The Harrisburg city council members seem to be supportive of the Act 47 plan.
Comments [Add Comment]
Mayor Linda Thomson and three members of the city council said that they believe the Act 47 recovery plan will work. Another member is as yet undecided about the plan, but the initial impression is that the city officials are favorably inclined.
The 500 page working plan was released on 8 Jul 2011. The new plan is a modified and more detailed version of the first draft that was released on 13 June. Act 47 is the only hope of the beleaguered Harrisburg City to get its financial affairs in order. The incinerator has caused the city $310 million in debt. Mayor Thomson believes that the Act 47 plan can help the city achieve fiscal solvency by 2013.
Julia Novak of the Cincinnati based Novak Consulting group led the Act 47 team. The highlight of the plan is the sale of the troublesome incinerator to the Lancaster County Solid Waste Management Authority for $124 million. The plan also proposes that the city’s parking garages be sold or leased out to interested parties. Though there are many parties interested in the parking garages, their names have not been disclosed. According to the team, the city must net at least $120 million for the parking deal to be profitable.
Members of the council met with the Act 47 team to discuss the changes in the proposed plan, which include the following:
• Removal of 10 year tax abatement requirement, but this is still recommended to be considered.
• Removal of requirement for a non-profit organization to run the recreation department.
• Removal of requirement to close a fire station, though apparatus deployment is still recommended for evaluation.
• Removal of proposal to consolidate the mayor and city council offices and sharing of staff.• Removal of blended property tax rate proposal.
• Future employees will not have post-retirement health benefits, benefits will remain for those who are currently employed.
One of the members of the council, Brad Koplinski, said that he would have also liked to see some more concessions made by the bond insurance company Assured Guaranty Municipal Corp., backers of the city's incinerator debt, and Dauphin County, to reach zero stranded debt. Novak said that Harrisburg could have $26 million if all the asset deals are done under an approved plan, along with some other financial guarantees.
If Harrisburg pays off the $220 million principal debt ahead of time, AGM will pay $65 million in lost interest. This is the amount that bond investors would otherwise never see. Dauphin County and AGM will also set up a $6 million escrow this year to help with the funding shortfalls of the city.
If the changes are not made immediately, the city will not be able to make payroll this September. From the $3.4 million deficit this year, it may grow up to $10 million in 2015, if no action is taken. The escrow funds must also be used in advance, according to the Act 47 plan, though they are tied to the asset deals.
Daphne County officials are favorable about the plan. They will have to agree on $2 million in gambling revenue every year, for 5 years. The county had collected $14 million in gambling last year, so $2 million per year should not pose much of a problem. A property tax increase of 0.8 million must also be approved for lost asset revenue offset.
If the revenue is still not sufficient, higher property taxes as well as the elimination of additional positions in police and fire departments and public works need to be considered.
The plan includes pay freezes, some layoffs and increased fees for services. After the council meets again to hear a final overview of Act 47, the vote on the plan will be made on 19 Jul 2011.
