Harrisburg Mayor Linda Thompson has called for Pennsylvania, Dauphin County and a bond insurer to forgive any of the estimated $26 million of debt not covered by the sale of its financially troubled incinerator and revenue from other measures in her financial recovery plan.
Citing her responsibility “to hold together the delicate balance of stakeholders who all have a stake in [the] game,” Thompson on Tuesday proposed selling the incinerator to Lancaster County, leasing parking garages, and increasing property taxes by 8%.
She said she would ask the Dauphin County court to impose a commuter tax if the state capital does not receive regional assistance.
Her proposal represents the latest attempt at solving a political impasse as the city struggles amid $310 million of incinerator-related debt.
“Harrisburg is just an example of political gridlock,” said Brian Fraser, a partner with law firm Richards Kibbe & Orbe LLP. “The pieces are all there for a resolution. The county has agreed to provide more revenue and the bond insurer is willing to contribute. But with the mayor and the City Council at an impasse, the state will probably have to move in at some point.”
Harrisburg, with about 48,000 residents, is struggling under the weight of debt it guaranteed for its incinerator project, which fell short of financial expectations.
Bonds outstanding on the incinerator, located four miles southeast of downtown, total $220 million. The city also owes a combined $75.5 million to Dauphin County, bond insurer Assured Guaranty Municipal Corp., and the incinerator’s operator, the Harrisburg Authority.
Assured Guaranty and Dauphin County have lawsuits against the city, while the Harrisburg Authority is conducting a forensic audit. The Lancaster County Solid Waste Authority has a $124 million offer on the table, without debt assumption, for the incinerator.
Thompson, meeting a 14-day deadline to submit her own plan after the City Council on July 19 rejected a proposal by a consultant under the state’s Act 47 program for distressed communities, will formally present her plan to the council next Tuesday, with a public hearing two nights after that. Harrisburg entered the Act 47 program last December.
Aside from the commuter tax option, her plan essentially mirrors that of the Act 47 committee. The four members of the seven-person council who voted against the plan favored a commuter tax, some also saying the city should seriously consider filing for Chapter 9 bankruptcy protection. A new state law, though, could force Pennsylvania to cut off all state aid if Harrisburg files for bankruptcy. The Act 47 report said the city could run out of money by September.
The commuter tax has become the latest lightning rod in the politically gridlocked issue. Council members opposing the Act 47 plan cited the need for the tax, while lawmakers outside Harrisburg, notably state Sen. Jeffrey Piccola, R-Halifax, strongly oppose the idea.
The state and Dauphin County have committed to providing additional funds, while Assured Guaranty wants to see Thompson’s latest plan in writing.
“It’s encouraging to see a proposal that is similar to the Act 47 plan and recommends the sale or lease of assets and other debt-reduction measures,” Dauphin County commissioners Jeffrey Haste, Mark Pries, and George Hartwick 3d said in a joint statement.
“Avoiding a sales tax increase and potential commuter tax, which residents throughout the county can ill-afford, is critical,” they said. “We’ll carefully evaluate the recovery plan once we receive it in writing.”
Thompson also called for reworking contracts with municipal unions and attempts to obtain more revenue from payments in lieu of taxes from nonprofit organizations.
