No Tax Increase, More Red Ink as City Passes Budget
Dec. 18 -- The Harrisburg City Council tonight passed a 2013 budget, which does not increase the city property tax but does add to the deficit.
The budget expects expenditures of $56.3 million, but revenues of only about $53.2 million, baking in a $3 million deficit before the year even begins. The spending plan adds to the city's already large fiscal deficit of $13 million that is being carried over from 2012. Most of that deficit originates from two general obligation bond payments that the city's receiver ordered skipped earlier this year so that Harrisburg could still make payroll and meet vendor payments. During the meeting, Councilman Brad Koplinski introduced several amendments to Mayor Linda Thompson's proposed budget, but most were voted down. For instance, Koplinski asked the council not to approve $70,000 to fund the proposed position of communications director, which it also refused to fund last year. The council, however, approved the position this time. Mayoral spokesman Robert Philbin has been serving in that post all year without pay. Against Koplinski's motion, the council also voted to fund the position of community policing coordinator. However, it did deny funding for an executive assistant for Ricardo Mendez-Saldivia, the city's chief operating officer. The council increased funding for one item from the proposed budget. It added $70,000 more than requested by Thompson for street light repair
And Then There Were 6: Council Selects Finalists for Open Seat
Dec. 3 -- The Harrisburg City Council tonight narrowed a list of candidates for an open council seat to six, selecting half-a-dozen names fairly well-known to city residents.
The six finalists for the seat are Floyd Stokes, Latasha Frye, Joseph Solomon, Bruce Weber, Michael Parker and Julie Bancroft. The nominations came after 32 residents who had submitted applications for the seat were given two minutes apiece to introduce themselves to the council. That process took about 90 minutes. After the brief introductions, each council member voted in a secret ballot for one finalist. The six finalists then were interviewed by the entire council to conclude the lengthy public meeting. Council members will vote on Dec. 11 to fill the seat, which is empty after being vacated by former Councilwoman Patty Kim, who was elected to the state House last month. The new council member will serve the remaining 12 months of Kim's term. To hold the seat after 2013, he or she will have to run for a full, four-year term next year. In all, 33 residents applied for the seat, but one applicant, the well-known concert promoter and blogger "Jersey" Mike Van Jura, died last month. Council asked for a moment of silence in his memory before starting the interview process.
Not My Fault: Buck Passed Once Again at Incinerator Hearing
Nov. 13 -- State senators today got no closer to unlocking the mystery of who's at fault for the Harrisburg incinerator fiasco, as witness after witness ducked blame at a second committee hearing.
As in the original hearing, key players in the crisis said they shared little, if any, responsibility for decisions that has buried Harrisburg under about $340 million in incinerator-related debt, nearly bankrupting the city. For the most part, they placed blame at the feet of general contractor Barlow Projects Inc. and its engineers for a faulty incinerator design, trouble-plagued construction and wildly inaccurate cost estimates. "If (owner) Jim Barlow had performed, we wouldn't be here today," said Andrew Giorgione, former counsel for the Harrisburg Authority, the city's utility authority that owns the incinerator and oversaw its upgrade. On Oct. 4, during the Senate Local Government Committee's first hearing, several witnesses, including former Mayor Stephen Reed, also placed blame on Barlow. Moreover, they pointed fingers at financial and legal advisers, saying they were taking their advice that the incinerator's fees would be able to pay its debt. The witnesses who testified today, however, said they were not involved in determining whether the incinerator debt was self-liquidating. That, they said, was up to engineers who determined how much the project would cost and how much revenue it would generate. James Losty of RBC Capital, one of the Harrisburg Authority's principal financial advisers, mounted a passionate defense of the financial and legal consultants who worked on the project, saying they were among the "finest bond professionals" in Pennsylvania. He also said that the 2003 incinerator financing, which raised $125 million and included several interest rate swaps designed to lower the project's interest rates, was virtually flawless, "The '03 financing worked out better than ever could be imagined," he said. Several witnesses also blamed public and appointed officials from Harrisburg, Dauphin County and the Harrisburg Authority for voting several times to mount greater and greater levels of debt. "All the public officials knew what the situation was," said Carol Cocheres of Pittsburgh-based