Pennsylvania unveils plan for distressed capital city

The state of Pennsylvania on Thursday released a plan for keeping essential services running and obligations met in financially embattled Harrisburg, as the city tries to get out from under a $300 million debt.The administration of Governor Tom Corbett, preparing to assume control of the city, also said it is considering three to five candidates for the job of receiver who could decide Harrisburg‘s financial future if city leaders do not agree on a plan to repay its debt.

Harrisburg is mired under $300 million in debt due to an expensive revamping of its garbage incinerator.

Corbett has signed legislation giving the commonwealth power to assume the city’s financial reins, and the City Council has filed a petition for municipal bankruptcy protection.

The state’s plan for Harrisburg, announced by Department of Community and Economic Development Secretary Alan Walker, contains cost-containment measures designed to ensure Harrisburg‘s essential obligations are met.

The measures include a spending freeze on discretionary purchases, reduction or elimination of optional contracts for professional services or commodities, a hiring freeze, overtime restrictions and elimination of the city’s ability to incur new debt.

The plan also includes an increase in parking ticket fees, elimination of the city’s three-member Park Ranger Corps and higher business license fees.

BASIC SERVICES PROTECTED

“While the mayor, city council and stakeholders work to come to an agreement on a fiscal recovery plan, this emergency action plan will make sure basic services continue and the safety of the public is protected,” Walker said.

In response, Harrisburg Mayor Linda Thompson said many aspects of the state plan are underway or pending.

“We have reviewed Secretary Walker’s emergency action plan priorities and expectations carefully and I can assure you the city is currently administered at or above the level of performance outlined in the communication,” she said in a statement.

“Of the approximate 15 recommended actions and initiatives included in the Secretary’s list of priorities, we have been working on all of them,” she said, adding that “many of the priorities suggested are already or soon to be in place.”

Thompson and the City Council plan to meet on Monday November 7 in an effort to design a plan to avert a state takeover.

The governor declared a fiscal state of emergency for Harrisburg on October 24.

As to the candidates being considered for receiver, the Corbett administration was tight-lipped.

“The governor’s preference, of course, is that the mayor and city council work out a recovery plan to put the city’s finances in order,” said spokeswoman Kelli Roberts. “However … if they do not take action, he will, in the form of a receiver.”

Harrisburg has until November 14 to deliver a consent agreement to the state showing how it plans to escape from its debt.

If its proposal is rejected, Corbett will designate a receiver. If the proposal is accepted, Harrisburg will work through the plan and a receiver will not be named.

Harrisburg did not seem alarmed by the state’s latest move.

“The city is hopeful a receiver will not be required,” said Robert Philbin, press secretary for the mayor’s office.

“However, if and when necessary, we anticipate the potential receiver will have the leadership and negotiation skills, as well as the financial acumen and professional experience, to guide the city’s many-faceted fiscal challenges toward solvency as expeditiously as possible,” he said.

However, either option could be derailed if a federal bankruptcy court decides the city council‘s petition for municipal bankruptcy protection is allowed to proceed.

The council filed its petition last month, and a hearing is scheduled for November 23.

HARRISBURG, Pa (Reuters) – By Mark Shade(Editing by Ellen Wulfhorst and Jerry Norton)