The Sorry State of Harrisburg’s Finances
Shahd Mansour and Caitlin Setlock, Elizabethtown College

The finances of the city of Harrisburg, the capital of Pennsylvania, have lately been a controversial topic among politicians, lawyers, and government officials. The city of 50,000 residents has managed to accumulate $300 million in debt. A large part of the debt was the result of a renovation to its trash incinerator about 10 years ago. There were several attempts by state officials to resolve the debt over the past several months. State leaders are in the process of trying to take over the city’s finances after the U.S. Bankruptcy Court in Harrisburg halted the City Council’s attempt to solve the state capital’s financial problems.

The city had originally counted on the revenue from the incinerator to cover the cost of financing the renovation. The debt from the project kept growing over the past several years and the revenue from the incinerator was not sufficient to repay the debt. On October 11, 2011, the municipal government of Harrisburg decided to file for bankruptcy in hopes of being relieved from some of the debt owed to its creditors. The municipal government made that decision after a 4-3 vote at the city council in favor of the filing. This decision rankled many politicians and officials, but despite the negative reactions, the city council’s attorney, Mark Schwartz, filed for bankruptcy. The council referred to Chapter 9 of the U.S bankruptcy code to support its claim.

On November 23, 2011 federal judge, Mary France, dismissed the bankruptcy petition declaring that such a petition violated state law. Pennsylvania state law prohibits a city from filing bankruptcy. The city council then filed for appeal, but the judge denied the request to revive the case stating that the city council requested the appeal after the two-week deadline set by the court.

The mayor also put forth measures to deal with the city’s problem. Ms. Linda Thompson’s plan was to sell the incinerator, rent public parking lots, and increase the property tax, reduce hiring, and cut spending. Under her plan, a typical homeowner would pay an additional $50 to $100 in property taxes. Higher taxes reduce disposable income, and the result would be less spending on various goods and services in the city. Restaurants, bars and entertainment venues all stand to be affected.

On December 2, 2011 a state takeover of Harrisburg was confirmed and David Unkovic was appointed as the Receiver. Unkovic was granted the power to override Harrisburg’s mayor and city council, and he is required to deliver a financial recovery plan by February 6.¬ The likely actions he will take include seeking contract concessions from the city’s unionized workers, higher taxes on city residents, reduction in hiring, and cutbacks in key services. As a result, the quality of life is likely to go down, which will further harm the economic status of the city.