Eckert Seamens, which represented the Harrisburg Authority as bond counsel for the 2007 financing and as underwriter's counsel for the 2003 financing. She singled out Dauphin County for special blame, as county commissioners were instrumental in pushing the incinerator retrofit forward, but then successfully fought a waste fee increase in 2009. If the county had agreed to the hike, the Authority would have been able to continue to pay its debt, she said. "You've blamed the elected officials," said Sen. Mike Folmer. "The elected officials have blamed the consultants and advisers." Former Authority board member James Ellison, a lawyer for Rhoads & Sinon, echoed Cocheres' view. "We went to the Harrisburg City Council and said we needed the rate increase, and they gave it to us," he said. "But when we went to Dauphin County, we found ourselves embroiled in litigation for about a year." In contrast, county commission Chairman Jeff Haste, who also testified, likened the county's role to that of the Coast Guard, swooping in to save the incinerator project by acting as a second guarantor of the incinerator's debt. On behalf of the county, he signed the certification that the 2003 bond issue was self-liquidating. Ellison added that, after taking a seat on the Authority in 2007, he urged the FBI and the state attorney general to investigate the so-called special projects fund, money derived from the utility but often used by Reed for non-Authority business, such as to purchase museum artifacts. The FBI launched an investigation, but dropped it without filing charges. "It was my opinion that there was some type of fraud there, and we contacted law enforcement," he said. In his Oct. 4 testimony, Reed said the Authority, not he, had control over the special projects fund. In his testimony, former city receiver David Unkovic said that all parties should share blame, but was especially critical of the experienced financial and legal professionals who should have realized that something was amiss. They should have seen, he said, numerous red flags, including that debt was being piled too high, that some debt was being used to pay other debt, that debt was added and re-packaged to push out loan terms and that the Reed administration was using fees it received for guaranteeing debt to plug holes in the city's general fund. "It stunk like a kettle of rotten fish," he said. "This is the worst set of financings I've ever seen." He added that the actions of those involved affected much more than one project. Because of the actions of officials and consultants, residents have had their lives adversely affected, with higher tax rates, lower property values and insufficient government services that have been slashed to the bone. "The people of Harrisburg have not been treated well by their public officials and the public finance industry," he said.
Democrats Take State Senate Seat, Attorney General Post
Nov. 6 -- Democrats tonight had a strong showing both locally and statewide, capturing several offices long held by Republicans.
In a heated race, Democrat Rob Teplitz dispatched Republican John McNally, becoming the first Democrat in about 80 years to represent the Harrisburg area in the state Senate. With all precincts reporting, the preliminary tally showed Teplitz with 60,720 votes and McNally with 57,153 for the 15th state Senate seat, which includes most of Dauphin County and a portion of York County. In the state Assembly, Democrat Patty Kim, running unopposed, will represent the 103rd House district, which includes Harrisburg, Steelton, Highspire and parts of Swatara Township. The seat was open after the retirement of long-time state Rep. Ron Buxton. On the state level, U.S. Sen. Bob Casey Jr., the Democratic incumbent, coasted to re-election over his challenger, Republican businessman Tom Smith. Other statewide winners included Democrats Kathleen Kane as attorney general, Eugene DePasquale as auditor general and Robert McCord as state treasurer. Kane became the first woman and the first Democrat to hold the attorney general post since it became an elected office in 1980. Pennsylvania also selected President Barack Obama over challenger Mitt Romney by a margin of about 300,000 votes. Election Day, however, wasn't all good news for Democrats. In northern Dauphin County, Republican incumbent Sue Helm won re-election over her challenger, Democrat Chris Dietz, for the 104th district state House seat. In addition, the state legislature's gerrymandering of Pennsylvania's congressional districts seems to have paid off, as both congressional seats that slice through Harrisburg were won by Republicans. In the 4th congressional district, which includes most of the city as well as the west shore of Cumberland County and all of Adams and York counties, Republican Scott Perry easily defeated Democrat Harry Perkinson for the open seat. In the 11th congressional district, a sprawling district that includes most of Dauphin County, touching the southern tip of Harrisburg, incumbent Lou Barletta took down Democratic challenger Gene Stilp by a wide margin.
