HARRISBURG – House Speaker Mike Turzai (R-Allegheny) today said that the city of Harrisburg should remain in its Act 47 status while retaining the ability to tax those who live and work in the city at the elevated levels permissible under the act.
“While Harrisburg officials claim to have taken steps to address the city’s legacy costs, they have not truly begun to undertake the needed reforms to get the city back onto steady financial footing,” Turzai said. “Allowing the city to maintain the increased taxes allowed under Act 47 without the oversight to rein in its spending would only seek to encourage the city to continue the spending habits that got them into Act 47 protection in the first place.”
Harrisburg has been operating under Act 47 oversight since 2013, and is eligible to have its status as a financially distressed municipality lifted by one of four options. The options the city has under current law are the termination of distressed status; municipal disincorporation; fiscal emergency; or a three-year exit plan.
The city of Harrisburg’s recovery coordinator recommended in this year’s Financial Condition Report that the city enter into a three-year exit plan.
“If Harrisburg officials want to get out of Act 47, they should give up the increased earned income tax on residents and the doubling of the Local Services Tax (LST),” Turzai said. “Further, while in Act 47, the city needs to make changes working with the private sector, not against it.”
Turzai led the effort to put Pittsburgh on solid financial footing with colleagues formerly in the state Senate. In 2004, Turzai sponsored Act 11, which created the Intergovernmental Cooperation Authority for Pittsburgh, designed to curb overspending and overborrowing that put the city into distressed status.
“When we addressed Pittsburgh back in 2004, we held off on enacting a needless and harmful commuter income tax,” Turzai continued. “At that time, the LST was enacted which was made optional for all municipalities including Pittsburgh and Harrisburg. Harrisburg opted to impose the LST. That Harrisburg was granted an increase in its earned income tax on residents and a doubling of the LST was above and beyond what was contemplated by statute. Now Harrisburg wants to keep the taxes and get out from under the restrictions of Act 47. This is wrong.
“Just as we did with Pittsburgh, we need to get Harrisburg on track to exit Act 47 on strong financial footing, instead of allowing it to simply continue to tax those who live and work in the city at a higher rate.”
The latest Financial Condition Report found that the city had not completely addressed its financial issues. Mainly, the report concluded that:
• Because the city was operating under the 2013 confirmed Strong Plan on the effective date of Act 199, its status as a financially distressed municipality is subject to termination on Sept. 23, 2018.
• The options available to the city as of that date include: (1) termination of distressed status; (2) municipal disincorporation; (3) fiscal emergency; or (4) a three-year exit plan.
• Under Act 47, as a distressed municipality, the city sought and received Commonwealth Court authority to levy an additional 1 percent Earned Income Tax (EIT) AND a $104 increase to the Local Services Tax rate on employees in the city.
• This extraordinary taxing ability has provided approximately $11 million per year.
• The city’s legacy costs were $19.1 million in 2014 (32 percent of overall operating expenditures); $19.9 million in 2015 (34 percent); and $20.1 million in 2016 (32.4 percent).
• The legacy costs significantly impact the city’s ability to provide current services to its residents from the revenue it receives from the taxes.
• The city’s outstanding principal on long-term debt as of Dec. 31, 2017, is $77,289,455.
• The city’s unfunded actuarial liability for retiree healthcare as of Jan. 1, 2016, was $155,120,287.
• For the 2018 budget, the city has projected Act 47 tax revenue (additional EIT) at $7,460,000 and Act 47 LST revenue at $3,749,251.
• The overall projected expenditures equal $72.8 million (vs. the actual spend in 2017 which was $66.3 million).
Representative Mike Turzai
Speaker of the House
Pennsylvania House of Representatives
Media Contact: Neal Lesher
717.260.6495 (office) 717.507.9240 (cell)