With federal pandemic relief funds on the horizon in Harrisburg, Pennsylvania, a plan to refinance the city’s decades-old municipal debt has caused a dispute between the city council and the mayor, which surfaced during a city council meeting on Tuesday night.
Harrisburg City Council President Wanda Williams and Vice President Ben Allatt, who is also the finance chair, recently halted debt refinancing legislation proposed by Mayor Eric Papenfuse from moving forward. The proposed legislation would refinance the city’s $25 million debt to reduce the current interest rate of 6.75 percent by half at a cost of $400,000 in legal fees and financial services.
Instead of refinancing, Williams and Allatt support paying the debt off in full with cash from the general fund. “It is a priority to pay off the debt,” Allatt told The Epoch Times when reached for comment via email. “I can’t speak for the mayor or the administration on their behalf or speak to what their agenda is. I can only speak to what I see.”
The issue was addressed during Tuesday’s city council meeting when Allatt disputed claims made by Papenfuse that the city didn’t have enough cash on hand to pay off the debt. Allatt said his determination was made after meetings and correspondence between council president, the city controller, the city treasurer, and himself.
Allatt detailed the plan to pay off $24.6 million in debt, thus leaving at least $13 million in the general fund balance. Allat concluded that the refinancing plan would only save roughly $3 million in interest payments over time versus not refinancing, but overall it would be in the city’s best financial interest to reduce the debt liability altogether.
Part of the new plan to pay down the city debt relies on federal pandemic relief funds from the American Rescue Plan Act being used to reimburse the city for qualified COVID-related expenses to free up money in the city’s budget.
Councilman Westburn Majors questioned how federal stimulus money that has already been received is being used in the city. Majors said, “We still have not had a conversation with the administration about use of some of the monies that have come in.”
Majors highlighted the use of the relief money in other cities, and urged cooperation between the city council and the mayor’s office. “I think it’s important that we have that conversation, have a public conversation and work through with the administration and as council on how we best use those monies to improve our city and recover from this global pandemic,” he said.
“I’m just hopeful that over the summer that we can work as a city to try to make some decisions on this American Rescue Plan money,” Majors said during the city council meeting.
Without providing specifics, Papenfuse had suggested in April that the federal relief money could be used to fund guaranteed universal income for Harrisburg residents. Papenfuse was unable to be reached for comment.
The city’s finance department has been in a state of turmoil and is currently being operated by Harrisburg’s business administrator following the resignation of Finance Director Bruce Weber, and the inexplicable firing of the budget manager soon thereafter. Requests for comment went unanswered by the business administrator.
Mayoral Race Undecided
Papenfuse lost the primary election to City Council President Wanda Williams by 50 votes, just 1 percent of the total vote, and although he has not publicly signaled a move, local pundits suggest that he could mount a strong write-in campaign with the support of other primary candidates. Williams will face Republican nominee Timothy Rowbottom on the November ballot. Being the Democrat nominee in a city with far fewer registered Republican voters, she is predicted by many to be the next mayor of Harrisburg.
Of the recent debate about refinancing city debt, Republican nominee Rowbottom told The Epoch Times, “I agree with paying off the debt and not refinancing.”
Rowbottom called for a FOIA request to provide transparency regarding the use of Federal pandemic relief funds in Harrisburg and accountability for the debt repayment. “It needs to completely be made available to all city residents under the freedom of information act concerning financial records.”
He also called into question the political motives of the mayor regarding the debt refinancing and suggested the plan was not beneficial to the city. “It would be in the best interests of the residents to be debt-free and to bring new accountability to the allocation of these funds.”
Williams followed up Allatt in Tuesday night’s meeting by calling into question the financial practices of the mayor’s administration. She listed a series of claims about the mishandling of debt repayment and a lack of transparency with other government agencies by the mayor’s administration, and said the council never received an amortization sheet of the debt repayment. Williams said “the administration never paid any money against the principle” and cited $6.4 million in interest payments which she said were unnecessarily incurred by not paying off the debt.
Harrisburg’s History of Debt
The debt problems in the city of Harrisburg have made national headlines for decades. A portion of the existing debt in the relatively small city (population: 50,000) dates back to the financing schemes of former Mayor Stephen Reed for various city construction projects in the late 1990s. Harrisburg was then devastated in the early 2000s by a poorly written contract for its incinerator retrofit project, which quickly ballooned from $125 million into $310 million. The city was left in financial ruin, despite being warned of the inevitable municipal bankruptcy in testimony presented before Harrisburg City Council prior to council voting in favor of the incinerator project. The city eventually defaulted on debt and bond payments in 2009 and 2012.
The Securities and Exchange Commission accused the City of Harrisburg of misleading its bond investors. The S.E.C. found Harrisburg in violation of federal antifraud rules for securities issuers by repeatedly giving misleading information that created risks for bond investors as the city’s finances were rapidly deteriorating.
Harrisburg was declared financially distressed and subsequently bailed out by the Financially Distressed Municipalities Act 47 in 2010. The city reduced its staff, leased its parking assets to a private company, and sold its debt-ridden incinerator. The city also deferred maintenance on its roads and other critical infrastructure.