More Taxes: Reluctant Council Agrees to Double EIT
Oct. 23 -- Amid heated debate, the Harrisburg City Council tonight reversed course, agreeing to a temporary hike in the resident earned income tax rate.
The council voted 5-2 to raise the EIT by 1 percent for one year after several council members, who previously had opposed the hike, switched positions. Council President Wanda Williams said she reluctantly changed her mind because the city desperately needs the money. "Where do the resources come from to continue services, to pay employees?" asked Williams. "Where will the money come from?" The city is expected to run out of cash next month, which may necessitate a bridge loan or emergency state aid to make it through the end of the year. The EIT hike, from 1 percent to 2 percent, will take effect Jan. 1. The council's change of heart came after three recent meetings between members and receiver William Lynch. To urge council support, Lynch provided members with certain assurances, which remain confidential, said Williams. At a public meeting last night, Lynch told council members that the tax increase would show labor unions and creditors that the council is willing to make hard choices to help retire the city's enormous debts, helping to convince them to do the same. He also said that a bankruptcy judge would look favorably upon the move, in case Harrisburg ends up filing for municipal bankruptcy. Several council members said that the sunset provision would let them, a year from now, judge for themselves if their action helped prompt other stakeholders to make concessions. Councilwoman Patty Kim said the receiver's office had promised two important items: to not ask for an EIT increase extension after one year and to request no more tax hikes for city residents. Council members Susan Brown-Wilson and Brad Koplinski voted no to the increase. Both said they did not believe the tax hike was in the best interest of residents. Brown-Wilson added that she did not trust the receiver's promises, saying the estimated $5.1 million raised by the increase would not be enough to balance Harrisburg's budget, which this year is expected to have a shortfall of more than $12 million. She warned that the state will return asking for more sacrifices next year. "This EIT is just a drop in the bucket," she said. "They'll be back again and again and again." Approval of the tax hike ends the related litigation between the council and Lynch, who had sued council to force the increase. In response to the suit, Commonwealth Court Judge Bonnie Brigance Leadbetter ordered the increase in late August. After council appealed, Leadbetter agreed to reconsider her decision pending negotiations between Lynch and the council.
Senate Candidates Spar in Heated Debate
Oct. 16 -- Education. Family planning. The state's hand in running Harrisburg.
These are among the issues that divide state Senate candidates Rob Teplitz and John McNally, giving voters a clear choice at the ballot box on Nov. 6. Teplitz and McNally, competing to replace retiring legislator Jeff Piccola for the 15th Senate district, found few points of agreement during a candidate's debate held last night at Midtown Scholar Bookstore and sponsored by Harrisburg Hope. Right from the start, Democrat Teplitz blasted Republican McNally for supporting school vouchers and privately sponsored charter schools, a charge he repeated throughout the hour-long event. "You're using [campaign] money from organizations that support privatization of schools then saying the opposite," said Teplitz. "For you now to begin to Etch-a-Sketch your way through the fall campaign doesn't do a service to anyone in this community." After some prodding, McNally said that he does support vouchers, but denied Teplitz's claim that he wants to gut public education. "I am for increasing funding for basic education," said McNally. "This campaign is about getting to the truth, about integrity. I have not said I will cut education." McNally added that he supported other school reforms, including creating a county-wide system of school administration, which he called "the Maryland model." Teplitz said his educational policy would focus on providing greater funding to reduce class size and boost early education, a hot issue in Harrisburg as kindergarten was nearly eliminated this school year before the state restored some funding cuts. Moderator Alan Kennedy-Shaffer then turned the debate to Harrisburg issues, asking about the state's rocky relationship with its capital city. Teplitz said he opposed repeated moves by Piccola to intervene in city affairs, which led to a 10-year takeover of the city school district and, currently, to state receivership of the city. "It's unfortunate that the senator we have now has not played a constructive role," he said. "My job as senator would be to bring all the parties together. Every option must be on the table." McNally was more supportive of the state's interventions. "You have to get all the people to the table, and I believe [receiver] Gen. Lynch can do that," he said. In a rare moment of agreement, both candidates said they expected creditor concessions and possibly restitution to result from a final deal to resolve Harrisburg's debt crisis. Audience questions broadened the scope of the debate, with several members of the large crowd asking about issues that included the state's troubled voter ID law and women's reproductive rights. Teplitz said he opposed voter ID, while McNally said he supported it as long as measures were taken to ensure everyone has the proper identification to vote. "Let's all take personal responsibility so that all our neighbors have ID so that they are not disenfranchised," McNally said. An audience member questioned the candidates on the subject of funding for Planned Parenthood, providing perhaps the sharpest distinction between the candidates. McNally called himself "unapologetically pro-life," saying he would like to ban all abortions, even in the case of rape or incest. "We have too many abortions already," he said, adding that he opposed public funding of abortion. Teplitz accused McNally of purposely confusing the issues of family planning and abortion, as state funding of abortion already is illegal in Pennsylvania. "We need to support women in this country and women's ability to make their own reproductive decisions," said Teplitz.
