Th P The Poor Pay More: P M No Shared Pain in the Receivers Plan - - PowerPoint PPT Presentation

Th P P M The Poor Pay More:

No Shared Pain in the Receiver’s Plan

Harrisburg City Controller g y Dan Miller

A Plan OF, BY and FOR the Creditors

The citizens of Harrisburg had no advocates during the formulation

• f this plan.

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Critical Decision for Harrisburg

 Deprives Citizens of their Democratic rights  Deprives Citizens of their Democratic rights.  Will impact the citizens of Harrisburg for the next 40 years or longer.  Trying to force this decision in only 30 days is an insufficient amount of

time, creates an unnecessary deadline. C il d th ti t f ll d t d l t d id if thi i

 Council needs the time to fully understand, evaluate and consider if this is

the right decision for Harrisburg.

No need to rush No need to rush

R t th t C il t d i i til th h

 Request that Council postpone any decision until there has

been a full evaluation of the plan. Thirty days is not enough time.

 Council needs time to fully comprehend the plan.

Th iti f H i b d ti t l t l d t d

 The citizens of Harrisburg need time to completely understand

the ramifications, consequences, and limitations imposed by this plan.

Plan Overview Plan Overview

D bt Debt Budget Deficit Budget Deficit Non‐profits/Trust Non‐profits/Trust

Debt – no real concessions from Dauphin County or the Bond Insurers

C A Incinerator Incinerator ‐ $300 million Current Assets Current Debt Parking Parking $100 million Total: $400 million Total: $400 million

Incinerator Sale is a Disguised Loan

I i t “ ld” f $120 illi

 Incinerator – “sold” for $120 million

 Immediately upon the sale Harrisburg will enter into a 20 year contract with the

buyer. $

 Harrisburg will pay the buyer $6.7 million per year whether or not one pound of

trash goes to the incinerator.

 If the contract is terminated, the termination fee is equal to the balance of the

purchase price purchase price.

 Result ‐ $120 million in cash and $120 million in debt due to contract with buyer.

Loss of Parking Assets and Control

P ki

Parking

 Enter into a minimum 40 year lease of

ki /l t / t parking garages/lots/meters.

 Re‐finance the debt at $250 million  Pay off existing $100 million debt on parking garages  Pay off existing $100 million debt on parking garages  Results in $150 million in cash

Where does the money go?

Cash from Incinerator: $120 million Cash from Incinerator: $120 million Net Cash from Parking: $150 million Total: $270 million Expenses / Other: ‐$60 million Cash to Bond Insurer and Dauphin County: $210 million

City Balance Sheet after the Receiver’s Plan

Incinerator Contract: $120 million

City Assets City Debt

$ Parking Garage: $250 million 75% of the future parking 75% of the future parking Income to Dauphin County And the Bond Insurer: $100 million Total Debt: $470 million

Debt Recap Debt Recap

City Debt before Receiver’s City Debt after the Receiver’s y Plan

$ ll

y Plan

 Incinerator Contract: $120 million  Incinerator:

$300 million

 Parking:

$100 million

 Incinerator Contract: $120 million  Parking Garage: $250 million  75% of the Future Parking Income  Total Debt:

$400 million

 75% of the Future Parking Income

to Dauphin County and the Bond Insurer: $100 million

 Total Debt:

$470 million

 Total Debt:

$470 million

d

Cit i tl i $10 $15 illi l d fi it

Budget Gymnastics

 City is currently running a $10‐$15 million annual deficit  Receiver plan indicates the 2013 deficit at $13.2 million  Deficit is eliminated in the plan from 3 major sources  $5 million subsidy of Commonwealth of PA (state)  $4 million in concessions from the unions  $8 million increase in earned income tax (EIT) rate increase

from 1% 2% from 1% ‐ 2%

Trouble with the Receiver’s Budget g Solutions

• Temporary nature of the $5 million subsidy from the State
• Temporary nature of the $5 million subsidy from the State.

 As recently as 2011, the state subsidy was reduced to $496,000 and

historically has been reduced at the whim of the State Legislature.

 Question if the $4 million in union concessions is real and can be

achieved.

 The only real concession that has been attained has been from

Harrisburg residents. The Earned Income Tax (EIT) was increased from 1% to 2% generating $8 million in revenue and The Poor Pay More. 1% to 2% generating $8 million in revenue and The Poor Pay More.

l d d ? Balanced Budget?

ll h b bl b l How will the city be able to balance the budget after 2016 when the g receiver’s plan ends? Will the EIT rate spike to 3% or 3.5% as it is in Reading and Scranton? as it is in Reading and Scranton?

Citizens Lose Self‐Governance

 The City loses control of parking rates and parking enforcement for at least 40  The City loses control of parking, rates and parking enforcement for at least 40

years.

 The City loses control of the trash, recycling and environmental impact.  The unnecessary non‐profits/trust are governed by appointed boards that are

not controlled by the city.

 Economic development and infrastructure are basic city functions.

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 Formation of nonprofits indicates lack of confidence in city leaders’ decision‐making

and deprives council of ability to prioritize projects on behalf of their citizens.

 The Retiree Health Insurance Liability (OPEB Trust) is papered over – ($3.7 million

funding of the trust is insignificant against the $180 million unfunded liability) funding of the trust is insignificant against the $180 million unfunded liability).

Wall Street Benefits from City’s Loss of Self‐governance

N fit th l f th i i t d l i th Non‐profits, the sale of the incinerator and leasing the parking creates additional layers of management. In this arrangement, the revenue flows first to those entities. They will control the money. those entities. They will control the money. The city will not.

The Bottom Line – Loss of Control

• Parking, Fees and Enforcement

 Sewer and Water Rates  Incinerator  Incinerator  Economic Development Corporation  Infrastructure Improvement Corporation  Health Insurance Trust (OPEB)

The Poor Pay More

City Residents will pay higher: City Residents will pay higher:

Earned Income Tax Real Estate Taxes Sewer and Water Rates Parking Fees Parking Fines Parking Fines

Oth V i Other Voices

 “It’s a bad deal for Harrisburg ”

~Ernie Hoke former director of Public Works



It s a bad deal for Harrisburg. Ernie Hoke, former director of Public Works

 “Bulls eye! I think you hit all the issues. I hope the members of Council can

understand the wisdom of your concerns. ~Judith Schimmel, Former Harrisburg City Solicitor Harrisburg City Solicitor

 Thank you Dan. I think you wisely pointed out the potential political and

economic effects of the (uncompleted and contingent) plan. ~Dan Stern, Harrisburg City Attorney g y y

 Good letter. The fact that the pain isn’t shared by all the bond insurance

companies and the County is most troubling. It sets a precedent that I am sure Detroit or the sewer fiasco in Alabama would like to have. ~Bill Welch, Owner Benchmark Energy Solutions, Inc.