Harrisburg Fights to Stave Off Bankruptcy

The city of Harrisburg in Pennsylvania currently stands at the verge of bankruptcy, according to consulting firm Management Partners. Harrisburg’s mayor Linda Thompson says the city has an immediate need of $3.8 million. This figure is set to grow to $164 million in five years’ time. A major part of this amount is because of the $288 million debt the city guaranteed on the Harrisburg Authority’s incinerator. The city has yet to pay $68.7 million in debt-service payments this year.

To address the situation, the city will embark on a concerted drive to avoid the bankruptcy courts. Management Partners has laid out 21 steps of action the city needs to take. Among them are selling off some of the city’s assets, negotiating with the company that runs the Harrisburg Authority incinerator to either sell or lease it in the long term and reviewing labor agreements with the unions. The city also has had to deal with other parties such as Dauphin County. One action step the Harrisburg city authorities are in the process doing is reviewing its emergency financial plan with Dauphin in order for the county to fulfill its financial obligation to make debt-service guarantee payments.

In addition to these steps the city will implement some other potential deficit reducing measures. Some of the actions they could take include doubling the parking tax, a 20% increase in water and sewer rates, increasing sanitation fees and parking infringement fines by 100%, raising property taxes by 117 percent next year and selling the city’s parking garages. The city’s employees are also required to take 5 days’ no pay leave a year each.

For now, Management Partners has not recommended that the city apply to the state to be declared financially distressed under Act 47 of Pennsylvania state. Act 47 states that financially distressed cities in Pennsylvania need to submit to the state’s oversight although it still may receive funds. This is usually the final step before formally filing for bankruptcy. It appears an Act 47 declaration may become a reality by the middle of this year.

Various city officials have differing opinions about bankruptcy. City controller Dan Miller is one of the proponents for the idea of applying for bankruptcy sooner rather than later. He feels that bankruptcy protection would stave off creditors and save some of the city’s assets. However, Mayor Thompson feels otherwise. Bankruptcy is not one of her immediate options.

Dauphin County, meanwhile is happy that the city is considering selling its assets. This was something the County had proposed in the past.