Pennsylvania Gov. Tom Corbett has held out both a carrot and a stick to Harrisburg.

In a letter to Mayor Linda Thompson in advance of Wednesday’s critical City Council vote on another proposed financial recovery plan, Corbett warned that the state would not bail out its capital city, mired in more than $300 million of incinerator-related debt, if it does not pass the plan.

“This is the last best chance for all stakeholders to agree on a process and a plan. If there is no approved plan at this point, then the city is likely to become mired in litigation and chaos,” he said.

If Harrisburg approves the plan Thompson has urged, which largely mirrors that of a consultant under the state’s Act 47 program for distressed communities, Corbett said the state would provide an $8 million grant for improvements to the incinerator and a $5.66 million loan from the Pennsylvania Infrastructure Investment Authority for sewer improvements.

The Republican governor has also agreed to increase annual payments to the city for fire protection to $2.5 million per year from $500,000 and would discuss additional state funding for infrastructure.

Meanwhile, the Harrisburg Parking Authority is willing to pay $7.5 million up front to extend its lease agreement by 10 years. That would help the city make a $3.3 million general obligation bond payment due Sept. 15.

Bonds outstanding on the incinerator located four miles southeast of downtown total roughly $220 million, while the city also owes a combined $75.5 million to the county, bond insurer Assured Guaranty Financial Corp., and the incinerator’s operator, the Harrisburg Authority.

But Thompson must sway at least one more member of the seven-person council to vote her way. The July 19 vote against a plan recommended by Novak Consulting Group was 4 to 3 against. Wednesday’s meeting is scheduled for 6 p.m. in council chambers.

Thomson’s plan would also call for a commuter tax, for which she would need court approval from Dauphin County.

Should the council again reject Act 47, a state takeover looms. Pending before Pennsylvania’s General Assembly for consideration when it reconvenes next month is a bill by Sen. Jeffrey Piccola, a Republican whose district includes parts of Dauphin County, to establish a three-member panel to essentially run any city that rejects Act 47.

Piccola filed that bill in the last session, but lawmakers passed a modified version, an amendment to the fiscal code that prevents small-to-medium-sized cities in Act 47 from filing for bankruptcy protection under the threat of losing all state aid.

Corbett, who met with Thompson last week, said he would sign Piccola’s bill.

“If the city continues down the path of irresponsible economic decision-making, it is probable that legislative action will result in the city losing control of its ability to make such decisions,” the governor wrote to the mayor.

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