Bill in Pennsylvania Senate would appoint board to strip assets from financially troubled Harrisburg

A Republican state senator in Pennsylvania has proposed a bill that would put the state capital under the control of a three-member “management board” whose role would be to sell off public assets to shore up the city’s large debt.

Sen. Jeffrey Piccola proposed the legislation after Harrisburg officials balked at a list of recommendations brought to them by a state-appointed committee charged with finding cuts to a struggling city’s budget. The committee indicates in its report that Harrisburg owes $220 million despite its 2011 General Fund budget just barely exceeding $55 million.

Piccola’s plan, Senate Bill 1151, which has the support of at least 12 co-sponsors according to his press release, would obviate the authority of Harrisburg elected officials, with the management board acting alone in clearing city structures and services. The state committee appeared before the Harrisburg City Council on Monday suggesting thefollowing, according to the Patriot-News:

• Sale or lease of assets of the Harrisburg Parking Authority.
• Sale of the incinerator to the Lancaster County Solid Waste Management Authority.
• Reduction of 19 city employees across city departments.
• To replace loss of revenue from sale or lease of assets, a $2 million annual payment from Dauphin County’s gaming funds and the increase of property taxes by 0.8 mills.
• Negotiate contracts to freeze wages, restructure health benefits and control the growth of personnel costs.
• Improve management infrastructure and accountability.
• Contain fast-growing employee compensation.
• Combine park maintenance operations into the Department of Public Works.
• Outsourcing commercial sanitation collection.
• Pursue payments in lieu of taxes from nonprofit entities.
• Increase property taxes only when necessary to close remaining gaps between revenues and expenditures.

The actual document was over 400 pages, and it appears its authors did not seek input from the city’s lawmakers. In a Patriot News commentary piece, the City Controller said:

Did [Dauphin] county write the damn thing?” city Controller Dan Miller asked about the 418-page plan.

“I mean, why did [the Act 47 team] get so in bed with the county? Their solution is the worst-case scenario if we went bankrupt. How could any judge’s ruling be any worse for the city? That makes this a great argument for bankruptcy,” Miller said, adding the kicker:

“Who’s going to vote for it?”

But in Piccola’s bill, any city that falls under the state’s 1987 Municipal Financial Recovery Act (Act 47) would not be permitted to file for bankruptcy. Originally, Act 47 was a process by which distressed communities could receive state financial support after accepting the terms of an Act 47 team.

In January, former Democratic Gov. Ed Rendell said he was “pleased” with the members of the team that would look over Harrisburg’s finances. That team includes a law firm from Ohio and another headed by the state’s former speaker of the House, Robert W. O’Donnell.

The law firm McNees Wallace & Nurick wrote a legal brief on how a city qualifies for assistance through Act 47 and the attendant consequences. A running and growing deficit of at least one percent of the city’s budget, missing payroll for 30 days, defaulting on bonds and missing payments to judgments are all considered by the Department of Community Affairs of the Commonwealth before the process scripted by Act 47 begins.

And though state senators have said they do not expect Piccola’s bill to come to a floor vote before the fall, Harrisburg has few options if it does not go through with the recommendations presented to them on Monday. From the McNees Wallace & Nurick brief:

Should a municipality fail to adopt or implement the coordinator’s plan, the municipality is no longer eligible to receive grants, loans, entitlements, or other payments from the Commonwealth or any of its agencies. Further, a failure to adopt and/or implement a coordinator’s plan could result in a suspension of all Commonwealth funding to the municipality.

There have been nearly 30 distress determinations under Act 47 since 1987.

In Michigan, a state-wide law was passed that is similar to Piccola’s SB 1151. Commonly called the Emergency Financial Manager legislation, it gives wide powers to an independent authority to order the sale of city assets and nullify collective bargaining agreements, while also merging emergency service response units like police and fire into a single group. The Michigan Messenger, a sister site of The American Independent, has reported extensively on that law and the decisions EFMs have made to resolve municipal debt.