Patriot-News (Harrisburg, Pa.) (pg. B1), November 28, 2006

PUBLIC SAFETY BUILDING FOR SALE?

By John Luciew

Mayor Stephen R. Reed's plan for rescuing Harrisburg from a multi-million-dollar deficit now involves selling its public safety building on Walnut Street, home of the city's police and fire officials.

In a bit of creative financing that has become his trademark, Reed is proposing to sell the office building to another city agency, the Harrisburg Redevelopment Authority. The city would lease office space in the building from the authority for an undisclosed sum.

Harrisburg would reap a $10.5 million purchase price from the authority -- the amount Reed has said he needs to blunt the effects of this year's $13.8 million budget deficit -- but the city would have to rent space it now owns.

To buy the building, the authority would issue a $10.5 million bond, with repayment of the debt guaranteed by the rent the authority would collect from the city.

The combination sale and lease-back arrangement for the McCormick Public Services Center will be part of the overall financial plan Reed is expected to unveil tonight at a City Council meeting.

Reed could not be reached for comment last night, but details of the proposal are outlined in the agenda for tonight's council meeting. The council is likely to hold at least one committee meeting on the proposal before voting.

The city's budget for 2007 also is expected to contain borrowing, tax increases and possibly more layoffs in order to deal with a carryover deficit from this year. Harrisburg already has borrowed $7 million through the end of this year to blunt the effects of the $13.8 million budget shortfall.

Reed had announced that he would propose taking a $10.5 million, 10-year loan to help solve the crisis for the longer term.

The loan would repay this month's short-term $7 million borrowing. The remaining $3.5 million would cover a portion of the leftover $6.8 million deficit for this year.

Reed had said he would use money from the sale of city assets, including Western artifacts he accumulated for a museum, and naming rights of parks and a Susquehanna River island, to repay the $10.5 million over 10 years without using tax dollars.

The emergence of the sale and lease-back plan for the public safety building is a new wrinkle. Previously, Reed said he had explored and rejected a similar proposal to sell, then lease, city hall. At the time, he said the short-term cash gain would not be worth the long-term lease payments.

Councilman Dan Miller said yesterday that he is not sure how selling, then leasing, the public safety building would be any different; however, Miller said he would reserve judgment until he hears Reed's presentation tonight.

Miller, along with council Vice President Susan Brown Wilson and members Linda Thompson and Gloria Martin Roberts, have formed a voting bloc that argues that more borrowing isn't the path to sounder city finances.

While refusing to commit to a specific amount or plan, Miller said Reed's idea of a loan to be repaid by the sale of the artifacts and other city assets makes more sense.

The sale of city assets to other city agencies is not unlike the arrangements Reed has made with the Harrisburg Authority involving water, sewer and trash utilities.

The quasi-governmental Harrisburg Authority owns the physical plant and assets of the utilities, while city employees help run them.

The large deficit generated by the Harrisburg Authority-owned trash incinerator is contributing mightily to the current deficit.

The $80 million incinerator began its first year of operation months behind schedule and riddled with design flaws. The result is a year-end deficit estimated between $4 million and $5 million for incinerator operation alone. It will take $13 million more to fix flaws in the three-burner facility.

At least 37 city managers and police cadets have been let go in the budget crisis, and as many as 38 nonuniformed employees are to follow as early as Jan. 5, Reed has said.

JOHN LUCIEW: 255-8171 or jluciew@patriot-news.com

Copyright 2006 The Patriot-News Co