Pennsylvania’s state constitution and tax codes regulate tax rates and increases for all municipalities in the commonwealth. When a city is in Act 47, those tax laws no longer apply. By an order of the court, Harrisburg increased taxes on residents and non-residents who work in the city. The city council doubled the city’s personal earned income tax in 2012, then tripled its local services tax in 2016. The local services tax is paid by anyone who works in the city.
The Harrisburg Swamp and Historic City Council–Mayor Dispute
Fredrick Clark was the former chair of Harrisburg Authority in 2003 when the incinerator debt was originally incurred. Clark takes responsibility for his role in the debacle and current fiscal stress in Harrisburg. When reached for comment, “That was me,” he told The Epoch Times. Clark now jokingly admits to formerly being a “creature in the Harrisburg swamp.”
Now a highly successful private business owner, Clark has been out of the local city government for more than a decade and said he is not currently privy to the particulars of the disputed debt refinancing plan.
Clark went on to describe the problem in general as an ongoing feud between the mayor’s office and city council. “Historically it has been the number one ongoing problem. The interactions between city council and the mayor have been demonstrous. They simply can’t agree on nothing, and that’s a fact,” said Clark. He also mentioned, “the irony of yet another former council president potentially becoming mayor.”
Others agree that the political turmoil does a disservice to the city. “The political dysfunction in Harrisburg is as historic as it is present,” said commercial real estate broker Beau Brown of the everlasting dispute between city council and the mayor’s office. Brown, born and raised in the City of Harrisburg, provided his perspective to The Epoch Times on the mayoral contest, which is not yet decided:
“This latest disagreement between outgoing Mayor Eric Papenfuse and longtime City Council President Wanda Williams who beat him in the May 2021 primary is less about money and debt, and more about power playing and egos.
“Wanda Williams, who believes the office of mayor is guaranteed to her, will face a strong Republican opponent in the November general.
“In the meantime, she is furthering the dysfunction that she helped oversee by using parliamentary procedure to jam up the current mayor’s ability to strategically realign the interest rates on existing debt to a highly manageable cost.
“The political dysfunction you see in this battle is not isolated to debt. As mayor and council president, both Papenfuse and Williams have battled before over petty issues, while the Harrisburg homicide rate is the highest its been in years, while the graduation rate of the district is less than 60 percent, and as private businesses get chased away.
“They’ve both even managed to attack private property rights in Harrisburg’s most vulnerable Allison Hill precinct.
“What you are seeing here is the Democrat method. Disrupt, Destroy, Deflect & Disrespect.”
Many Cities Face Similar Struggles
The financial and political turmoil in Harrisburg, Pennsylvania, can be viewed as a microcosm of what municipalities across the nation have been and will be facing in the years to come. Along with debt comes an increase in crime, taxes, and troubled public schools.
Municipal debt woes have become common throughout the United States. Year by year, cities throughout the country are falling deeper into debt while fabricating their annual budgets to appear balanced. Much of this can be attributed to political corruption or mismanagement, and is resulting in an increased burden on taxpayers and an overall reduction in city services.
Pension and retiree health care benefits make up a significant portion of the municipal debt in the United States, and a lack of transparency in government finance of these benefits further complicates the situation. City officials are using accounting schemes to give the appearance of a balanced budget sheet, when in fact they are hiding massive amounts of debt. Many cities are spending more than their revenues.
More Problems in Harrisburg
Political and financial dysfunction create a domino effect of problems. For instance in Harrisburg, deferred city infrastructure projects have contributed to unsanitary conditions and environmental hazards due to parts of the city’s antiquated sewer and water infrastructure that date back more than 100 years. Raw sewage is being discharged directly into the Susquehanna River. In 2018 alone, Capital Region Water pumped 1.4 billion gallons of raw sewage mixed with stormwater into the river.
The Harrisburg School District is plagued with its own financial mismanagement and low graduation rates. School district officials openly admit to falsifying the grading of report cards in order to advance failing students to the next grade level. Standardized test scores show the district students are just 15 percent proficient in math and English.
The crime rate in Harrisburg is 24 percent above the national average, according to the FBI. The city logged more homicides in 2020 than it did in over 30 years. In one day, Harrisburg officers responded to 67 “shots fired” calls, as reported by ABC27.
The city violence has flared recently and is spreading to neighboring municipalities. A Harrisburg man who was the victim of a shooting that occurred last week in a popular Camp Hill park isn’t cooperating with police, and they have no suspect. News broke this week in the Allison Hill neighborhood of Harrisburg where a woman was murdered while sitting on her front porch in broad daylight just before 7:00 p.m. She was an innocent bystander caught by the stray gunfire of a drive-by shooting. Her 6-year-old son who was with her on the front porch was injured in the shooting as well.
Further inflamed by the global pandemic, the endless stories of dysfunction and chaos that prevail in the city will give the next mayor a full plate in 2022.