Patriot-News, The (Harrisburg, PA) (pg. A04)  [Printer-friendly version]
October 27, 2006

WHERE'S THE MONEY?

By John Luciew

A touchy, temperamental incinerator project. A mayor who resisted
pulling the trigger on a tax increase, though he recognized the
writing on the wall.

Overspending for police and fire protection, the lion's share of the
city's budget. An ill-advised property tax rebate in an election year.

Missed opportunities to bring in more revenue, and finally the old
budget bugaboos of medical insurance and spiking energy costs.

These factors created a budget-busting perfect storm in Harrisburg
that blew away spending and revenue projections, rained red ink and
resulted in four dozen staff layoffs yesterday.

Here's a look at what went wrong and why:

THE MONEY-BURNING INCINERATOR

It was supposed to be state of the art. Instead, Harrisburg's $80
million trash incinerator was months behind schedule, is riddled with
design flaws and is a bear to keep burning.

The result is a year-end deficit estimated between $4 million and $5
million for incinerator operation alone. It might take $5 million to
$10 million more to get the plant working as it should, according to
city officials.

Originally, incinerator builder Barlow Projects Inc. was contractually
obligated to have all three burners up and running by Jan. 2.

After steel shortages and construction delays, the Harrisburg
Authority, the quasi-city agency that owns the burner operated by the
city, gave the company an extension to April 2. The authority also
waived a penalty clause calling for $22,000 payments for each day the
project was late.

City Council members have cited this forgiveness as an incredibly bad
decision.

Even when the incinerator's three burners were lighted, design flaws
with the trash and fuel feeds at one end and the ash handling at the
other have hampered operations to the point where just one or two
furnaces are firing at any time. It's no wonder the incinerator will
miss its revenue target by $12.6 million.

It's taken more staff to run the burner than first thought, resulting
in double shifts and plenty of overtime.

The biggest worry is looming. Harrisburg and its taxpayers -- not the
authority -- are on the hook for about $220 million in incinerator-
related debt. That equates to hefty annual payments of about $16
million for the next 30 years.

NO TAX INCREASES DESPITE TROUBLING TRENDS

Mayor Stephen R. Reed said he spotted the signs and knew where things
were headed. For years, he said, the city's spending had been rising
much faster than revenue.

Reed now says he was prepared to propose a tax increase in three of
the last four budget years but ultimately backed off.

Instead, the city raised fees for virtually all of its services --
sewer, water and trash collection. Reed concentrated on controlling
spending by being tight-fisted with raises and winnowing staff through
attrition, eliminating 235 positions since 2000.

It wasn't enough.

The rising line representing the city's spending finally crossed the
more stagnant one representing revenue.

Reed said he felt he needed some red ink to convince the City Council
to go along with a tax increase, which surely is coming for 2007.

Council members have countered that it is Reed and his administration
who study the numbers, make the estimates and propose the budgets. The
board merely reviews the plan, tinkers and votes.

Both sides might have underestimated just how fast the deficit has
risen.

City spokesman Randy King has said vendors, unpaid for months, are
increasing the pressure. Suppliers of such vital items as bullets for
police and Internet access for patrol car computers are threatening to
cease shipments and cut off services.

THE GIVEBACK THAT BIT BACK

It was trumpeted triumphantly as the city's first property tax rebate.

The year was 2005, and the city was flush with $2.6 million in cash
from the emergency and municipal services tax. It was a new $52 annual
levy imposed on 68,000 people who work in the city.

City officials wasted little time in finding a use for the money. What
could be better in an election year than checks in the mail to
taxpayers?

The City Council earmarked $1.6 million for the property tax rebates.
After initially resisting, Reed went along.

The roughly 18,000 checks averaged about $85 for every residential and
commercial property owner in the city.

Although the rebate plan was terminated this year, the city had
already bought itself more budget trouble.

Reed now calls the idea "a major mistake."

MISSED OPPORTUNITIES

It's no secret Reed and the City Council battle over money.

The most recent squabble centered on Reed's call for a $14 million
budget bailout loan that he said would have headed off yesterday's
staff layoffs. The council approved borrowing half that amount and
attached conditions that administration officials labeled a "poison
pill."

It might be the most direct example of politics costing jobs. But
several other disagreements between the two sides have cost the city
money and might have indirectly led to yesterday's layoffs.

Reed said the council wouldn't go along with a proposed interest-rate
swap on some parking authority debt last year that he said would have
injected an immediate $1 million into city coffers.

This year, the council passed on the annual financial tactic of
selling Harrisburg's real estate tax liens, losing out on about
$575,000.

Some council members have defended their more cautious stand on the
city's financial wheeling and dealing by saying Harrisburg can no
longer borrow its way out of debt.

Even the state didn't help Harrisburg's cause. The city can't get its
hands on $2.4 million in 911 money that Reed says the city is eligible
for. Officials are still trying to get the cash, but it likely won't
come this year.

ENERGY AND INSURANCE

Any discussion of municipal budgets must mention the rising costs of
medical insurance and energy.

It takes more and more money to cover the medical expenses of city
workers, put gas in police patrol cars and keep electricity running
through city street lights.

Harrisburg's annual outlay for medical insurance is $6.6 million,
nearly double what it was in 2000. Prescription drug coverage is up
270 percent to $2 million since then. Liability, casualty and other
insurance eats up $1.1 million, up 77 percent since 2000.

Harrisburg spends $1.3 million annually on gas and diesel, a 200
percent rise since 2000, and an additional $359,290 to heat its
buildings, up 112 percent in six years.

"Many of these costs involve external market conditions over which a
local government has no control," Reed said.

HIGH COST OF PROTECTION

Harrisburg has a paid fire department and a 170-member police force.

They cost plenty of money.

Public safety is the city's single biggest expense. The $27.8 million
budget for the two departments wasn't enough this year.

Based on the most recent projections, the city's police and fire
departments will burn through that amount and $2.8 million more,
blowing the budget by 10 percent.

Part of the problem might be that these departments are running on
very lean staffs. The fire bureau, especially, is at the minimum
staffing requirements outlined in the labor contract.

That means when one firefighter calls off sick, another will
automatically reap overtime to fill the gap.

Not coincidentally, the fire department is projected to overspend its
$8.1 million personnel budget by $1.8 million, mainly because of
overtime. Minimal staffing is also the reason the city's 90
firefighters were spared in the first round of layoffs. Job cuts would
generate more overtime.

Copyright 2006 The Patriot-News Co