Clearly, a majority of Harrisburg's city councilors object to a Pennsylvania court order compelling them to raise the earned-income tax to 2% from 1%.
What they'll do in the face of the directive, though, is uncertain.
The council on Tuesday night met with its attorney, Neil Grover, to discuss options, which include seeking an emergency injunction against Commonwealth Court Justice Bonnie Brigance Leadbetter's decision. Leadbetter backed state-appointed receiver William Lynch's motion to increase the tax as part of the city's recovery plan.
Leadbetter said the council has 15 days to comply, though it could buy time with an injunction, or seek clarification from the court. Noncompliance could risk a contempt citation.
The tax would take effect for a year, though Lynch could seek an extension. It could bring in about $6 million to the city, less than half of its estimated structural deficit. Harrisburg's bond debt exceeds $320 million, largely due to cost overruns to an incinerator retrofit, which have triggered requests for a federal investigation into the bond financings.
Lynch's plan includes selling assets, including the incinerator, the sewer and wastewater systems and parking garages.
Council member Patty Kim, who opposes a bankruptcy filing and has supported initiatives under the state's Act 47 program for distressed communities which paved the way for receivership, opposes the tax hike. "We cannot tax our way out of this massive hole," she said.
Another council member Brad Koplinski, said the city should negotiate with major creditors first before selling assets, then increasing taxes only as a last resort. "The commonwealth, in pushing for this tax first, is wrong in its approach," said Koplinski, who favors bankruptcy.
Harrisburg has $3.4 million in general obligation bond payments due Sept. 15. It skipped $5.3 million worth of GO payments in March. Moody's Investors Service has cited the move as reflecting more willingness to default on insured debt and financial guarantors' increased exposure.
Ambac Assurance Corp. insured the GO bond debt. Assured Guaranty Municipal Corp. is the incinerator debt insurer.