Panelists Express Hope as Harrisburg Seeks Justice
Oct. 11 -- Will the people of Harrisburg ever see justice done?
Last night, a group of panelists convened at Midtown Scholar Bookstore to discuss the issue, with their answers widely ranging from "doubtful" to "highly likely." At the Harrisburg Hope forum, Neil Grover, founder of the taxpayer group, Debt Watch Harrisburg, said he is encouraged after last month's state Senate committee hearing on the city's incinerator fiasco. "We're moving towards justice on a lot of parallel tracks," said Grover. "I sat through that whole hearing, and I am optimistic about what I heard, partly because there were two very different stories, and they are compelled to go forward and find out who's telling the truth." Tara Leo Auchey, editor of Today's the Day Harrisburg, agreed that recent events are reason for optimism. "The Senate Local Government Committee hearings have me very encouraged," she said. "As Neil said, we're starting to hear public contradictions." Nearly 200 people packed Midtown Scholar to hear from the panel, which included Bishop A.E. Sullivan Jr., the president of Harrisburg’s Interdenominational Ministers Conference, firefighter union leader Eric Jenkins and mayoral spokesman Robert Philbin. Of the group, Jenkins was arguably the most pessimistic. He said that the receiver's office has barely communicated with his union since March, which is troubling as re-negotiation of union contracts is a key element of Harrisburg's financial recovery plan. In addition, he is suspicious of the state's role in driving the recovery process, as it played a key part in allowing Harrisburg to amass such a large debt level to begin with. "I find it difficult to believe that justice will be achieved when the people who are conducting the task and responsibility of getting justice are the very same people who are culpable for the problem to begin with," he said. If nothing else, the forum showed how far the issue of "justice" has advanced recently. A year ago, few thought that anyone connected with the incinerator disaster ever would have to answer for their actions. But, in January, the Harrisburg Authority set the stage for a discussion of responsibility with the release of its forensic audit, a damning analysis of how the incinerator was upgraded and financed. Both City Council and former receiver David Unkovic then sent letters asking for federal and state investigations, and, last month, the state Senate began hearings on the matter. Grover applied some historical context to Harrisburg's problems, saying that public malfeasance and corruption date back practically to the founding of the city. "The cloud over Harrisburg and honesty has been here a long time," he said. "I don't think we're going to alter that culture." In addition, Grover said that the Reed administration constantly wanted to spend more money than the city took in. Therefore, it took irresponsible actions to plug recurrent budget gaps, such as diverting utility and bond fees to the general fund. "Harrisburg was living beyond its means for 30 years," he said. Philbin also expressed optimism that, in the long run, Harrisburg would see some type of justice, whether that will take the form of creditor concessions, restitution or criminal indictments. In the shorter run, he said that the financial recovery plan, which currently is being implemented, is the first step towards getting the city healthy again. "At some point, down the road, there may be penalties, fines, etc., but we're talking about a multi-year process to get to that point," he said. "In the meantime, I think it's great that we have this [recovery plan] process in place." Both Grover and Auchey said they held out hope that those responsible may eventually be forced to make financial restitution to the city or may even see jail time. They further agreed that "justice" most likely would take the form of concessions from creditors—either through negotiations or as part of a bankruptcy process. "Concessions from creditors are going to happen either voluntarily or by force only because, if you step back and look at the overall picture, there's not enough money to pay them," said Grover. "There's just not enough money to put on the table to pay them everything they demand, and you couldn't tax your way out of this if you tried." Auchey added that she hopes for yet another form of justice for Harrisburg—political justice. "I also have a little "j" justice in my mind in terms of the justice as citizens of this city feeling that we have leadership that we can count on," she said. "That we feel that we have people in place who will have our best interest in mind—and not just power for power's sake."
