Sunday, July 3, 2011

Harrisburg, Pennsylvania, on the brink of financial collapse

Harrisburg is a city on the brink of financial collapse.

Week to week, city employees wait to see if officials will scrape together the money to cut their paychecks, creditors breath down the necks of the city's elected leaders and the debt from a failed investment in the city's incinerator now tops $300 million, according to published reports.

And the state is closing in.

Harrisburg has been undergoing Pennsylvania's Act 47 process in order to straighten out its financial future, but the act comes with some state recommendations -- such as selling assets and raising taxes -- that many in Harrisburg don't like. Some city leaders have pushed for the city to declare bankruptcy and keep the legislature out of its finances. The legislature last week passed a bill that makes it harder for third class cities to ignore Act 47.

So what did it mean when York's Mayor Kim Bracey stood alongside Harrisburg's Mayor Linda Thompson last week during a news conference where she opposed the state's additional restrictions on the Act 47 process?

City officials say they know what it didn't mean. York is not in the same boat as Harrisburg, Bracey and her Business Administrator Michael O'Rourke said this week.

The two cities are in the midstate. They're both third class. But the similarities end there, O'Rourke said.

"Their situation is compromised by the incinerator," he said.

The most serious trouble with Harrisburg's incinerator began in 2003, when the city's Harrisburg Authority -- with the backing of Harrisburg, county leaders and bond insurers -- invested in a failed retrofit for the facility that cost far more than the revenue created.

With the authority unable to make the sizeable payments necessary to pay off the failed plan, the debt has ballooned, and now the city and its taxpayers face several multi-million dollar payments each year. (read more)