The City of Harrisburg has come a long way over the last five years.
There have been a few signs along the way. The city has been eligible to take out loans for road repairs that may not have been available before. They have a fund balance to use for capital improvements this year.
But there are still some big issues that need to be resolved before the city can be considered to be financially sound.
A financial-condition report issued today by the state Department of Community and Economic Development said through the state-crafted recovery process, the city “has made noteworthy progress on a number of fronts.”
But the city is not ready to leave recovery yet.
If it did, “the city would immediately return to fiscal emergency status,” the city’s Act 47 coordinator, Marita Kelley, wrote in her financial-condition report, handed to the city this morning.
Kelley told city council earlier this month that her report to pave the way to a brighter financial future was coming today. The two most likely recommendations were that the city would exit the recovery plan this year, or remain in it for another three years.
She chose the latter. If the city were to exit recovery now, it would lose $11 million from the local services tax for commuters, turning a projected $353,766 surplus in 2019 into a $10 million deficit, according to her report.
The city may even need more than three years in recovery, she noted, urging city officials to explore home rule options or work to bring about legislative changes to allow it.
The city’s problems include a limited tax base, climbing costs for collective bargaining contracts, increasing costs for supplies and a legacy of fiscal obligations that continue to stress the city’s coffers, she wrote.
Harrisburg’s operating expenses are projected to increase by 5 percent over the next four years, but operating revenue will only increase by 1.3 percent.
The city was first placed under receivership after the governor’s office declared a fiscal emergency in October 2011. This was followed by the Harrisburg Strong Plan’s confirmation by the Commonwealth Court in September 2013 to guide the city out of financial distress.
Since the adoption of the Strong Plan, the city has seen an operating budget surplus, ending with a surplus of $2.9 million in 2017, according to the report. By comparison, they had a $23.6 million deficit in 2012.
In the 2018 budget, the city had a $9.2 million fund balance appropriation, which the city intends to use to pay for needed capital improvements. And another big step, the report notes, is that the city has sufficient cash to pay its bills with no accounts going 30 days overdue.
The issues, on the other hand, include debt, as well as retiree healthcare and pension costs, making up roughly a third of the city’s total operating expenses. The outstanding principal on Harrisburg’s long-term debit is $77.3 million, on which the city is making an $8 million payment this year. The annual pension obligation is roughly $4 million.
And even with the extra funds coming in from Act 47, the city still faces an operating deficit next year of $696,755, growing to $1.9 million in 2020.
The mayor, city council and the citizens of Harrisburg will have a chance to read and submit comments on Kelley’s report, and it will be the subject of a public hearing in April.
By July, using the revised financial condition report based on that input, Kelley will submit an exit report. Once again, council, the mayor and the citizens can comment on it, and it will be up for a public hearing, as well.
Kelley said recommendations on how to eliminate projected operating deficitswill be included in the exit plan.
Council will then vote on the final report by Sept. 13.
You can see the plan, provided by the Pennsylvania Department of Community and Economic Development, here:
Harrisburg Coordinator Financial Condition Report_20180322 by Steve Marroni on Scribd