Senate Takes Swipe at City Debt Crisis, Incinerator Debacle
Oct. 4 -- A state Senate committee listened to conflicting realities today, as key players in the Harrisburg incinerator debacle gave starkly different versions of how the city came to be buried beneath more than $300 million in debt.
On one hand, the Harrisburg Authority explained its forensic audit of the incinerator project, a report that claims that repeated project financings and refinancings were rife with self-dealing, arrogance, terrible decision-making, abuse of power and corruption. On the other hand, former Mayor Stephen Reed and his associates described the incinerator as simply a project whose costs greatly exceeded projections. The Senate Local Government Committee held the day-long hearing ostensibly to learn how to avoid future disasters like the Harrisburg incinerator, in which, over many years, the Harrisburg Authority, the city, Dauphin County and the state all pushed through or approved numerous bond deals that has sent the city into state receivership and to the verge of bankruptcy. However, many attendees viewed the hearing as a way to begin to piece together the details of how and why Harrisburg officials entered into so many complex financial deals -- and who benefited from them. Harrisburg Authority consultant Steven Goldfield, who wrote much of the forensic audit, testified that numerous rules were either broken or not followed. For instance, he said that incinerator bonds were certified as self-liquidating, but that the incinerator's cash flow clearly could not support these bond payments. In addition, the incinerator retrofit begun -- and later abandoned -- by Barlow Projects Inc. lacked a mandated performance bond. Moreover, fees the city received for its role in bond deals were diverted either to plug holes in the city's operational budget or went into the mayor's Special Projects Fund, which financed the purchase of museum artifacts, among other items. "The guarantee fees matched the structural deficit of the city," said Goldfield. "So, it filled a budget gap." Goldfield took committee members on a 20-year tour of the history of the incinerator, beginning in 1993, when the city sold the facility to the Harrisburg Authority. The authority borrowed $26.7 million to fund the purchase, then accumulated nearly $100 million in debt by 2000. The debt skyrocketed further after the Authority hired Barlow to improve and expand the incinerator to accommodate more waste from Dauphin County and to satisfy the environmental mandates of the federal Environmental Protection Agency. The Barlow technology, however, never worked, necessitating more borrowing to finish the retrofit. Harrisburg backed nearly all of these bonds, and Dauphin County acted as a second guarantor for about half of them. Reed admitted that the project was a financial fiasco, but said that city and Authority officials relied on the advice of professionals, who told them that the project made sense technically and financially. "If we had any idea the Barlow project would cost what it did, we never would have approved it," he said. "We never would have initiated it." Furthermore, Reed said he was never aware that Barlow lacked a performance bond, a position reiterated by former Harrisburg Authority member Fred Clark, who also testified. In addition, Reed, Clark and Dan Lispi, former director of special projects, said they believed, at the time, that the debt was self-liquidating. Bernadette Barratini, former counsel for the state Department of Community and Economic Development, also dodged blame, saying that, while she affirmed various bond filings, ensuring they were complete, she was not responsible for the accuracy of the information. At times, Senate committee members seemed frustrated with their lack of progress in discerning what exactly happened -- and who was responsible -- for Harrisburg's desperate financial situation. "So no one did anything wrong?" asked an exasperated Sen. Mike Folmer near the conclusion of the hearing. The committee has scheduled a second hearing on the matter for Oct. 29.