Harrisburg’s state-appointed receiver late Tuesday petitioned a Pennsylvania court to force the City Council in the distressed capital city to triple the earned income tax to 1.5% from 0.5%.
William Lynch asked Commonwealth Court Judge Bonnie Brigance Leadbetter for a writ of mandamus, or an order, to raise the taxes. The council has repeatedly opposed the move, which Lynch called essential to the city’s recovery plan.
Harrisburg is struggling with $310 million of debt related to guarantees for an incinerator retrofit project. State law prohibits a bankruptcy filing until at least Nov. 30.
The tax hike alone will not solve Harrisburg’s problems, according to Lynch. But he added: “Should Harrisburg fail to collect this revenue, the city’s operating shortfall will be that much greater and will be so substantial that it will seriously jeopardize any ability of the city to achieve a consensual recovery plan resolution with its creditors.”
In court documents, Lynch said the City Council’s inaction has made it impossible to collect any increased revenue from the tax in 2012, thus widening Harrisburg’s operating deficit by a further $1.7 million. He said the tax could generate more than $5.1 million in revenue in 2013 and $6.9 million each year from 2014 through 2016.
Raising the income tax rate goes back to the original recovery plan that Novak Consulting Group Inc. of Cincinnati recommended when Harrisburg enrolled last year in the state’s Act 47 program for distressed communities. The City Council rejected the plan three times, triggering takeover action by the state.
Mark Schwartz, who represented the City Council in its bankruptcy filing last fall, which a federal bankruptcy judge invalidated, questioned Lynch’s legal ground. “If you read the statute, a receiver can’t force the council to levy taxes,” he said.
Leadbetter has 14 days to act on Lynch’s request.
“If we refuse to do that, I don’t know what that means," council member Brad Koplinski said at Tuesday night's meeting. "Will we be held in contempt of court? Will we be looking at jail time? Will we be thrown out of office? How far will the state go to put a tax on the people of Harrisburg who did nothing to get us into this mess? How far will the commonwealth go?”