to guard against future financial emergencies. It could also provide increased services and make the city healthy, virtually overnight. 

 

Leasing of a parking system or City Island, unlike the sale of assets or the lease of a home, does not deprive the users of the system and does not burden the residents or taxpayers. These assets will continue to be available to current users in exactly the same way it was before it was leased. The only change will be who manages them. 

 

If the private entity that signed the Parking Authority lease is still willing to lease the city’s parking garages at the price obtained when the market was much stronger, the Mayor and City Council must make a responsible choice and lease the parking system. 

 

Harrisburg’s citizens deserve sensible solutions. It’s not the time to bankrupt the city or dramatically increase the tax burden on those who can least afford it. 717