Harrisburg’s City Council will hold a special legislative session at 6 p.m. Tuesday to accept or reject a proposed financial recovery plan for Pennsylvania’s capital city, which is saddled with $220 million of bonds outstanding on its incinerator.
Which way the seven-member group votes is uncertain, and it could come down to a 4-to-3 vote.
“I think we’re up against a wall,” council member Patty Kim said in an interview Wednesday, one day after the City Council at a public meeting debated the Act 47 plan.
Harrisburg entered a state program last December for distressed communities, named Act 47 after its enabling legislation.
Novak Consulting Group of Cincinnati crafted the plan on behalf of Pennsylvania’s Department of Community and Economic Development.
Novak said in its report that asset and lease sales would help pay down much of the incinerator debt, along with meeting short-term liquidity needs. The sales would also help the city repay a combined $75.5 million to Dauphin County, bond insurer Assured Guaranty Municipal Corp. and the facility’s operator, the Harrisburg Authority.
Councilwoman Susan Brown-Wilson said at Tuesday’s meeting that she opposed the plan because it has no provisions for a commuter tax.
Colleagues Brad Koplinski, Eugenia Smith and Wanda Williams have also voiced exceptions to the plan, though they haven’t specified yet how they will vote.
Council President Gloria Martin-Roberts and member Kelly Summerford have favored the plan, and Kim, speaking Wednesday, called it “a good working document.”
“It’s a good starting point for us,” Kim said. “We may not like everything that’s in it now, but we can put our hands on it and improve it.”
Some council members say a regional solution, such as a commuter tax or county tax, would help Harrisburg, whose population is about 48,000.
Kim opposes a commuter tax, saying it would hurt economic development, but would favor a Dauphin County tax “if we can get the stars aligned.”
Last month, the council, in a 4-to-3 vote, authorized Mayor Linda Thompson to prepare bankruptcy papers, should the city choose to file for Chapter 9 protection. Council members have discussed the city’s problems with law firm Cravath, Swaine & Moore LLP, which is representing the council pro bono.
But the Pennsylvania legislature two weeks ago passed a bill preventing Harrisburg and other small-to-medium-sized cities in Act 47 plans from filing for Chapter 9 bankruptcy protection, under the threat of losing state aid.
“That creates a challenge” to filing bankruptcy, said one lawyer who asked not to be identified.
Thompson, who has repeatedly said she opposes bankruptcy, favors the Act 47 plan.
“We think it will lead to a liquidation of debt with minimal impact on the city,” Harrisburg’s mayor said. “We think the stranded debt will be manageable. I know the structural deficit in the city will be eliminated.”
