Capital Crisis III
On Point with Chris Papst
The City of Harrisburg is on the verge of financial collapse. And a recent court ruling blocking the city's attempt at bankruptcy shows how truly unprecedented the situation is. The federal judge upheld a state law passed earlier this year that prohibited such an action. Council's hope was that the law would be found unconstitutional. Like many political situations, this is viewed largely through the eyes of ideology. History, however, will not be so partisan.
Harrisburg's money troubles began about a decade ago when the EPA shut down the city's ailing trash-to-steam incinerator. In response, despite overwhelming opposition from the community, city leaders accepted a $125 million loan to fix it. Following some bad luck and a few unfortunate business decisions, that initial $125 million of debt has nearly tripled. Citing no better option, council filed for bankruptcy.
When a federal judge ruled that the filing was illegal, both sides had strong words. “Truly, I can attest that it is a day to give thanks,” stated Mayor Linda Thompson. “It’s a great day for the City of Harrisburg and for the very people I can come here to the government center everyday to serve.”
“The citizens of Harrisburg don’t deserve what they are going to get. The mayor does and her bones are going to be absolutely picked by this receiver,” believes Council's Bankruptcy Attorney, Mark Schwartz.
Now, for the first time in history, a state will take over its own capital city. The governor has nominated a receiver to run Harrisburg. The mayor and council will lose their powers to govern.
Throughout this entire financial crisis, the mayor and council have been at odds. And both have legitimate arguments. The mayor opposed bankruptcy from the beginning, saying it's embarrassing, too expensive and highly uncertain. The state agreed, adding if Harrisburg were to go bankrupt, the availability of credit for every municipality in the commonwealth could be affected. So, they passed the recently upheld law.
But others say bankruptcy is the only solution and will eventually happen. The city has $310 million in incinerator debt; it's been reported the school district has close to $500 million; its revenues are shrinking; half of city residents live in poverty; and it somehow needs to find $70 million to upgrade its sewage plant (an EPA mandate). All of this in a city that generates $50 million in annual revenue.
Many don't feel state officials understand how dire the situation is. Said City Controller, Dan Miller, “When the state comes in here they are going to find the numbers don’t add up. They can sell the assets, but we still can’t pay off our debt. And they still have to deal with the deficit in the city’s budget. So, there’s a dilemma here. What are they going to do? I don't know. But now it is their problem.”
The realization that it is “their problem” gives many hope. It's widely believed that if Harrisburg fails, Governor Corbett fails along with it (since he signed the takeover legislation). And he can't let that happen. Some even think the Governor will bail out the city to save his own political career. One elected city official told me Harrisburg is doomed to fail, so why not let the state takeover and blame it on them.
The Harrisburg financial crisis is a perilous situation on multiple levels. And it still is not getting the attention it deserves. What happens with Pennsylvania's capital city will affect not only every taxpayer in this state, but it will have national implications. While this is not yet the topic of conversation at America's dinner tables, make no mistake, many are watching very closely. This is historic.
Chris Papst is a two-time Emmy award winning reporter for CBS-21. Follow him on Facebook and Twitter@chrispapst.